ARA Asset Management Limited Stock Analysis

Real estate investment trusts are quite popular in Singapore as investments. Most investors here have probably held one in their portfolio at one time or another.

But, there is actually another way to get exposure to REITs, and that is through investing in a REIT manager. One such company that is listed in Singapore is ARA Asset Management Limited (SGX: D1R).

ARA was listed in Singapore’s stock market in 2007. At the end of that year, the company had assets under management (AUM) of S$9.9 billion. This has nearly tripled to S$29.8 billion as of end-2015. Of ARA’s total AUM of S$29.8 billion, S$22.2 billion comes from the eight REITs under its care.

Six of the REITs – namely, Fortune Real Estate Investment Trust (SGX: F25U), Suntec Real Estate Investment Trust (SGX: T82U), Cache Logistics Trust (SGX: K2LU), Prosperity REIT, AmFIRST REIT, and Hui Xian REIT – are publicly-listed. Three of the listed REITs are in Singapore’s stock market while three are in Hong Kong (Fortune REIT is dual-listed in both Singapore and Hong Kong) and one is in Malaysia.

Shares of ARA have had a bad time over the past 12 months, falling by 28%. Let’s analyse the company using four metrics to determine if it could be a value buy at its current stock price. The four metrics are: The price-to-earnings (P/E) ratio, the price-to-book (P/B) ratio, the net debt level, and the dividend yield.

ARA is currently trading at a price of S$1.17 a share. Based on its last reported financials (for the whole of 2015), the company has an earnings per share (EPS) of S$0.0896, giving rise to a P/E ratio of 13.

For some perspective, this is higher when compared to the SPDR STI ETF (SGX: ES3), an exchange-traded fund which tracks the fundamentals of Singapore’s stock market barometer, the Straits Times Index (SGX: ^STI). The ETF’s P/E ratio stood at 11.7 as of yesterday.

Moving on to the P/B ratio, ARA’s book value per share is at S$0.52 at the moment, leading to a P/B ratio of 2.25. While value investors often prefer stocks with a P/B of lower than 1, it is important to keep in mind that ARA is more of a services company without much physical assets. This might explain its relatively higher P/B ratio.

Looking at the balance sheet, the company has S$14.2 million in total debt and S$76.7 million in cash. This puts the company in a net cash position, implying a solid balance sheet.

Lastly, ARA had declared a dividend of S$0.05 per share for the whole of 2015. At the company’s current share price, that works out to a yield of 4.2%.


If you'd like more insights on investing and important updates about the stock market, you can sign up for The Motley Fool Singapore's free weekly investing newsletter, Take Stock Singapore. 

Also, like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Esjay owns units in Cache Logistics Trust and the SPDR STI ETF.