ARA Asset Management Limited (ARA) is a global integrated real estate fund manager. As at 30 June 2019, Gross Assets Managed by ARA Group and its Associates is more than S$83bn across over 100 cities in 23 countries.
(+) Stable income operating model
(+) Established stakeholders
(-) Depressed interest coverage ratio when including perpetual bond payments
(-) Private company, possible re-listing
(+) Stable income operating model – Primarily a real estate management services provider, ARA’s income mainly consists of a stable base fee component as well as a variable component for performance. The allows the group’s income to demonstrate a recurring and stable nature so long as its assets under management remain stable or shows growth.
(+) Established stakeholders – The group is majority-owned by established stakeholders. This provides possible access for future liquidity or funding needs.
(-) Depressed interest coverage ratio when including perpetual bond payments – Based on FY2018 results, EBIT interest coverage including payments for perpetual bonds stood at 2.1x.
Debt to equity ratio spiked in 2018 as the group funded acquisitions to work towards it’s AUM target of S$100bn. As at 30 June 2019, ARA’s AUM stands at S$83bn. Some acquisitions completed in 2018 include:
(-) Private company, possible re-listing – As a private company, ARA is not required to disclose its financial information. This reduces transparency for bond investors.
However, the management of ARA previously hinted at a possible re-listing when the Group reaches its AUM target of S$100bn, set to be achieved by 2021. A re-listing would increase disclosure requirements and deleveraging opportunities. Both could lead to a positive re-rating of its bonds.