ARA Asset Management

[greengiraffe]

Leighton steps up bid to sell property arm
THE AUSTRALIAN JULY 28, 2014 12:00AM

Bridget Carter

Mergers and Acquisitions Editor
Sydney
Marcellino Fernandez Verdes is the CEO of Hochtief, based in Germany.
Marcellino Fernandez Verdes. Source: News Limited
LEIGHTON Holdings has intensified its sales campaign for its property development arm, holding talks with the country’s largest developers in the past week in an effort to drum up interest.

The $7.7 billion Australian construction company will report its half-year results for the 2014 fin­ancial year today, with analysts expecting it to reaffirm its full-year guidance of $540 million- $620m net profit.

The latest development over its real estate business comes with reports emerging from Spain at the weekend that Ferrovial is ­offering $1.5bn to buy Leighton contractor John Holland, a price above one analyst’s valuation estimate of $1bn-$1.36bn.

The assets are part of a portfolio earmarked for sale by Leighton following a proportional takeover bid of the company ear­lier this year by Hochtief, the German company controlled by Spanish construction giant ACS.

However, sources told The Australian that the country’s largest residential developer, Stockland, is believed to be the only local player with a potential interest in Leighton’s property arm, adding that the interest was very preliminary.

Talks had been held with major listed groups such as Dexus Property, the Morgan Stanley-backed office landlord Investa and Stockland, in a bid to muster up interest in the business.

ARA out of Singapore had been named as a potential candidate, while Mirvac was also thought to be a logical suitor for some of the properties, given the developer had a joint venture arrangement for the $1bn-plus Green Square mixed-use development project in Sydney.

Put up for sale by Leighton chief executive Marcelino Fernandez Verdes, apart from John Holland, are its services operations, Leighton Properties, its interests in other listed entities, including listed resources group Sedgman, mining-services business MacMahon Holdings and residential property developer Devine.

While Macquarie Capital is handling the sale of Leighton’s services and John Holland business, Bank of America Merrill Lynch is selling developer Leighton Properties as Goldman Sachs is engaging with potential suitors to buy Devine in its entirety.

Leighton made about a quarter of its $24.4bn of annual revenue from John Holland last year, contributing $4.75bn in sales and $128.4m of the company’s net profit of $509m. Leighton Properties and Devine generated $642m in revenue last year, while reporting a $44m annual loss.

Deutsche analyst Craig Wong-Pan predicted Leighton would report today that its work in hand would fall slightly to $40.5bn, from $40.9bn in March, and its debt levels would also be lower after recouping money owed.

“There’s going to be a lot of questions still unanswered, with the major under claims likely to be outstanding,” he said.

Earnings from the businesses that had been earmarked for sale would also be under the spotlight, according to Mr Wong-Pan, with investors trying to determine how much money could be achieved through the sales process.

[EnSabahNur]

John Lim Sees Real Returns With Li Ka-shing

Property tycoon John Lim quit worrying about having enough money in 2007. That was when ARA Asset Management went public and he cashed out part of his holdings as the company’s cofounder. “It was the biggest payday of my life,” says the group chief executive, who describes himself as an “ordinary guy” with a knack for spotting a good deal.

To celebrate Lim bought a secondhand Porsche 911 Carrera S, picking silver as the color because it wasn’t too flashy. He moved his growing staff into new quarters on the 16th floor of one of the Suntec City towers just above the crown jewel of his real estate empire, Suntec City mall. The mid-1990s office building is functional but, again, not too flashy. Lim says he didn’t consider slacking off and instead found himself working more. “It’s the passion that drives me now,” he explains. “After so many years I still love my business.”

