ART – Kim Eng

An opportunistic sell‐out

What’s New

• ART is divesting Country Woods in Jakarta for S$33.9m, which is 60% above the property’s valuation as at June 2010 and implies an exit yield of 2.9%. The net proceeds from the sale could be used for funding future acquisitions. We are keeping our estimates intact as the impact from the sale is negligible. Maintain BUY.

Our View

• Country Woods was sold to an unrelated party via a bidding process. We understand that ART is disposing of this aging property as it has reached its full growth potential as a rental house in South Jakarta’s intensely competitive environment.

• As Indonesia accounts for just 7% of ART’s total gross profit, the impact of the divestment on its income is insignificant. Post divestment, Indonesia’s share of total asset value and gross profit is 4% and 6%, respectively. The group’s NAV will inch up by 1 cts/share.

• The net proceeds of $28.8m are small relative to ART’s total debt, which means they would more likely be used to fund future acquisitions. Management continues to target Vietnam, India, China and Singapore for potential acquisitions.

Action & Recommendation

This is ART’s first divestment and it demonstrates management’s ability to optimise the yield of its portfolio. Potential acquisitions are catalysts for re‐rating. Maintain BUY.