ARA Asset Management

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(18-09-2013, 12:04 PM)valuehunter Wrote:
(18-09-2013, 11:55 AM)Nick Wrote: Annualizing the 1H 13 recurring EPS gives a figure of 6.40 SG cents. Assuming we value this recurring business at PER of 25, this translates to $1.60 (incidentally close to the price John Lim purchased last week). If we use a PER of 20, we get $1.28.
(Odd Lots Vested)

May i ask why you would value the recurring business at 20-25x PE? Is this the norm in the industry? Eg. compared to similar listed co in US for example?

There isn't any local comparable - both GLP and CMA keep their reit management unit unlisted. For example, Value Partners listed in HK (equity fund manager) trades at PER > 20.

I don't think it is strange for high PER in this case - the recurring business has a pretty deep moat since REIT Managers are difficult to replace (and impossible if the sponsor has 25% + 1 stake) and while property AUM is variable, it doesn't suffer the fluctuations seen in open ended fund. And historically, ARA has traded at pretty steep PER. Of course, all things carry risk and its up to the individual investor to decide where the margin of safety lies.

I wish to clarify that I am not saying ARA should trade at that PER band. I did mention that PER is the variable here - if you deem, PER of 10 is fair value, then 64 cents will be the value of the recurring business etc. Its up to the individual investor to decide. I just wished to highlight that one can use the recurrent net profit to help value this fund manager (and my post wasn't meant to justify its market valuation).
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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Please refer to page 28 of the following document from PWC: Asset Management Company Valuations

http://www.pwc.com/en_US/us/asset-manage...s-2012.pdf

The report was based on US data, nonetheless………..

Valuation metrics:
1) PE
2) EV/EBITDA
3) P/AUM

I think one has to factor in the following as well
- dividend payout
- growth : AUM has been growing every year – if growth rate could be maintained – justifiable for higher premium and hence higher PE

(Vested)
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
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(18-09-2013, 12:25 PM)Nick Wrote:
(18-09-2013, 12:04 PM)valuehunter Wrote:
(18-09-2013, 11:55 AM)Nick Wrote: Annualizing the 1H 13 recurring EPS gives a figure of 6.40 SG cents. Assuming we value this recurring business at PER of 25, this translates to $1.60 (incidentally close to the price John Lim purchased last week). If we use a PER of 20, we get $1.28.
(Odd Lots Vested)

May i ask why you would value the recurring business at 20-25x PE? Is this the norm in the industry? Eg. compared to similar listed co in US for example?

There isn't any local comparable - both GLP and CMA keep their reit management unit unlisted. For example, Value Partners listed in HK (equity fund manager) trades at PER > 20.

I don't think it is strange for high PER in this case - the recurring business has a pretty deep moat since REIT Managers are difficult to replace (and impossible if the sponsor has 25% + 1 stake) and while property AUM is variable, it doesn't suffer the fluctuations seen in open ended fund. And historically, ARA has traded at pretty steep PER. Of course, all things carry risk and its up to the individual investor to decide where the margin of safety lies.

I wish to clarify that I am not saying ARA should trade at that PER band. I did mention that PER is the variable here - if you deem, PER of 10 is fair value, then 64 cents will be the value of the recurring business etc. Its up to the individual investor to decide. I just wished to highlight that one can use the recurrent net profit to help value this fund manager (and my post wasn't meant to justify its market valuation).

Thanks for the clarification Nick!
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(18-09-2013, 11:34 AM)Jacmar Wrote:
(18-09-2013, 11:13 AM)valuehunter Wrote: However may i ask how does one ascertain the fair value of this business? PE, PB wise doesn't seem very appealing. By what metrics should one value this company?

Well according to John Lim in one of his presentations when asked this question he said it should be around 5% of AUM and he said this is what similar companies in US is also trading at. That being the case then fair value should be about 1.53 with latest AUM. So why is he buying at a premium to fair value. 2 scenarios:

1. to support his share price under attack
2. he thinks the aum is going up soon. given the latest fortune reit deal, aum will go up.

Everything considered, I think current share price is about right at fair value.

not vested....no discount to fair value.

