(30-10-2013, 12:46 PM)gutman Wrote: [ -> ] (30-10-2013, 11:33 AM)gutman Wrote: [ -> ]A summary from DBS Group Research :
New wings
• Exciting times with Straits Trading Company as a new strategic partner
• Capital commitment of S$950m; could be multiplied up to S$10bn in potential AUM
• Growth trajectory accelerated; BUY, TP raised to S$2.08
Exciting times ahead with new strategic partner. ARA Asset Management Limited (ARA) and Straits Trading Company Limited
(STC) have announced a strategic collaboration to jointly invest in property. The transaction details: (1) STC will acquire a 20.1%
stake in ARA, from vendor share sales by Cheung Kong and John Lim, (2) ARA will manage STC’s entire real estate portfolio (ex
hospitality) and (3) STC and John Lim will set up a new S$950m co-investment vehicle (Straits Real Estate) to provide seed capital
for new fund products to be managed by ARA
Major shareholders not seen as cashing out. We do not see this transaction as a cashing out step as (i) John Lim, the founder,
continues to show his commitment through re-deploying his capital back into ARA’s business through a new co-investment
vehicle anchored by STC (capital commitment of S$950m), while (ii) Cheung Kong remains a significant supporter through their
stakes in its various managed REITs and 7.8% direct stake.
ARA to benefit from a huge warchest. The S$950m seed capital will form a major source of seed capital for co-investment
opportunities for ARA. This can be multiplied further assuming that it forms 10% of the new AUM that ARA intends to raise. As
a start, S$100m will be invested into a yet-to-be launched ARA development fund.
BUY, TP raised to S$2.08. With a much-needed strong war chest to accelerate its growth trajectory, we see exciting times
ahead for ARA. We have raised ARA’s TP to S$2.08 as we now peg 20x PeE to its AUM business (18x previously).
I think if we understand ARA's business and the impact of this deal sufficiently, current valuation is really not stretched.
The 40 bil AUM target would probably be reached earlier than expected following this alliance.
Hi, I'm new here. Hope I can share some of my thoughts to this as well.
Seems like quite some news for both ARA and STC. Given this is a ARA thread, I will keep my views to solely ARA.
The AUM of $40bil by 2016, as pointed out by you seems not difficult and I agree. Given that they are at $23.5bil now, with STC's assets of around 1 bil, that will make close to $25bil by end of this year. And it is also well publicized that John Lim's target of $2bil yearly through organic growth, that will give another $6 bil in the next 3 yrs to make $31bil. Given ARA's track record of one new REIT/fund yearly, plus their record of acquisitions (ie Fortune REIT's acquisition of Kingswood recently alone is worth $1bil), i should think 2bil a year is do-able.
Based on their press release, ARA's warchest now boost of close to 1bil of committed capital that can support up to 10bil in AUM. And if this also comes true, add 31 + 10, you have $41bil.
Importantly, if you trace the roots of STC Chairman, Chew Gek Khim and her ties with the Tan family, I believe this network is also another important consideration not to be undermined. Such business is all about who you know and how they can open doors for you.
Also not forgetting how much they will be getting from the PROMOD as ADF I is in divestment mode and end of their shelf life.
Lastly, i may be wrong, but I don't believe PE is a good gauge for such real estate fund management business. The more they manage, they more they buy, sell, the more management fees they earn. Hence, the more AUM they have, they more management fees they earn. And given the above, I believe with the AUM growth of $40bil, it should also work wonders for their shareprice.
My 2 cents worth that is. Vested.