ARA Asset Management

[freedom]

Hi nerveofsteel,

The reason I did not compare to previous few years is that the revenue was much lower than today. Revenue wise, FY2007 was around 1/2 of today's, and FY2008 was slightly above 1/2 of today's. Net profit margin should be significantly higher because of economy of scale, unless we are talking about its inability to scale.

Plus, the business model has changed significantly. Last time it consumes very little capital; today, it consumed more than US$100 million.

Plus, its recent record of disposal of REIT units received as fee was bad. It did not sell it when the unit price was high enough and the lock period passed, instead, sell it when the unit price was much lower and almost the bottom. Of course, I don't expect it to make profit on units issued as fee, but at least it should try its best to break even. Recently, it has stopped selling the units received as fee. It got me worried greatly.

[CityFarmer]

Hi nerveofsteel,

The reason I did not compare to previous few years is that the revenue was much lower than today. Revenue wise, FY2007 was around 1/2 of today's, and FY2008 was slightly above 1/2 of today's. Net profit margin should be significantly higher because of economy of scale, unless we are talking about its inability to scale.

Plus, the business model has changed significantly. Last time it consumes very little capital; today, it consumed more than US$100 million.

Plus, its recent record of disposal of REIT units received as fee was bad. It did not sell it when the unit price was high enough and the lock period passed, instead, sell it when the unit price was much lower and almost the bottom. Of course, I don't expect it to make profit on units issued as fee, but at least it should try its best to break even. Recently, it has stopped selling the units received as fee. It got me worried greatly.

Let's me weigh in, while pending for nerveofsteel's reply.

I do agree the NPM is eroding, but I don't think it is due to operational inefficiency or "inability to scale". It is more of a structural issue, which is more and less solved by recent JV with Madam Chew from STC, IMO

For ARA strategy to work, it needs a strong sponsor. The role has been played by Li Ka-Shing's Cheung Kong Holdings, but the role is ceasing to function, due to whatever reasons. Without the support, ARA needs to provide seek capitals for growth. That is one major reason for the increase in debt recently. The approach will not make a sustainable growth of ARA because its business model never a capital intensive one.

Madam Chew and her STC filled in the sponsor role, to ensure the growth of ARA, without stressing on its balance sheet.

That is my reason to disregard the NPM erosion, because it will be solved in due course. I am not worry at all

(not vested)

[opmi]

I feel that STC don't have a great track record leh.

[freedom]

Let's me weigh in, while pending for nerveofsteel's reply.

I do agree the NPM is eroding, but I don't think it is due to operational inefficiency or "inability to scale". It is more of a structural issue, which is more and less solved by recent JV with Madam Chew from STC, IMO

For ARA strategy to work, it needs a strong sponsor. The role has been played by Li Ka-Shing's Cheung Kong Holdings, but the role is ceasing to function, due to whatever reasons. Without the support, ARA needs to provide seek capitals for growth. That is one major reason for the increase in debt recently. The approach will not make a sustainable growth of ARA because its business model never a capital intensive one.

Madam Chew and her STC filled in the sponsor role, to ensure the growth of ARA, without stressing on its balance sheet.

That is my reason to disregard the NPM erosion, because it will be solved in due course. I am not worry at all

(not vested)

We are looking at completely different perspectives of ARA. The ARA I liked was a REIT manager, that's a great business model. The ARA as a fund manager is not a great business. The capital requirement is high, but the return is not that great compared to REIT management, though fund management is easier to scale, competition is high.

[CityFarmer]

I feel that STC don't have a great track record leh.

IMO, a new role of Cheung Kong Holdings, is to provide stability and assurance of operation continuity.

Cheung Kong and John Lim = 7.8% + 19.3% (= 27.1%) , versus STC 20.1%.

Of course, with the change, MOS has to be higher, comparing with previous setup, IMO

[opmi]

I feel that STC don't have a great track record leh.

IMO, a new role of Cheung Kong Holdings, is to provide stability and assurance of operation continuity.

Cheung Kong and John Lim = 7.8% + 19.3% (= 27.1%) , versus STC 20.1%.

Of course, with the change, MOS has to be higher, comparing with previous setup, IMO

CK probably passive investor on ARA stake. Will follow what John Lim do. the stake now costs less than a house on the Peak...hahhaa..

