ARA Asset Management: Bagging a trophy asset

Friday, August 7, 2009

Growing its AUM. ARA Asset Management Ltd (ARA) announced its appointment as asset manager and convention and exhibition services provider for “Harmony Fund” post the fund’s purchase of Suntec Singapore International Convention & Exhibition Centre for S$235m. One of ARA’s managed reit – Suntec REIT, is a 20% stakeholder in this fund.

A strategic acquisition. We view this transaction as a strategic move for ARA as it will control both the convention centre and as manger of Suntec REIT - the adjacent office and retail mall. This will give ARA the free role in realizing the full potential of one of Singapore’s iconic asset amidst the re-making of downtown Marina Bay area with the upcoming Marina Bay Sands Resort.

Growing EPS by 10% in FY10. ARA is expected to earn management fees as asset manager & service provider for the fund, we project these fees to increase EPS in FY09 and FY10 to 6.6 Scts and 6.9 Scts respectively.

Maintain BUY, TP S$0.89. We have revised our valuation metrics to sum of the parts (SOTP) valuation, which is likely to reflect fully its strategic equity stakes in Suntec REIT and AmFirst REIT. Our SOTP valuation of S$0.89 offers 31% upside.


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