Maybe that’s because business is booming. ARA–short for Asian Realty Advisors–encompasses eight real estate investment trusts, seven private real estate funds, a burgeoning property-management operation and more than 1,000 employees. The business spans 14 cities, from Dalian to Sydney. It boasts $20.2 billion in assets under management as of Mar. 31, and its shares are up more than 120% since 2007. He makes the Singapore list for the fifth straight year, with a net worth of $565 million–40% higher than a year ago.

http://www.forbes.com/sites/forbesasia/2...-ka-shing/

(Vested)

[EnSabahNur]

> Straits Trading is an old South East Asian company. So now ARA has made inroads into 2 important regions.


Chew Ghek Khim will do everything she can to open doors for ARA - be it bring funds or bring assets where Straits has connections.

That is quite true. In the latest issue of The Edge, the possibility of Tong Jin Quan buying a stake in Suntec REIT to remove management was brought up. Apparently John Lim had discussed this with Tong directly and Tong says he is going to be a passive investor only and may sell the units since he has made a tidy profit.

STC's acquisition of Suntec REIT units may be to stymie the attempt. Whether or not this is accurate is unknown, but Suntec REIT doesn't have a strong sponsor standing behind it. ARA would not have the financial ability to buy large chunks of Suntec REIT to prevent itself from being removed as asset manager. With STC there is at least a possibility of putting up a fight.

(Vested)

[greengiraffe]

> Straits Trading is an old South East Asian company. So now ARA has made inroads into 2 important regions.


Chew Ghek Khim will do everything she can to open doors for ARA - be it bring funds or bring assets where Straits has connections.

That is quite true. In the latest issue of The Edge, the possibility of Tong Jin Quan buying a stake in Suntec REIT to remove management was brought up. Apparently John Lim had discussed this with Tong directly and Tong says he is going to be a passive investor only and may sell the units since he has made a tidy profit.

STC's acquisition of Suntec REIT units may be to stymie the attempt. Whether or not this is accurate is unknown, but Suntec REIT doesn't have a strong sponsor standing behind it. ARA would not have the financial ability to buy large chunks of Suntec REIT to prevent itself from being removed as asset manager. With STC there is at least a possibility of putting up a fight.

(Vested)

S Trading is over-rated, apart from the victory over OCBC/GE/Lee Family on UE, they have done nothing since the late 80s. Share price performance has been equally disappointing as well.

Tong meant what he says - I think he is merely managing what is best for his money outside China.

Otherwise, in the asset bubbly global environment now, nearly everyone is finding bargain hunting a big headache let alone REITs...

Odd Lots Vested
S Trading, UE, Suntec

[greengiraffe]

http://www.businesstimes.com.sg/premium/...a-20140804

PUBLISHED AUGUST 04, 2014
ARA eyes investments in Australia and Korea
It plans more fund products as it further diversifies from the saturated China market
BYLYNETTE KHOO
lynkhoo@sph.com.sg @LynetteKhooBT

[SINGAPORE] ARA Asset Management, the manager of listed property trusts and private equity funds, is looking to deploy some of its dry powder in development projects in Australia and raise its firepower in South Korea by creating more fund products.
This marks further diversification from the saturated Chinese market, although China remains a key market for the pan-Asian fund manager, backed by Asia's richest man Li Ka-shing.
Investing into Australia and South Korea has become feasible given ARA's physical presence in these markets through recent acquisitions, ARA Private Funds chief executive Ng Beng Tiong told The Business Times.
The private equity arm's interest in Australia follows Suntec Reit's entry last November, when the ARA-managed Reit acquired land and property in North Sydney for A$413.19 million (S$480 million) to be developed into a Grade-A commercial tower. In South Korea, ARA acquired Macquarie Real Estate Korea Limited in April, which manages two privately held Korean Reits comprising office properties worth a combined 588.4 billion won (S$708.6 million).

