ARA-CS

● Due to the deteriorating operating environment for its REITs as
well as growing new funds, we make some adjustments to our key
assumptions and consequently cut our FY08-10E forecasts by 5-
25% and target price by 30% to S$0.69 (from S$0.98) for ARA.
● While its business model is highly scaleable, asset devaluation at
its REITs will affect its fee income, which is based on AUM and
rental incomes, and growth momentum from raising new funds
(Islamic fund II, Japan fund) clearly slows with global investor risk
aversion and tight capital flows.
● We have assumed more conservative growth in terms of its AUM
as well as a 20% devaluation at its REITs by end-2009. We have
also adjusted for marked-to-market losses for its REIT
investments.
● Despite the slower growth momentum, we maintain
OUTPERFORM on its attractive valuation of 6x FY08 earnings
(5.2x ex-cash), a 12% dividend yield and strong balance sheet.
Risks include worse-than-expected asset devaluation and its small float/market cap.