Hutchison Whampoa Ltd. (13), controlled by Li Ka-shing, Asia’s richest man, sold a house in Hong Kong’s Victoria Peak area for HK$740 million ($95 million), the second-highest paid for such property in the city.
The 6,863 square-foot (638 square-meter) house at the seven-home, 28 Barker Road project was sold to an unidentified buyer, according to the project’s website. The price is the second-highest paid in the city after a house on Pollock’s Path in The Peak area sold for HK$800 million in 2011, according to broker Colliers International.

[Contrarian]

STRAITS Trading Co, an investor in Singapore's biggest publicly traded property trust manager, is planning "Blackstone-like" funds as Asia's appetite for real estate investments increases.

Straits Trading last month invested in ARA Asset Management Ltd, the property trust manager partly owned by billionaire Li Ka-shing, and set up a joint venture with ARA's chief executive officer John Lim to invest in property funds.

The funds, with an eight-to- 10-year time-frame, will seek to follow the model of Blackstone Group LP, the world's biggest manager of alternative assets including real estate, according to Chew Gek Khim, executive chairman of Straits Trading.

[nervesofsteel]

Hi nerveofsteel,

The reason I did not compare to previous few years is that the revenue was much lower than today. Revenue wise, FY2007 was around 1/2 of today's, and FY2008 was slightly above 1/2 of today's. Net profit margin should be significantly higher because of economy of scale, unless we are talking about its inability to scale.

Plus, the business model has changed significantly. Last time it consumes very little capital; today, it consumed more than US$100 million.

Plus, its recent record of disposal of REIT units received as fee was bad. It did not sell it when the unit price was high enough and the lock period passed, instead, sell it when the unit price was much lower and almost the bottom. Of course, I don't expect it to make profit on units issued as fee, but at least it should try its best to break even. Recently, it has stopped selling the units received as fee. It got me worried greatly.

Let's me weigh in, while pending for nerveofsteel's reply.

I do agree the NPM is eroding, but I don't think it is due to operational inefficiency or "inability to scale". It is more of a structural issue, which is more and less solved by recent JV with Madam Chew from STC, IMO

For ARA strategy to work, it needs a strong sponsor. The role has been played by Li Ka-Shing's Cheung Kong Holdings, but the role is ceasing to function, due to whatever reasons. Without the support, ARA needs to provide seek capitals for growth. That is one major reason for the increase in debt recently. The approach will not make a sustainable growth of ARA because its business model never a capital intensive one.

Madam Chew and her STC filled in the sponsor role, to ensure the growth of ARA, without stressing on its balance sheet.

That is my reason to disregard the NPM erosion, because it will be solved in due course. I am not worry at all

(not vested)

I think freedom's fears are not totally unfounded. Yes, business model of Ara has moved towards private funds now. But personally I think that's not a bad sign as private funds generate higher mgmt fees than reits. On the flip side, reits provide a perpetual recurring base for ARA which is what investors like. I also believe that though the focus is now on private funds, it is likely also due to unfavourable climate in listing a reit now compared to the past. The end of a private fund can also be a prelude to the next reit for ARA in future. Besides, ARA is not abandoning its reit model, it is also growing the reits organically rather than setting up a new reit. This may be the economies of scale freedom talks about.

Regarding ARA's record of disposal of reit units, it should be noted that all in all ARA's record on disposal of reit units has been overall positive over the last few years. In 2012, there was a net gain of S$11 mil and a loss of S$6 mil in 2011.Over last 5 yrs it was also a net positive even if we include 9m13 results.

[freedom]

If private equity or fund management is the focus, there are plenty of US fund managers listed. They have much larger asset under management and much longer track record. And cheaper in terms of PE. e.g. BX, KKR, etc.

To me, the REIT management part is the most valuable part of the company. It is worth 20x PE. It takes very little capital to make a good and stable profit year after year, possible for the next 20 - 50 years.

[opmi]

If private equity or fund management is the focus, there are plenty of US fund managers listed. They have much larger asset under management and much longer track record. And cheaper in terms of PE. e.g. BX, KKR, etc.

To me, the REIT management part is the most valuable part of the company. It is worth 20x PE. It takes very little capital to make a good and stable profit year after year, possible for the next 20 - 50 years.

Paying PE 20x for 'assets' that walk in and out of the company's door every day?