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ARA Asset Management and $1.78 a share.

Saturday, March 4, 2017

After my ARA "fixed deposit" has been redeemed, what remains is my original investment which I paid $1.00 to $1.32 a share for.

Although the offer of $1.78 would mean a 35% to 78% capital gain, I would be losing a very consistent and meaningful source of passive income. 

A yearly 5c dividend per share (DPS) gives me a yield on cost of 3.78% to 5% and from a growing business with a very strong balance sheet too.

At $1.78 a share, a 5c DPS gives a dividend yield of 2.8% which is still pretty decent considering the fact that ARA pay out only about half of their earnings as dividends.

As an investor for income, naturally, I would like to continue receiving dividends from companies such as ARA. 
With an impressive full year 2016 performance, I am even more reluctant to let go of my investment in ARA now. 

So, I have decided not to accept the offer.

See presentation slides: HERE.


RK said...

What about the fact that for them to grow bigger, they most probably will need to raise more capital and risk diluting shareholders' value?

wanchai30 said...

Dear AK47,

Another newbie question and would appreciate your insight.

If the dividend % drops from 6-7% to about 3-4%, only as a result of the increased in price of the stock, would you still hold on to it, assuming market condition and business environment remain the same and the company is still meeting your expectation?

Will you still look at % return based on original purchased price?


AK71 said...

Hi RK,

I think that is an opinion and not a fact. ;)

AK71 said...

Hi Pat,

There are many ways of valuing a business. In this instance, for a business with a good potential to grow much bigger, I believe that a 3% yield based on a 50% pay out is reasonable. You might want to read a recent blog post I published: Investing for income and dividend yields.

Kevin said...

Hi AK,

For your information, there is a upcoming dialogue session available for you and your readers who might also be shareholders to raise questions with CEO John Lim on 15 March 2017.

Details over at

AK71 said...

Hi Kevin,

Yes, I received the notice from SIAS. :)

41SAR Tankee said...

Hi AK,

Understand that you will be rejecting their offer and also not accepting IHC/HMC, may I know what is the possible consequences? Isn't that offer (in the case of IHC) mandatory unconditioned? Vested on ARA/IHC.



AK71 said...

Hi CH,

Consequence? I stay on as a shareholder. :)

AK71 said...

UPDATE by Rusmin Ang:

Should you vote for or against at the Scheme Meeting? Before you answer that question, here’s what you need to know and understand.

If the Scheme goes through, ALL existing shareholders (even if you have voted ‘No’) will receive a buyout price at $1.78 a share. In exchange, we will no longer have any interest in the company moving forward.

If the majority voted ‘No’ and the Scheme fails, ARA will stay listed and it’s business as usual. However, whenever ARA needs more capital, they may do so again through issuance of Rights or Placement to accredited investors to grow its AUM in the future.

The question to ask yourself is…

Will you be ready to subscribe to new shares when that happens?

ARA Dialogue Session.

AK71 said...

The directors of the Company are pleased to announce that at the Scheme Meeting
convened pursuant to an order of the Court dated 5 January 2017 and held today at Level 3,
Summit 2, Suntec Singapore Convention & Exhibition Centre, 1 Raffles Boulevard, Suntec
City, Singapore 039593 at 11.00 a.m., the Scheme Shareholders have, by a majority in
number of Scheme Shareholders representing not less than 75 per cent. in value of the
Scheme Shares present and voting at the Scheme Meeting, APPROVED the Scheme.


We can expect to be paid by 21 April 2017.

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