[greengiraffe]

http://www.businesstimes.com.sg/premium/...s-20140804

PUBLISHED AUGUST 04, 2014
Skill and luck playing out in ARA's private funds
Most properties ADF I bought into have done well, except residential ones
BYLYNETTE KHOO
lynkhoo@sph.com.sg @LynetteKhooBT

Sweet and sour: ARA had derived significant returns from the partial conversion of the convention space at Suntec City (above), but the deal for units at Grange Infinite has been followed by tepid resales. - FILE PHOTOS
[SINGAPORE] The interplay of skill and luck often plays out in private equity investing - and this could well be seen in some of the most notable investments by ARA Private Funds.
A club deal sealed just over a weekend with a few other investors in 2009 to take over the Suntec convention centre reaped a sterling 65 per cent internal rate of return (IRR) for the initial investors of the fund, who exited in 2011.
But elsewhere, it was a less rosy picture for ARA's bulk purchase of condo units at upscale project Grange Infinite in 2008, which was met with a legal tiff with the developers and tepid resales since the introduction of the total debt servicing ratio (TDSR).
"There are some lessons to be learnt for us," said ARA Private Funds' chief executive Ng Beng Tiong, referring to the purchase of the units at Grange Infinite.

[gutman]

PUBLISHED AUGUST 05, 2014 Business Times
ARA Asset's Q2 earnings up 36% as revenue rises
It plans to launch billion-dollar fund before year's end, says group CEO
BY LEE MEIXIAN



ARA Asset Management's net profit for its second quarter ended June 30 rose 36 per cent to S$20.8 million, while its revenue climbed 17 per cent to S$40.4 million.
The Pan-Asian real estate fund manager's net profit was driven by higher revenue from recurrent management fees, acquisition, divestment and performance fees, as well as finance income and other income.
It also enjoyed new contributions from two recently launched Korean private real estate investment trusts (Reits), as well as two funds, Morningside Investment Partners and Straits Investment Partners.
At the same time, fees were also higher from two funds, ARA China Investment Partners and ARA Harmony Fund; the higher fees from ARA Harmony Fund came from the higher valuation of Suntec Singapore following the completion of the spruced-up convention centre.

[safetyfirst]

if you exclude the fair value gains from investments and the other income from the negative goodwill of the korean funds, there doesnt seem to be much growth in earnings

[gutman]

From DBS Vickers Securities:

Time to accumulate
- 2Q14 results in line
- Growth initiatives in place; ADF 3 to launch by end 2014; M&A potential in new markets of Japan/Australia
- Price weakness offers opportunity to accumulate, BUY, TPS$2.00

Highlights
2Q14 results in line. ARA’s reported 2Q14 PATMI of S$20.8m +36% y-o-y) on the back of a c17% rise in revenues to S$40.4m. The higher topline was mainly brought about by higher management fees due to expanded AUM for its listed REITs (+19% to S$18.6m). This is on the back of completed acquisitions (Cache, Fortune and Prosperity REIT), contribution from two-privately held Korean REITs (MREK) while higher valuations were achieved portfolio-wide post various AEI activities. This more than offset the dip in fees attributable to its private funds (contribution from ARA Asia Dragon Fund 2 (ADF2) and ARA China Investment Partners (CIP) and Morningstar Investment Partners) and lower fees from ADF1 as it enters its divestment phase. Topline was also boosted by higher finance income arising from gains in valuation/higher dividends from its stakes in listed REITs. Operating margins were at a normalized 56.3%. ARA also announced an interim DPS of 2.3 Scts/share, in line with previous years.

Our View
Growth initiatives in place; ADF3 to be launched by end 2014. The Manager is expected to reap the benefits of an active 1H14 from (i) AUM growth from its various managed listed REITs (Suntec, Fortune and Cache) through opportunistic acquisitions; (ii) contribution from recently acquired MREK and newly launched platform, Morningside Investment Partners (MIP) which added AUM of US$554m and US$240m, respectively, to ARA. Key focus for ARA going forward will mainly come from higher AUM growth from its private funds. We understand that its private funds (MIP and CIP) are currently reviewing deals and management expects to launch ADF3 by end 2014, targeting to raise US$1bn, which we expect to contribute only in 2H15.

