ARA Asset Management

[Boon]

1H2014 results (all in SGD) :

AUM (Total):
As at FY 2013 = 25.1 billion
As at 1H2014 = 25.8 billion = 2.6% increase.

AUM (Reits):
As at FY 2013 = 18.2 billion
As at 1H2014 = 19.4 billion = 6.7% increase (“Above 10% growth rate, if annualized”)

Total Revenue (million):
1H2013 = 64.130
2H2013 = 76.266 (18.9 % increase compared to 1H2013)
1H2014 = 78.610 (23.0 % increase compared to 1H2013 ; 5.4% increase compared to 2H2013)

NPAT (million):
1H2013 = 32.111
2H2013 = 42.139 (31.29 % increase compared to 1H2013)
1H2014 = 38.664 (20.0 % increase compared to 1H2013 ; 8.2% DECREASE compared to 2H2013)

Management Fees (million):
1H2013 = 56.155
2H2013 = 57.848 (3.0 % increase compared to 1H2013)
1H2014 = 60.984 (9.0 % increase compared to 1H2013 ; 5.4% increase compared to 2H2013)

Acquisition, divestment and performance fees (million):
1H2013 = 2.292
2H2013 = 12.379 (440.0 % increase compared to 1H2013)
1H2014 = 3.216 ( 40.0 % increase compared to 1H2013 ; 74.0 % DECREASE compared to 2H2013)

Finance Income (million):
1H2013 = 5.640
2H2013 = 5.943 ( 5.4 % increase compared to 1H2013)
1H2014 = 12.190 (116.0 % increase compared to 1H2013 ; 105.0% increase compared to 2H2013)

Administrative Expenses (AE) - (million):
1H2013 = 20.363
2H2013 = 21.105 ( 3.6% increase compared to 1H2013)
1H2014 = 25.059 (23.0 % increase compared to 1H2013 ; 18.7 % increase compared to 2H2013)

Comments:
1) Total AUM is still growing but at SLOWER pace – only grown 2.6% over 1H2014.
2) AUM for Reits is still growing at above 10% on annualized basis.
3) Total revenue is still growing - though at slower pace – but ahead of total AUM growth rate.
4) Net Profit looks GREAT compared to 1H2013 but it actually DECREASES compared to 2H2013 - .
5) Management Fees (recurring revenue) is still trending up.
6) Acquisition, divestment and performance fees (ADPF) - are non-recurring irregular one-off fees which could fluctuate up and down greatly from quarter to quarter and from year to year – So is Finance Income (FI) which contains a few one-offs. Potentially, ADPF and/or FI could drag the headline NPAT in a particular year down –it hasn’t happen yet on y-o-y basis - would not be too concern if it does happen - once in a blue moon.
7) Interestingly, comparing 1H2014 to 2H2013, revenue seems to have grown at a faster rate than AUM ; but NPAT has DECREASED 8.2% – what has contributed to this? A combination of “Drag down by 74% decrease in ADPF” & “18.7% increase in AE”, I suppose.
8) Administrative Expenses has grown at a faster rate than revenue – it is a concern.

(vested)

[greengiraffe]

Got no vested interests here and may sound like a wet blanket but i just got to air my views or I will be drowned to death should I hold back...

Basically, John and CK have been off their backs with S Trading being the heroine here. The basic rule of thumb here - when HK Superman sells, you better think thrice.

Paying such multiples for a fun manager at such cycle in the global real estate markets is simply unwise. If i m not wrong, S Trading paid around 5x P/B for the fun manager and committed to invest big money to become the next Blackrock/stone (I just hope S Trading don't get black eyed eventually).

Armed with cash hoard scouting for opportunities in a global bubbly real estate environment is a potent combination for accident.

Anyway, like i say, I have no vested interests here - just clearing my mind.

I m sorry if I have offended any buddies in any way with my above rubbish.

No Vested Interests
A Thousand Apologies In Advanced
GG

[CityFarmer]

Got no vested interests here and may sound like a wet blanket but i just got to air my views or I will be drowned to death should I hold back...

Basically, John and CK have been off their backs with S Trading being the heroine here. The basic rule of thumb here - when HK Superman sells, you better think thrice.

Paying such multiples for a fun manager at such cycle in the global real estate markets is simply unwise. If i m not wrong, S Trading paid around 5x P/B for the fun manager and committed to invest big money to become the next Blackrock/stone (I just hope S Trading don't get black eyed eventually).

Armed with cash hoard scouting for opportunities in a global bubbly real estate environment is a potent combination for accident.

Anyway, like i say, I have no vested interests here - just clearing my mind.

I m sorry if I have offended any buddies in any way with my above rubbish.

No Vested Interests
A Thousand Apologies In Advanced
GG

ARA is in my watch-list. I do have similar concern as GG, thus the company remains in watch-list.

