17 August 2016


Update: 17th Aug 2016 (Stock price of SGD 1.375)

Promising 1H16 results. Reiterate buy call with target price of SGD 1.5

ARA has returned 30% since we initiated a position in the company in 26 Feb 2016 (see initiation report published on 26 Feb 2016)

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ARA’s 1H16 revenue and net income were slightly above with our expectations (+10% / 7% YoY growth). REIT management fees were mainly boosted by Suntec REIT’s acquisition of 3 floors of strata office space at Suntec Tower 2 and Cache Logistics Trust’s acquisition of Australia properties in 4Q15. ARA’s Private Real Estate Funds segment also contributed to higher fees due to the acquisition of 2 commercial properties in China. We expect 2H16 revenue and net income to grow at ~5% YoY in 2H16 (due to higher base in 2H15). The company continues to execute well on its

Initiation Report & position initiated

AUM growth strategy. ARA established its 2nd private REIT in Korea (ARA-ShinYoung REIT No.2). We are optimistic that a combination of more attractive REIT regulation and the similar ‘reach for yield’ by South Korean investors (similar to investors in developed markets) has the potential to make South Korea an attractive 3rd home for ARA to grow its AUM. ARA China Investment Partners (anchored by CALPERS) has also secured another additional commitment of USD 500m, bringing the fund’s total commitment to USD 1.3bn.

Additionally, Suntec REIT (managed by ARA) has been rumoured to be one of the bidders (with another partner) for the Central Boulevard land tender (in Singapore) with a potential gross development value in excess of SGD 3.5 billion. The award of the tender (at the appropriate valuation to Suntec) has the potential to increase ARA’s AUM by ~5% when completed in 2019. The company continues to actively evaluation evaluating investment opportunities in Australia, South Korea and China for its various funds.

We reiterate our target price of SGD 1.5 for the company.

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