Their job is to ensure that the REIT optimises its returns for shareholders. They might do this by enhancing the value of the properties, making sure the properties are properly maintained and ensuring that the properties have the right mix of tenants. They could also make strategic acquisitions to help reduce investor risk.
ARA Asset Management (SGX: D1R) is a REIT manager. Its portfolio of properties include Suntec REIT (SGX: T82U), Hong Kong focussed Fortune REIT (SGX: F25U) and AmFirst REIT (KLSE: AMFIRST), which is located in Malaysia. That is the first thing to like about ARA Asset Management – its geographic diversification. Around 70% of the company’s revenues are generated in Singapore, while the remainder comes from Hong Kong, China and Malaysia.
ARA Asset also has an enviable dividend track record. That is the second thing to like about the company. Since paying its first dividend of S$0.03 in 2007, the distribution has increased to S$0.05 cents, as of last year. The payout ratio is around half the annual profits that the company makes, so there is plenty left in the tank. At the current share price of S$1.80, the historic yield is about 2.8%.
The third thing to like about ARA Asset Management is its exceptionally high Return on Equity (RoE). At almost 29%, its RoE is more than three times higher than the median value for the 30 companies that make up the Straits Times Index (SGX: ^STI). The company’s extraordinary RoE is the product of a high Net Income Margin, an acceptable Asset Turnover and a small Leverage Ratio.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.