ARA Asset Management Limited’s Latest Earnings: What Investors Should Know

ARA Asset Management Limited (SGX: D1R) reported its fiscal first-quarter earnings yesterday evening. The reporting period was for 1 January 2015 to 31 March 2015.

For a quick introduction, the company manages real estate investment trusts, private real estate funds, as well as physical properties. The company’s source of revenue comes from four business segments: Management Fees; Acquisition, divestment and performance fees; Finance income; and Other income.

Some Singapore-listed REITs which are under ARA Asset Management’s umbrella include Fortune Real Estate Investment Trust (SGX: F25U)Suntec Real Estate Investment Trust (SGX: T82U), and Cache Logistics Trust (SGX: K2LU).

You can read more about the company here or catch up with its previous earnings report here. My colleague Stanley Lim also shared some notes taken from the firm’s recent Annual General Meeting – you can find it here.

Financial highlights

Here’s a rundown on ARA Asset Management’s latest set of financial figures:

  1. Overall revenue for ARA Asset Management had declined slightly by 1.3% year over year from $38.2 million to $37.7 million.
  2. Net profit for the period, though, rose 6% to around $19 million. This was helped by a three-fold increase in contributions from the company’s share of profit of associates.
  3. Consequently, earnings per share (EPS) rose 6% from 2.11 cents in the first quarter last year to 2.24 cents in the reporting quarter.
  4. Cashflow from operations came in at $6.5 million for the first quarter of 2015 with capital expenditures clocking in at $153,000. This gives ARA Asset Management a positive free cash flow of $6.3 million for the reporting quarter.
  5. As of 31 March 2015, the company had $68.6 million in cash and equivalents and borrowings of $31.7 million. This gives a net cash position of $36.9 million, down from the selfsame figure of S$42.7 million seen a year ago.

In all, revenue for ARA Asset Management was relatively flat, but profit improved on a year-on-year basis. The company also generated positive free cash flow and managed to end the end the quarter with a strong balance sheet.

Operational highlights

Revenue from the Management fees segment rose by 1% year on year for the reporting quarter to come in at $30.1 million. ARA Asset Management had benefitted from a rise in fees from its real estate investment trusts due to “better asset performance post the asset enhancement initiatives undertaken”; this rise was partially offset by a fall in portfolio management fees.

It is important to keep an eye on the company’s Management fees segment as the revenue generated here can be deemed to be recurrent.

Meanwhile revenue from Acquisition, divestment and performance fees leapt by 106% year on year to $5.4 million. This was due to higher fees received from acquisitions made at Fortune REIT and Cache Logistics Trust.

John Lim, the Chief Executive Office of ARA Asset Management, had given some comments on the reporting quarter’s results in the earnings release:

“We are pleased to report that the REITs division continues to post a strong growth year-on-year. The various private funds under ARA Private Funds launched subsequent to the ADF I [Asia Dragon Fund I] are also contributing higher revenues despite the reduced revenue from the ADF I.

We continue to work towards launching new funds and growing our funds platform across our six key markets across the Asia Pacific.”

As of 31 March 2015, ARA Asset Management had assets under management (AUM) of S$27.2 billion, up 7% from the figure of S$25.4 billion seen a year ago. After accounting for the effects of divestments, ARA Asset Management’s AUM at the end of the first quarter of 2015 would be S$30.6 billion.

Foolish summary

At its closing price yesterday of $1.73, ARA Asset Management traded at around 16.5 times its trailing earnings and has a trailing twelve months dividend yield of 2.9%.

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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 Chin Hui Leong owns shares in ARA Asset Management.