ARA Asset Management

[shanrui_91]

Hi Shanrui,

Would you mind going into detail on what you mean?

Something that investor should be concerned about is the sponsorship of Dynasty by ARA which will reduce the shine of its attractive business model


Are you referring to them taking a stake in their REITs, which is a change in direction from their current model?

You are right, it is about their $100 million stake. likely that they will have to mark-to-market by accounting rule which means fluctuating profit due to volatile share price instead of asset value which is more stable. It will also reduce their ROE since they are probably only going to get the meagre dividend yield as return. Though I do notice that ARA charge Dynasty at a higher level at 0.3% asset value and 4.5% npi as well as a stake in the property manager like the way they manager Suntec Singapore. In any case, for as long as Dynasty is not listed, we should not draw too much conclusion.

[Salty]

Regarding the part on ROE, I would think that the ROE might not drop because equity is not enlarged. It's cash at the moment and its a drag. Investing the 100m away for dividend return actually increases return and increase ROE.

However, high ROE is no useful if company are unable to reinvest at the same rates. It's just a paper indication I feel.

Ara can generate similar ROE by expanding its aum and not really through investing their cash. Since the aum part cannot be bought via cash investment, a sponsorship using excess funds that return higher than deposits rate actually increases value.

They could return excess cash to shareholder but without the sponsorship investment they might not be able to get that extra aum from IPOing reits.<think of the external and internal manager debate>

Thus investing the 100m that can increase value abit plus getting the huge aum that has good ROE actually is a good solution.

That's my amateurish though on this.

Not vested

[Salty]

ARA Results will be out tonight after market closes.
I wonder if the cancellation of dynasty Reit IPO admin fees would affect it.

Results should be decent due to higher property prices.

Not vested(yet)

[Nick]

4Q2012 NET PROFIT UP 33% TO S$17.7 MILLION
FY2012 NET PROFIT ROSE 7% TO S$72.7 MILLION
TOTAL ASSETS UNDER MANAGEMENT JUMPED 12% TO S$22.1 BILLION
- Total revenue rose 9% to S$133.5 million
- Proposed 1-for-10 bonus share issue
- Proposed final dividend of S$0.027 per share

http://info.sgx.com/webcoranncatth.nsf/V...D00327546/$file/ARA-4Q2012-PresentationSlides.pdf?openelement [PPT Slides]

http://info.sgx.com/webcoranncatth.nsf/V...D00327546/$file/ARA-4Q2012-Results.PDF?openelement [SGX Announcement]

http://info.sgx.com/webcoranncatth.nsf/V...D00327546/$file/ARA-4Q2012-PressRelease.pdf?openelement [Press Release]

Note that the bonus shares will enjoy the final dividend of 2.70 cents and that the Management intends to maintain the cash dividend at 5.00 cents in FY 2013 notwithstanding the increase in share float.

(Vested)

[Salty]

Super stock

[safetyfirst]

The growth in net profits doesnt look too fantastic if we minus off the net gain on fair valuation of held-for-trading securities (as it is likely to be non-recurring).

[Contrarian]

The growth in net profits doesnt look too fantastic if we minus off the net gain on fair valuation of held-for-trading securities (as it is likely to be non-recurring).

AUM grew. 2016 plan is double current AUM to $40Bn... Let's hope they execute as per plan!!!

[Nick]

There are 3 major sources of recurring revenue for ARA - management fees, distribution income and share of associates result. All 3 segments experienced growth in FY 2012 and should continue to grow in FY 2013 with an increase in AUM. Granted, a decline in property valuation will affect them since base fees are pegged to AUM.

The Management has already started divesting ADF 1 property assets and if this continues, the need for Dynasty REIT may prove to be unnecessary. In the SGX announcement, ARA mentioned that ADF 1 divested "its property at 169 Electric Road, a 41-storey Grade-A Hong Kong office block in 4Q2012."

For more details of this highly profitable deal - http://hongkongbusiness.hk/commercial-pr...ctric-road

It must be noted that according to the latest Kay Hian analyst report, ADF 2 has started investing - US$304 mil Ascendas Towers in Shanghai.

(Vested)

[Salty]

Bro Contrarian,

Where do you get the 2016 double AUM plans?
Aggressive!

[Nick]

Bro Contrarian,

Where do you get the 2016 double AUM plans?
Aggressive!

Business Times (28 Nov 2012):

There are a few other "P"s to mind if one is part of ARA. Since its establishment in 2002, it has scaled two hurdles - the Sars epidemic and the Global Financial Crisis - but a third task is set before it: to double AUM to $40 billion in five years.

Source: http://www.bankingandfinance.com.sg/Sing...g%20league

The previous target was set in 2008 - to double AUM within 3 years to S$20 billion.

Business Times (21 Feb 2008):

SEEMINGLY undaunted by the global credit crunch, real estate fund and Reit manager ARA Asset Management is aiming to double its assets under management to more than $20 billion by 2011.

Source: http://propertyforesight.wordpress.com/2...ree-years/

I don't think blindly increasing AUM is going to be an issue - the real challenge is delivering what they promised to their investors ie double digit IRR, increasing dividends to reit unit-holders etc in order to entice more investments in the medium term.

(Vested)