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What Investors Need To Know About ARA Asset Management Limited’s Latest Earnings Release

ARA Asset Management

ARA Asset Management Limited (SGX: D1R), an Asian real estate fund management company, released its second quarter results on Monday.

The firm manages real estate investment trusts and private real estate funds, and provides real estate management and corporate finance advisory services. Some of the locally-listed REITs which are managed by ARA include Fortune Real Estate Investment Trust (SGX: F25U), Suntec Real Estate Investment Trust (SGX: T82U) and Cache Logistics Trust (SGX: K2LU).

The company reports its revenue under four different segments: Management fees; Acquisition, divestment, and performance fees; Finance income; and Other income.

For the first half of 2014, total revenue went up 23% year-on-year to S$78.6 million mainly due to a 9% rise in Management fees to S$61.0 million as a result of improved asset performance after various asset enhancement initiatives were undertaken in the REITs the company manages. Management fees are recurrent in nature.

Elsewhere, Acquisition, divestment and performance fees increased 40% to S$3.2 million due to acquisition fees received from Prosperity REIT’s (a Hong Kong-listed REIT) acquisition of 9 Chong Yip Street in January this year and Suntec REIT’s progressive payments for its acquisition of 177 Pacific Highway.

ARA’s net profit increased 20% year-on-year to S$38.7 million. Consequently, earnings per share rose by the same amount to 4.57 Singapore cents. An interim dividend of 2.3 Singapore cents per share was declared, unchanged from a year ago.

In April this year, ARA completed the acquisition of Macquarie Real Estate Korea Limited (now renamed as ARA Korea Limited), a real estate management company based in Seoul, Korea. Due to the acquisition, ARA currently manages two privately-held Korean REITs – ARA-NPS Real Estate Investment Company and ARA-NPS REIT No. 2 – which are invested in office properties. ARA received REIT management fees from managing these two private REITs for the first half of this year.

Just a month later in May, ARA launched the ARA Summit Development Fund I, L.P. The fund has a mandate to invest in real estate development projects and projects with value enhancement potential in Australia and South East Asia. This deal paves the way for ARA to manage assets in Australia, which will be a first for the company.

The following’s a quick comment given by Mr. John Lim, Chief Executive of ARA, regarding the company’s earnings:

“The Group continues to deliver a steady financial performance overall. We will continue to drive the growth in recurrent management fees through our existing REITs and private funds and in the establishment of new products.”

ARA’s shares closed at S$1.705 on Monday. That translates to a dividend yield of 2.9% and a historical PE ratio of close to 19.

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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 contributor Sudhan P owns shares in ARA Asset Management Limited.