ARA Asset Management - DBS Research 2016-02-05: On route to greater heights

ARA Asset Management - DBS Research 2016-02-05: On route to greater heights ARA ASSET MANAGEMENT LIMITED D1R.SI 

ARA Asset Management - On route to greater heights 

  • Strong end to FY2015 as AUM reaches a new record at S$29.8m 
  • S$150m war chest; hunting in Asia to grow its AUM 
  • Aims to break new ground in Korea and Japan

Attractive valuations, BUY! 

  • The lack of newsflow and activity post the recent rights issue has resulted in a weak share price performance for ARA, which is unwarranted. 
  • We see 2016 as another banner year from the widely anticipated launch of Asia Dragon Fund 3 (estimated AUM of S$1.0bn and above) and earnings boost from the exit of Asia Dragon Fund 1, which is in the final stages of winding down. 
  • With 51% upside to our revised TP of S$1.57 after factoring in the rights issue, we maintain BUY! 

On route to its S$40bn AUM target. 

  • ARA’s assets under management (AUM) continued to grow in 2015, by S$3.1bn to S$29.8bn. This was driven mainly from acquisitions from its REITs and new capital raised from its private funds. 
  • We remain excited on the group’s prospects given its ability to anchor meaningful relationships with third party capital partners through its various real estate fund products.
  • This will aid in its push towards achieving an annual S$2bn AUM growth and medium term target of S$40bn in AUM. 

Positioned to capture opportunities. 

  • Armed with S$150m in capital from its recent rights issue, ARA is well positioned to capture opportunities that may arise in 2016. The group is hunting for deals in key markets of China, Australia, Korea and Japan. 
  • In addition, we understand that the group has invested close to S$200m as seed capital in its various funds, with an unrealized gain of US$21.7m, implying a return in the low-mid teens. 


  • We have adjusted our target price to S$1.57 based on 
    1. 18x PE on its FY16F recurring fee income; and 
    2. market price of its REITs. 

Key Risks to Our View: 

  • Execution risk. Given pre-determined timeframes for most of its private funds, a pro-longed downtown could result in the group not extracting full value upon exit of its various funds.

Derek Tan DBS Vickers | Singapore Research Team DBS Vickers | 2016-02-05
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.57 Down 1.79