Straits Trading Company

Straits Trading Company (STC): STC will acquire a 20.1% stake in ARA Asset management for $294.4m from Cheung Kong Investment company, translating to $1.7326/share, at a slight discount to its last close of $1.75. Post purchase, STC will become the largest shareholder in ARA, followed by ARA's CEO John Lim (19.25%) and Cheung Kong Investment (7.84%). Separately, STC will set up a 90/10 co-investment company, Straits Real Estate (SRE), with ARA's CEO, John Lim. SRE will have an initial capital commitment of $200m and eventually boast up to $950m. SRE will have a mandate to invest in real estate and real estate-related opportunities and help STC transform its low-yielding assets into potentially higher-return assets. Meanwhile, STC's existing property assets will come under ARA's management in a separate account arrangement. These include the Straits Trading Building, nine good class bungalows (GCBs), 13 units of Gallop Green, and 14 units of The Holland Collection. This strategic alliance in real estate will enable STC to unlock value from its property business and create new avenues to expand and diversify its real estate portfolio. UOB KayHian maintains a HOLD rating with TP $1.91.