The recent MAS consultation on changes to REIT management has spurred various reactions on its future impact. Most seem to suggest that it would be positive for all parties concerned.
One area of concern has been the impact on companies that manage REITs, especially ARA. Its management has expressed that while it may result in lower earnings, it could lead to the expansion of its asset under management and would balance off in the long run.
| (05/11/2013) | 1.940 |
| 52 Week Low (SGD) (04/02/2014) | 1.635 |
| 52 Week Return (%) | -2.010 |
| Average Volume ('mil) | 0.2852 |
| Beta | 0.85 |
| Financial strength | |
|---|---|
| Current Ratio | 1.84 |
| Quick Ratio | - |
| Long Term Debt to Equity (%) | 0.05 |
| Total Debt to Equity (%) | 10.98 |
| Interest Coverage Ratio (TTM) | - |
| Free Cash Flow to Firm (TTM) (SGD 'mln) | 68.32 |
| Margin | |
|---|---|
| Gross Margin (TTM) (%) | - |
| Operating Profit Margin (TTM) (%) | 61.88 |
| Net Profit Margin (TTM) (%) | 55.66 |
| Dividend § | |
|---|---|
| Annual Dividend per share (SGD) | 0.0500 |
| Dividend Yield (TTM) (%) | 2.93 |
| Dividend Yield (Annual) (%) | 2.93 |
| Payout Ratio (TTM) (%) | 28.24 |
| 3-Year Growth Rate (%) | 4.64 |
| Valuation | |
|---|---|
| Historical P/E Ratio | 19.41 |
| P/E Ratio (TTM) | 17.83 |
| P/BV (latest interim) | 4.93 |
| BVPS (latest interim) (SGD) | 0.3462 |
| EPS TTM (SGD) | 0.0956 |
[Source: POEMS, dated 13 Oct 2014]
Its financials appear to be in fairly good shape thus far. Question is, will it be able to absorb the effects of this upcoming change?
Its Distribution Per Share (DPS) grew steadily from 0.0397 to 0.05 (2.93% yield) between FY09 to FY13. A steady dividend payout history is an encouraging sign. Yet, its payout has kept below 30% despite this. Over the same period, its Earnings Per Share (EPS) has grown from 0.0572 to 0.0879. That means that its DPS has stayed below its EPS. I view these as positive and prudent.
Suppose its earnings were to collapse down to its FY09 level of 0.0572, would it still be able to sustain the dividend payout at 0.05 (FY13)? It would likely face increased pressure to reduce its dividends, or face an expansion of its payout ratio. But this is just one scenario.
I have a small holding in this company and will keep things unchanged for now. Happy to continue to collect its dividends meanwhile.
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