How do you get the $1.53 figure? Need to divide AUM by no. of shares? If so, you may have used the Pre-Bonus issue nos. Using post-Bonus Issue nos., it drops to $1.39....Confused
Post-FortuneREIT acquisition, a quick ball-park estimate (using +$1Bil to AUM) is ~$1.45. Perhaps a revaluation for SuntecREIT (with the completion of Phase AEI) may bring it a bit higher... Still, lower than current market price... Let's throw in some premium due to their continued growth in AUM and pray that it continue to grow... Cool

Reference
- Q213 Financials
- Q213 Presentations
Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks
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What I think you all may not have noticed is he sold 1 million shares of CACHE REIT few days earlier to trade the sale proceeds to buy ARA. Smart choice indeed!!!
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(18-09-2013, 06:14 PM)Contrarian Wrote: What I think you all may not have noticed is he sold 1 million shares of CACHE REIT few days earlier to trade the sale proceeds to buy ARA. Smart choice indeed!!!

They were two different thing.

If I am not mistaken, it was ARA, the manager who sold the shares of Cache Logistic, and that was actually the fee paid to ARA.

The recent purchase of ARA shares itself was in the CEO John Lim's personal capacity.
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ARA Asia Dragon Fund selling assets
Posted on 28/08/2013
Vasantha Ganesan

ARA Asia Dragon Fund, a fund affiliated with Hong Kong’s richest man Li Ka-shing’s Cheung Kong Group, plans to divest all five of its assets in Malaysia in the second quarter of 2014 but will acquire new assets along the way.

The five shopping centres – 1 Mont Kiara, Aeon Bandaraya Melaka, Ipoh Parade, Klang Parade and Citta Mall – are expected to be ripe for sale once the ongoing renovation and refurbishment exercise, costing in excess of RM200 mil, is complete in the first quarter of 2014.

“The renovation for each of the mall will be completed at different stages. The renovations should be done by first quarter of next year. The logical time to sell these malls is when the renovation is done,” ARA Private Funds CEO Ng Beng Tiong tells

FocusM

. ARA Private Funds is the manager of ARA Asia Dragon Fund.

Ng adds it hopes to see at least 20% in an internal rate of return (IRR). “Because we started building this portfolio since 2010, the holding period is not long. We are going to do well in terms of IRR,” he says. He adds that typically this fund looks at a three- to five-year investment horizon.

ARA as a group entered Malaysia in 2006 through a partnership with AmBank Group and the setting up of AmFirst Real Estate Investment Trust (REIT). “AmFirst REIT is primarily an office REIT but they do have a retail component.

“As for ARA Asia Dragon Fund I [ADF I], the focus has been on retail and in the span of 18 months we have acquired five malls.” Total investment in the five shopping centres with over 2.7 million sq ft of space is an estimated RM1.3 bil.

Ng is quick to point out the sale of assets that the fund holds will not necessarily be to AmFirst REIT. “In the case of a private fund, our investors’ interest will come first. It doesn’t matter if it’s AmFirst REIT, another REIT, the market or private investors. The important thing is we have to maximise the returns for the private funds’ investors.”

“If we do well for our investors, then they will come back to us and give us more money to manage,” he says, stressing that it has no obligation to sell to AmFirst REIT. “It will go to the highest bidder.”

ARA has already been approached by buyers but Ng says: “We are not in a hurry to sell as we want to get the renovations done first. If you have a portfolio of good malls, offering good yields, selling it will be a piece of cake.”

However, he adds that while the fund will dispose of the assets, it plans to continue managing the shopping complexes.

According to Ng, the fund – which now has a 200-strong staff in Malaysia – is looking at recurring income. “We want to continue the management of the five malls,” he says, indicating that ARA does a similar thing in Singapore, Hong Kong and China.

Ng says it is nevertheless open to discussion should an established mall operator prefer to purchase the mall as well as take over the management of the mall with its own team.

Despite the move to divest the five malls, ARA Asia Dragon Fund has plans to acquire more properties in Malaysia and it is not limiting itself to shopping complexes.

It is now in talks – all in various stages of negotiation – with a handful of players, both for retail acquisition and for offices, predominantly in Greater Kuala Lumpur.

Ng says Ara Asia Dragon Fund II (ADF II) has raised US$441 mil (RM1.45 bil) as of August 2012 and adopted the same strategy as ADF I; its intention is to acquire more properties in Malaysia.

“Retail is our preferred asset class but the fund’s mandate allows us to invest in office and residential. For Malaysia, our strategy is for a portfolio investment.”

