Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on changes — just in case they’re material to our investing thesis. The Straits Times Index (SGX: ^STI) has slipped by 0.27% to 3,292 points after 16 of its 30 constituents had clocked losses for the day. Given that majority of the blue chips were in the red, let’s move outside the index for a closer look at some market beaters. ARA Asset Management Limited (SGX: D1R) has climbed by 1.76% to S$1.74 after posting solid double-digit growth in both…
Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on changes — just in case they’re material to our investing thesis.
The Straits Times Index (SGX: ^STI) has slipped by 0.27% to 3,292 points after 16 of its 30 constituents had clocked losses for the day.
Given that majority of the blue chips were in the red, let’s move outside the index for a closer look at some market beaters.
The real estate investment trust and private real estate fund manager scored a 35% year-on-year increase in revenue to S$130.8 million mainly due to a large increase in performance fees it had earned on its ARA Harmony Fund. In September, the fund had announced some stellar returns after crossing its initial five-year term in its fund cycle. The top-line growth had helped to drive a 33% spike in profit to S$69.4 million.
Besides the great head-line numbers, there were other bright spots in the company’s earnings release too. For instance, revenue from ARA’s management fee segment (which is recurring in nature) had grown by 11% year-on-year to S$92.9 million. When it comes to recurring revenue, growth should almost always be appreciated by investors.
Although things are looking up for the company, there’re still some important questions regarding its near future. Back in October, the Monetary Authority of Singapore had proposed changes to regulations governing REITs here. Part of the changes deal with the management fees and acquisition and divestment fees which a REIT manager can earn. As these fees form a significant part of ARA’s revenue, adverse changes to them can affect the company’s profits.
There was no update on the topic given in ARA’s earnings release, but it’s certainly something for investors to keep an eye on.
Next up is China-based shipbuilder Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6). The company’s shares had gained 2.15% to S$1.19. Last Friday, the firm released its third quarter earnings and saw quarterly revenue grow by 2% to RMB3.74 billion compared to a year ago. Profit meanwhile, had dipped slightly by 1.2% to RMB811.2 million.
In the earnings release, the company once again reiterated its desire to focus on its core business of shipbuilding and gradually sell its non-core business of investing in financial assets and making micro-finance loans. Although shareholders might be happy to note that the company has decided to concentrate its efforts on what it does best, the abruptness at which the decision had initially came about might cause some concern regarding management’s ability to plan strategically.
In any case, management’s timing to again place the spotlight on Yangzijiang’s shipbuilding business couldn’t have come any better. As Ren Yuanlin, the company’s Executive Chairman, commented in the earnings release:
“The industry has shown early signs of recovery as the enquiries and new orders started to see some momentum as compared to that of last year. The softer oil prices are in a way benefitting the recovery of the shipping industry as well. We feel that overtime this will have a positive trickle-down effect on the shipbuilders as well.”
These comments would probably sound like music to the ears of investors given that it points to a nascent recovery in the shipping and shipbuilding industry. Ren also alluded to Yanzijiang’s strong competitive position in its industry and if that’s true, the company would likely be able to benefit from the tailwinds of an upturn in its industry’s fortunes.
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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 writer Chong Ser Jing does not own shares in any companies mentioned.