ARA Asset Management was a stock I fully divested more than 3 years ago.
On hindsight, it was a mistake because deviating from a familiar practice, I did not keep a core position for income. I suppose I was a bit more active as a trader in the past.
I have been waiting for a chance to get back in and the recent plunge in its stock price has provided me with an opportunity to do so.
ARA's EPS for 2014 was 10.35c and DPS was 5c. So, they paid out about 48% of earnings as dividends.
When looking at ARA's PE ratios in the last few years since 2012, we see a range of about 12x to 22x. Median PE ratio is, therefore, about 17x.
ARA's 1H 2015's EPS came in lower at 4.19c. Could 2H 2015 do better for FY 2015 to beat FY 2014's EPS in aggregate? Of course, your guess is as good as mine.
If we should simply annualise 4.19c, we get a full year EPS of 8.38c. Multiply that by 17x and we get a price I might buy at which is about $1.42 a share.
At $1.32 a share, I am re-initiating a long position at a PE ratio of 15.75x which is a bit lower than the median of 17x identified earlier.
Of course, if ARA should deliver an EPS of 10c for FY 2015, $1.32 a share would look much cheaper then (with a PE ratio of 13.2x).
Dividend yield, assuming DPS of 5c remains unchanged, is almost 3.8% with a purchase price of $1.32 a share.
Another stock for income and growth? Good to accumulate at lower prices? Perhaps so.
Related post:
ARA: Divestment $1.30 and $1.32.