• Acquisition of real estate platform in Korea ; immediate foothold into a new market
• Private Funds business continue to grow steadily
• BUY with SOTP target price of S$2.08
Acquisition of a fund management platform in Korea, with a potential to grow further
ARA recently entered into a conditional sale and purchase agreement for the acquisition of Macquarie Real Estate Korea Limited (“MREK”) for an undisclosed sum. MREK manages two privately held REITs with an AUM of KRW588.4bn (US$554.1m). We view this M&A transaction positively as it will enable ARA to gain an immediate foothold into Korea, a new market for the group. Through MREK, an established real estate platform, ARA will gain valuable experienced personnel and new partnerships with investors. In addition, we see potential synergies and growth through the launch of new products, tapping a larger investor base going forward.
Growing private fund business
The private fund arm continues to grow steadily with the launch of a new platform, Morningside Investment Partners, LLC (MIP) and a US-based, public pension fund has committed US$240m as seed capital. MIP, which has an initial term of eight years, will pursue a core-plus strategy of investing in real estate assets in Singapore/ Malaysia/Hong Kong. This complements ARA’s suite of different fund products that focuses in other geographic regions. Together with MREK, fees from MIP will contribute positively to a higher recurring base in 2014.
BUY, TP S$2.08 maintained
We believe that the group remains on track to meet its targeted S$2bn growth in AUM for 2014, supported by new private funds, while its REITs continue to acquire (Suntec, Fortune and Prosperity) and grow its recurring income fee base. Maintain our BUY Call, SOTP target price of S$2.08. This is based on 20x PE of its REIT/fund business and the market prices of its REITs. (Read Report)
Source : DBS Group Research