ARA Asset Mgt

ARA Asset Mgt: Citi maintains Buy with $1.90 TP. House hosted an investor lunch with Group and below are the key takeaways from the luncheon:

Target size of ADF II is about US$1bn and, based on the last results, ARA has secured US$300m. ARA will look to commit about 10% as seed capital for the fund. Requirements of the seed capital will be progressively drawn down, pending on opportunities for investments, with existing cash reserves as the first option.

ADF II likely to have more investments in China. According to mgt, investment mandate for ADF II will be similar to ADF I (Pan-Asia) but ADF II is likely to have more on investments in China. Mgt sees greater momentum in new REIT listings in HK relative to SG and sees a push for China assets to be injected into REIT vehicles. Some of the exit strategies for properties in ADF I would be
i) a REIT listing;
ii) divestment to existing REITs;
iii) direct sale of assets.

Mgt is committed to paying out 4.8c p.a. as dividend, supplemented by bonus issues. Since listing, the share base has grown by 32%, following a 1-for-5 and a 1-for-10 bonus issue in the past two years. Mgt is comfortable with growing AUM by $2b p.a. but highlighted that growth of AUM could also come from M&A opportunities, either at the REIT level or mgt company levels.