Saturday, March 2, 2013

ARA Asset Management - Good Business, Great Stock?

ARA Asset Management is an Asian real estate fund management company that focuses on the management of public-listed real estate investment trusts (REITs).  ARA is listed on the Singapore Stock Exchange and is also an affiliate of Cheung Kong Group (whose chairman is currently Li Ka Shing).

Company Info

ARA was listed on SGX on 2 Nov 2007.  It manages various REITs that are listed on both the SGX as well as the HKSE and Malaysia Stock Exchange.  REITs that it manages includes Hui Xian REIT (HKSE), Cache Logistics Trust (SGX), Fortune REIT (SGX).

Based on its website, its business strategies include generating attractive returns for investors in REITs and private funds as well as growing real estate assets under management of the REITs managed by ARA.  It has also started to grow its private real estate fund management business through the establishment of closed-end funds that focuses on Asian real estate.

Reasons to Buy

While the stock trades above its net asset value (NAV), ARA has been growing its business steadily over the years.  Its earning are almost recession proof. Rain or shine, it earns recurring frees from its managed REITs and private funds.

ARA has also been able to increase both its revenue and earnings since the time it was listed on the SGX.  This is even during the global financial crisis period.  It also has plans to grow its business and assets under management.

Reasons to be Cautious

With its current stock price of S$1.875, it is trading at PE of almost 20 which is a premium to other global asset managers.  DBS also has a HOLD call on ARA with target price adjusted to S$1.94.

Latest News

ARA has proposed a 1-for-10 bonus issue.  It has also declared a final dividends per share of 2.7 Singapore cents.  Bonus units will also be entitled to this dividend.

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