ARA

ARA: FY11 results slightly below consensus, due to mark-to-market (MTM) losses, otherwise in line.
Net profit was $68.2m, +8% yoy, driven by higher recurring mgt fees and one-off performance fees (divestment of equity interest in ARA Harmony Fund), but dragged down by MTM losses of $6.1m on Suntec Reit units.
ARA’s AUM stands at US$20.3b (+19% yoy), well ahead of its original 2012 target. The group expects to continue to grow its AUM by ~S$2b pa. BOA-ML notes for 2012, this target can be met easily with the launch of ADF II and a Reit listing. ARA has raised a total of US$400m for its ADF II and will start investing from Mar ’12 onwards. Mgt remains confident it will reach the US$1b target at its final closing in 2H12.
ARA declared a final div of 2.7cts, bringing full yr div to 5cts. This translates to 3.5% yield on the counter’s last close at $1.41. Mgt is keen to maintain the 5cts payout, supplemented by bonus issues.
The majority of houses continue to like ARA for its scalable, asset-light business model which generates a steady and defensive stream of income from mgt fees and offers a high ROE of >30%.
Citi keeps at Buy, with slightly lower TP of $1.87 (from $1.90).
BOA-ML reiterates Buy with TP $1.85.
StanChart maintains Outperform with slightly higher TP of $1.58 (from $1.57).