ARA Asset Management Limited’s Latest Earnings: Quarterly Growth Seen

On Tuesday evening, ARA Asset Management Limited (SGX: D1R) released its financial results for the first quarter ended 31 March 2016 (1Q 2016). The reporting period was from 1 January 2016 to 31 March 2016.

ARA manages real estate investment trusts (REITs) and private real estate funds. Some of the locally-listed REITs under the firm’s umbrella are Fortune Real Estate Investment Trust (SGX: F25U)Suntec Real Estate Investment Trust (SGX: T82U), and Cache Logistics Trust (SGX: K2LU). On top of management of REITs and private funds, it also provides property management services and corporate finance advisory services.

Financial Highlights

Let’s have a brief look at the latest financial numbers:

  1. Total revenue for the quarter came in at S$41.4 million, a rise of 10% year-on-year. The higher revenue was due to increased management fees, finance income and other income. This was partially offset by lower revenue received from acquisition, divestment and performance fees.
  2. Net profit inched by just 2% year-on-year to S$19.4 million, largely attributable to lesser share of profit from associates and joint venture.
  3. Earnings per share (EPS) for the latest quarter was at 1.94 Singapore cents, down from 2.19 cents a year ago. Despite the increase in the bottom line, EPS fell mainly due to enlarged share count after a rights issue was carried out in November 2015.
  4. Cash flow from operations in 1Q 2016 came in at S$27.6 million, more than quadrupling from S$6.5 million seen exactly a year ago. The ballooning of the figure was mainly due to higher proceeds received from the sale of REIT units and increased distribution income received during the year.
  5. As of 31 March 2016, the firm had a total borrowing of around S$14 million with a cash balance of approximately S$111 million. This is a vast improvement from the total debt of the same amount and a cash balance of S$77 million, as of 31 December 2015.

ARA seems to have had a great quarter, with an increase in both top and bottom line, stronger cash flow and a robust balance sheet.

Business Highlights

For the quarter, management fees, which are recurring in nature, went north by a good amount. These fees grew 14% year-on-year to S$34.3 million. This was mainly on the back of (i) better asset performance from some of the existing properties after asset enhancement initiatives were undertaken; (ii) increased management fees from a few of its private funds; and (iii) higher property management fees.

Assets under management, as of 31 March 2016, stood at S$28.9 billion. This is a slight decline from S$29.1 billion seen at the end of last year.

Looking Ahead

Mr John Lim, Group Chief Executive Officer of ARA, clued us into the future, saying, “Despite the ensuing volatile macroeconomic environment, our business model remains robust and scalable for us to pursue our growth strategies with prudence and discipline. Notwithstanding sector headwinds, the performance of the office and retail portfolios under management is expected to be stable for the year and our long-term growth initiatives will add value to stakeholders.”

With a current price of S$1.18, the firm is now trading at 15 times its historical earnings and has a dividend yield of close to 4%.

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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.