ARA Asset Management - DBS Research 2016-08-03: Delivering as promised

ARA Asset Management - DBS Research 2016-08-03: Delivering as promised ARA ASSET MANAGEMENT LIMITED D1R.SI 

ARA Asset Management - Delivering as promised

  • 1H16 NP +9% y-o-y from higher fees and distribution income.
  • Obtained US$500m additional capital for CIP and established ARA-ShinYoung REIT No.2.
  • S$0.8bn increase in AUM; on track to meet target.

Positioned to grow, BUY. 

  • Flushed with proceeds from the recent rights issue, ARA Asset Management (ARA) is well positioned to capture AUM through the launch of new fund products with capital partners. We expect ARA to grow AUM by S$2bn per annum. 
  • In addition, its staple of REITs under management has more than S$5bn in acquisition capacity which can be utilised to acquire and grow its AUM. 
  • We maintain our BUY call and TP of S$1.76. It currently trades at 15x FY17E PE, at the lower end of historical range, and implied EV/AUM multiple of 4.2%, below -1SD of its historical range.

1H16 results recorded strong growth; obtained US$500m additional capital for CIP. 

  • ARA reported 9% y-o-y increase in 1H16 net profit to S$39m, in line at 47% of our FY16E estimates, mainly led by higher management fees (+10%) and distribution income (+67%). 
  • ARA obtained US$500m additional capital for CIP and established its 2nd ARA- ShinYoung REIT, growing its AUM by S$0.8bn, on track to meet annual target of S$2bn.

Country desk strategy in target markets of China, South Korea and Australia. 

  • We are positive about the group’s focus on establishing a “Country Desk Strategy“. Apart from deepening its local expertise and gaining access to deals, we believe that it gives them the ability to cement relationships with brokers, corporates and capital partners. 
  • In addition, we believe that ARA stands ready to capture demand from onshore investors looking to invest outside of their home country.


  • We maintain our BUY call but raise our TP to S$1.76 based on 
    1. 18x PE on its FY16F recurring fee income; and 
    2. market price of its REITs and capital committed to its private funds.

Key Risks to Our View:

  • Execution risk. Given pre-determined timeframes for most of its private funds, assuming a prolonged downturn, ARA’s funds could be divesting in a down-cycle.

Rachel Lih Rui Tan DBS Vickers | Derek Tan DBS Vickers | 2016-08-03
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 1.76 Same 1.76