ARA Asset Mgt: CS maintains Neutral, but reduce TP to $1.45 from $1.71, Note that latest results saw solid performance fees; premium valuation for its resilience. 3Q11 NP (+95% YoY, +72% QoQ) of $25.4 mn brought 9M11 to $54.9 mn (+44% YoY).
Key updates:
(1) AUM grew 3% QoQ to S$19.3 b,
(2) ADFII continues to face delays, with final closing target at 1Q12, instead of 4Q11;
(3) a China REIT is in the pipeline, but believe unlikely in near term, given China property headwinds. Hui Xian REIT has lost 32% since IPO.
Overall, raise FY11E EPS by 12% for the performance fees, but cut FY12-13E EPS by 1-5% and TP on slower ADFII and lower MTM listed entities’ values. While ARA should be relatively resilient (div yield of at least 3.8%), given its fee income business model, negative sentiment on China property and fund flows could affect perceived performance of its ADF investments (>50% China) and ARA’s fund/AUM growth. Stock currently trades at 14-15x P/E, and is already at a premium to its peers’ 11x.
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