(not vested, but monitoring)

[sykn]

Very interesting - I came to the same conclusion not to go in after doing my own analysis. I must concede that this is a very attractive-looking stock (no pun intended) with its high ROE and after S-Trading got involved, but after several rounds of parameter relaxation (to give me an excuse to buy), I still ended up with a razor thin MOS, so I decided not go in. When it goes down to $1.00, I might consider. Thanks for all your frank views.

[EnSabahNur]

Got no vested interests here and may sound like a wet blanket but i just got to air my views or I will be drowned to death should I hold back...

Basically, John and CK have been off their backs with S Trading being the heroine here. The basic rule of thumb here - when HK Superman sells, you better think thrice.

Paying such multiples for a fun manager at such cycle in the global real estate markets is simply unwise. If i m not wrong, S Trading paid around 5x P/B for the fun manager and committed to invest big money to become the next Blackrock/stone (I just hope S Trading don't get black eyed eventually).

Armed with cash hoard scouting for opportunities in a global bubbly real estate environment is a potent combination for accident.

Anyway, like i say, I have no vested interests here - just clearing my mind.

I m sorry if I have offended any buddies in any way with my above rubbish.

No Vested Interests
A Thousand Apologies In Advanced
GG

I agree. Buying from Li Ka Shing is usually a bad move
(vested)

[Boon]

Total AUM = 25.8 billion (1H2014)

Reits AUM = 19.4 billion = 75% of total AUM

EPS = 8.79 cents (FY2013)

EPS = 4.57 cents for 1H2014 = 9.14 cents if annualized.

High PE implies high forward growth expectation.

Assuming:
1) ARA could not grow anymore in year= Y
2) Reits AUM = 90% or more of total AUM = pretty stable business
3) EPS = X
4) DPU = 0.9 x EPS (pay out 90% of earning)

Questions:
1) What is Y or when would it likely to happen?
2) What would X be then ?
3) DPU = 0.9 X
4) How would one value ARA then?
5) What if X = 12.5 cents ( implied DPU = 11.25cents ), what would be the fair value of ARA?

(vested)

[Layman A]

Has the golden era of ARA superb growth model coming to an end ?

Given that much of the free lunch provided by Chung Kong a.k.a Li Ka Shing
has run out. ( pipeline of prime shopping malls and grade A offices ready of REIT listing )

Performance of fund management has not been consistent.
( 53 units at upscale condominium Grange Infinite is one good example )

And for fund management business you need to find enough investors to cough out the seed money.
( They have manage to find one big CARROT ( S Trading ) so far, but going forward it will be increasingly difficult to find more CARROT. )

At PE ratio close to 20X , expectation ( Share Price ) are running far ahead of fundamental.

Just my personal opinion.
ARA is still a goose that lay golden eggs ( which other company listed in SGX can have net profit margin of more than 50% ? )
But the expectation of ARA repeating the kind of growth in the past 10 years is simply impractical.

[specuvestor]

Agree with GG. Been skeptical since the deal was done. Personally the main question I want to ask is how much of the SG&A increase is due to payments to Managers?

Maybe I am biased against against STC. Just not impressed with their original fight with OCBC over control of STC. loaded up with debt just before the crisis. Worst timing.

The party on the other side are the smartest money around. Best record for selling near peak.

^^ That's my observation as well. Maybe not best record but pretty good... probably tips from a page of Superman's books And Superman tends to sell 6-12 months early.

IMHO probably best record in feeding themselves silly

http://www.valuebuddies.com/thread-223-p...l#pid65578

Straits Trading obviously has more aligned interest with ARA than Cheung Kong. For Straits Trading, ARA is its new strategic direction. Straits Trading could co-invest with ARA and probably even buy more shares if its share price drops to certain level. For Cheung Kong, ARA is nothing. Whether ARA @20 cents or ARA @ $2 probably does not move a needle.

In a way, Straits Trading is a close partner but Cheung Kong probably is an outsider at least now, probably in the future.

However, ARA should watch its SG&A expense. It is running faster than its revenue.

^^ Agree, but the other way to look at it is ARA is not where it is without CK. For some reason LKS is willing to give John Lim a hand.

Remains to be seen if Straits Trading can give a better hand

The SG&A is again running ahead of revenue

[freedom]

Since you come from investment banking or know about investment banking, among of the fees earned, how much percentage is paid to the investment bankers? How much is left to the bank itself? If I am not wrong, more than 50% is paid as SG&A.

From that angle, I feel investment managers from ARA are not that overpaid compared to investment bankers.

[specuvestor]

I think you are confusing shareholders' return with managers' return. When times are good nobody cares about the latter as long as committed capital is low.

You highlighted ARA should watch their SG&A which I agree. I am just reiterating the outstanding basic concern based on the latest results, or that's not a concern anymore?