Ng points out that 1 Mont Kiara has an office component called Wisma Mont Kiara but it remains the only investment with an office component.

“We do not want to be a one-mall wonder. Rather, we want to create a portfolio of shopping malls and build an operational team to run the shopping malls.

“This way, we can distinguish ourselves from other fund managers in Europe and the US. These funds [in Europe and the US] are basically financial investors, whereas for us we have adopted a philosophy of investor-cum-operator.

“We want to operate our own assets. Based on our past experiences in Singapore, Hong Kong and China, only if we have control over the assets can we maximise the returns for the assets.”

Ng is unfazed at a possible influx of retail space from mall openings, expected to come onto the market over the next two years. According to him, the fund has a portfolio (dating from 2003) of 30 malls; all are in the mid-market region.

“Our experience is during SARS, the middle-market malls serving the community or catchment of residences or office crowds were recession-proof. These malls serve the daily needs of the people and are pretty defensive.

“We have a team that can run the middle-market malls very well. We are very clear on this sub-sector of retail and we are fully aware that there is quite lot of supply coming in Malaysia, and this is not new to us. The oversupply in China is worse than in Malaysia but the key is to identify the right asset and have the team to run the asset. This actually makes a distinction between success and failure.”

http://www.theantdaily.com/news/business...ing-assets

(vested)
Research, research and research - Please do your own due diligence (DYODD) before you invest - Any reliance on my analysis is SOLELY at your own risk.
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1 mont Kiara and Citta Mall are not the mainstream of retail mall in KL though. The occupancy rate for both malls are pity. The other three may be better. Lets see how good is the management to generate wealth for the shareholders.
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The following article was published on Sunday's Zaobao.

中国银行对放贷更谨慎 外资低价格收购资产的好机会

ARA私募基金总裁黄明忠受访时指出,金融危机后,由于银行对放贷更谨慎,中国许多中小房地产发展商面对资金紧张的问题,因此将一些运营中或正在发展的项目出售,而这都为ARA创造了以相对较低价格收购资产的好机会。

中国信贷紧缩闹“钱荒”,为本地上市的ARA资产管理公司(ARA Asset Management)带来更多收购良机。ARA私募基金已进军中国四个城市的购物中心和优质办公楼房地产市场,累计管理资产总值达30亿美元(约38亿新元)。

ARA私募基金总裁黄明忠日前受访时指出,金融危机后,由于银行对放贷更谨慎,中国许多中小房地产发展商面对资金紧张的问题,因此将一些运营中或正在发展的项目出售。

商业房地产市场价值收益较住宅房地产高
他说:“即使上市的大型房地产商尚未遇到信贷问题,但为了支撑受挤压的住宅房地产业务,也可能将购物中心和办公楼这类商业房地产项目卖出套现,这都为我们创造了以相对较低价格收购资产的好机会。”

从2008年开始,ARA已先后在南京、大连、上海和北京投资了六个商业房地产项目,累计资产总值达30亿美元。它看好商业房地产领域主要是因为中国城镇化进程加速,经济增长势头保持稳健,无论是商场还是办公楼的价值收益都有较大的上升空间。毕竟中国房地产市场从2000年开始才真正起步,二三线城市办公楼的平均资本价值每平方英尺只有几百新元,上海最优质办公楼每平方英尺达到1500新元,新加坡是3000元,香港则高达5000新元,差距分明。

此外,黄明忠认为,中国的房地产发展商在办公楼及商场的设计、运营管理方面同新加坡、香港还有一段距离,ARA在投资后能提供增值服务,例如经过设计改造或加强管理后推动租金和出租率上扬,令资产价值提高。“相比之下,住宅房地产市场不但受政府政策左右的程度较大,近几年当地住宅发展商的实力和水平也已取得迅速发展,没有什么空间能让我们来增值。”

2002年成立的ARA管理多个房地产投资信托,包括在新加坡上市的新达信托(Suntec REIT)、置富产业信托(Fortune REIT)、凯诗物流信托(Cache Logistics Trust),以及在香港挂牌的泓富产业信托(Prosperity REIT)、汇贤产业信托(Hui Xian REIT),以及在马来西亚市场交易的AmFIRST REIT 。