Recommendation
Exploring more markets in Asia Pacific; Maintain BUY and S$2.00 TP. ARA is on the lookout to grow its presence in Japan and Australia either through M&A and/or accumulation of assets through its various vehicles. Maintain BUY and SOTP-based target price of S$2.00 pegged at (i) 20x PE on REIT/Funds business and (ii) market price of its REITs. Share price has been weak recently, which presents an attractive accumulation opportunity.

[gutman]

From UOB Kayhian :

ARA Asset Management (ARA SP)
2Q14: On A Firmer Footing, Upgrade To BUY
ARA is on a firmer footing with STC-related companies emerging as the largest holder of Suntec REIT, while the recent share price correction (9% from recent high) provides a buying opportunity. Looking ahead, ARA is building on its fund management platform for the long term with the impending launch of ADF III while exploring overseas opportunities in China, Korea, Japan and Australia. Near-term catalysts would be a major acquisition by a REIT and performance fees from ADF I. Upgrade to BUY with an unchanged target of S$1.94.

RESULTS
• Results in line with expectations. ARA reported a 36% rise in 2Q14 PATMI to S$20.8m due to higher recurrent management fees post-REIT AEIs and acquisitions undertaken in 1H14, together with higher performance fees from acquisitions, higher finance income from fair value gains of financial assets and also higher distribution of income of S$1.8m from ongoing divestments at ADF I. 1H14 net profit of S$38.7m is in line with expectations at 46% of our full-year forecast.

• 1H14 assets under management (AUM) growth of S$0.7b remained primarily driven by the REITs (+S$1.2b, +7%), offset against ongoing divestments by private funds’ AUM (-0.2b, -5%) and as private funds capital were deployed (-0.3b, -27%).

• ARA declared an interim dividend of 2.3 S cents (unchanged yoy)


STOCK IMPACT
• On a firmer footing with Straits Trading (STC)-related companies emerging as the largest holder of Suntec REIT with a 6% stake in the largest REIT within ARA’s portfolio. This commitment of approximately S$270m, in our view, demonstrates STC’s commitment to ARA beyond its initial S$1b in capital commitments to grow ARA’s private real estate fund business. Suntec REIT is a pivotal asset in ARA’s property funds and REITs portfolio, accounting for a one-third contribution to both AUM and to total fee income.

• Look forward to the launch of ADF III, which is expected to be launch by end-14 with a target fund size of US$1b. The launch is contingent on ADF II deploying 75% of its funds with the first closing for ADF III targeted for 1Q15 with 25-33% of capital committed. We believe that the timeline for ADF III will likely coincide with the divestment phase of ADF I, allowing investors in ADF I to redeploy capital returned back to an ARA-managed fund. The divestment phase for ADF I is ongoing, with 6 of 14 major assets already divested. Five malls in Malaysia have also been put up for sale following the completion of AEI at the properties. ADF I has returned 88% of invested capital, and is targeting to fully divest its assets by 2015.

• Further potential from overseas investments including a new REIT platform in Korea which will enable ARA to potentially launch more single-asset REITs, while ARA continues to explore potential development opportunities through Summit Development Fund (SDF) and asset acquisitions in Australia under its current REIT platforms. ARA is also looking to acquire a private/public real estate fund platform in Japan to ease entry into the largest REIT market in Asia. Investments into China continue to be driven through the private funds platform.

VALUATION/RECOMMENDATION
• Upgrade to BUY with an unchanged target price of S$1.94. Our target price is based on a sum-of-the-parts (SOTP) methodology, which comprises: a) the DCF-derived enterprise value of ARA's stable fee-based earnings stream, assuming 2.0% terminal growth and 7.7% required rate of return, b) strategic stakes in REITs and private funds, and c) net cash.

SHARE PRICE CATALYST
• Launch of new REITs and new private property funds.
• Acquisition of REIT managers.
• Acquisitions, AEIs and rental income growth for the REITs under management.
• Performance fee income from ADF I.