同时它还设有未上市的投资基金,例如规模达11亿3300万美元的亚腾基金I(Asia Dragon Fund)、已筹集了4亿4100万美元的亚腾基金II,以及于去年设立、初始资金承诺达5亿美元的中国投资伙伴基金(China Investment Partners)。这些基金的主要投资者都是美国退休基金。ARA把通过这些基金所筹得的部分资金投资在中国商业房地产市场,目标回报率介于10%至20%左右。

中国投资三经验
总结这几年在中国投资的经验,黄明忠认为,首先是“逆势而行”。
2008年金融危机发生,市场充满恐慌情绪时,ARA却开始了迈向中国市场的步伐,并选择以二线城市南京为开端,以16亿元人民币投资位于金融商业中心地段的优质办公楼。

黄明忠说:“市场低迷其实对我们是好事,能找到相对质优价廉的项目,我们相信越来越多外资企业将在二线城市扩展业务,所以持守到经济复苏时套现以取得不错的收益。结果,这座办公楼在第一年的出租率不到10%,第二年猛增至60%,第三年达到了90%,并且正如我们所预期的,租户中超过一半是跨国企业。”

其次,建立本土化团队。“房地产是一门很本土化的生意,它涉及与当地政府的关系、社会文化等多个方面。我们在中国组建了400多人的团队,主要负责对办公楼、商场的物业管理,而良好的物业管理对提升资产价值起着至关重要的作用。”

黄明忠以ARA在大连投资的一家购物中心为例,在不到三年的时间里,商场租金倍增,ARA今年将其出售,取得超过20%的投资回报。
他指出,ARA通过重新设计一些店面的布局和大小,增加流动摊位和可出租面积,组织周末促销活动等方式提高商品的多样性和客流量。虽然投资这个购物中心时它已经建成五年,但经过运营管理,显示出新活力。“商场与住宅和办公楼项目不同,要不断改变创造新鲜感才会顾客盈门。”

能让ARA在中国激烈的市场竞争中脱颖而出的第三个法宝就是自身的品牌效应。黄明忠说,随着新中两国友好往来的日益加深,来新受训的官员增加,ARA旗下新达城的名号早已远播神州,再加上ARA的一大股东是香港房地产大亨李嘉诚的长江实业,这样的背景实力也为公司在中国市场发展助一臂之力。

针对未来发展战略,黄明忠希望依照ARA目前的架构,同样在中国设立私募基金、产业信托和物业管理服务这三大业务板块。

他说:“现阶段ARA私募基金的投资者主要来自美国,我们根据投资者的风险和回报要求进行运作,例如亚腾基金就是高风险、高回报,目标回报率在20%左右,可投资于尚未建成的房地产项目,而中国投资伙伴基金则只投资在已建成的成熟商业房地产项目,目标回报率介于10%至12%。ARA计划在中国设立私募基金,吸引中国本土的投资者,我们也同样会根据投资者的不同需求推行相应的投资策略。另外,等待中国的法规政策开放后,公司也会在当地设立产业信托并挂牌上市。”

市场低迷其实对我们是好事,能找到相对质优价廉的项目,我们相信越来越多外资企业将在二线城市扩展业务,所以持守到经济复苏时套现以取得不错的收益。
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(29-09-2013, 09:49 PM)Boon Wrote: ARA Asia Dragon Fund selling assets
Posted on 28/08/2013
Vasantha Ganesan

ARA Asia Dragon Fund
, a fund affiliated with Hong Kong’s richest man Li Ka-shing’s Cheung Kong Group, plans to divest all five of its assets in Malaysia in the second quarter of 2014 but will acquire new assets along the way.

The five shopping centres – 1 Mont Kiara, Aeon Bandaraya Melaka, Ipoh Parade, Klang Parade and Citta Mall – are expected to be ripe for sale once the ongoing renovation and refurbishment exercise, costing in excess of RM200 mil, is complete in the first quarter of 2014.

http://www.theantdaily.com/news/business...ing-assets

(vested)

I thought ADF 1 was supposed to be in the divestment phase and return capital back to its investors in 2014 (along with our performance fees) ? Why are they planning to acquire more properties then ?

(Odd Lots Vested)
Disclaimer: Please feel free to correct any error in my post. I am not liable for anything. Do your own research and analysis. I do NOT give buy or sell calls and stock tips. Buy and sell at your risk. I am not a qualified financial adviser so I do not give any advice. The postings reflects my own personal thoughts which may or may not be accurate.
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