Posted by: donmihaihai | March 10, 2010

What the crap!

However, Lim waves off questions about how these investments are doing. “I’m not too keen to talk about it because it’s irrelevant,” he says. “I’m not a developer. The project I bought in Singapore, whether it makes $10 million or $100 million, will not improve ARA’s bottom line. We just get an incentive fee.” In fact, Lim is more focused on getting ADF, which counts the California Public Employees’ Retirement System as a cornerstone investor, fully invested and then rolling out a similar fund. “We should finish investing the bulk of our capital in ADF1 this year, and start ADF2 next year.”

So after ADF1, there will be ADF2, maybe ADF3, 4, 5678910. As a shareholder, I must be happy lah because more private funds = more incomes = more dividends and higher share price.

Crap!

What do shareholders want?

Good business that generate at least reasonable profit and surplus cash.

What is the business of ARA?

Assets Management. I.e. take money from clients, pool them and invest.

What do clients want?

Return on their investment, hopefully not losing money with adequate return on invested money.

To link them up, it is the inverse of …. good profitability = happy clients = well managed funds.

A well managed fund is one that most likely will produce good return on investment for its clients. So since when it has become irrelevant? This is the core, the main reason why ARA exists! Can someone help me by saying, “Oh it is fault of the unprepared writer who write without any understanding.”

But there may be something more to that. For a person like Mr Lim, it is unreasonable to think that he don’t understand this. And for many company, appearing in News or Magazine like “The Edge Singapore” is more for the sake of publicity than giving investor or shareholder a better understanding of their company. ARA needs publicity for lot of reasons. At the mist of doing so, never give out negative news/views, not even being perceived negatively because they may be get punished in ways more then they deserved. The best way to get through is —– give them what they want. They refer to whoever that read “The Edge Singapore.”

ARA also faces another problem. Fund management is about skill. Over a long period of time, results will speak. But skill alone is not everything when timing is involved, i.e. life span of the fund, buying and selling timing. When timing is wrong, results may not be good. So it is may be better by having more funds = more records to speak itself, earned the reputation rather than betting on one or two funds.

Whatever it is, this may be a side question in short term. With good results for the past few years(good but managed results) and generous dividends. Yields hunters are gathering around and pushing it to trade at around 5% AUM. Go! Give it an extra push and I will be grateful for it.

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Responses

  1. hi dnhh,

    what is your assessment on PFood currently?

    best regards.

  2. Good point on this. Read the same article as you did and John Lim’s comment disturbed me a little.

    I agree with you that a successful fund managerment company should be able to provide good returns to its investors and build up its reputation. If ADF 1 does not perform, don’t tell me CALPERS will be ok with that?

    I would argue that how well funds under management are doing is relevant to them. This is considering that ADF is a fund about 1 billion in size, which is a chunk of their AUM.

    As a vested investor, I hope he was grossly misquoted.

  3. hi drizzt,

    Not good. It look like there is a price war going on for fresh and frozen pork segment. Pine Agritech is not doing as bad as the results shown.

  4. Hi Donmihaihai

    Just a follow up, in your opinion, how does this affect your opinion of the company as an investment?

  5. Hi EnSabahNur,

    Not really. Still about the same since I wrote

    “Smart people dumb money a system that works.”

    Maybe the only thing is being more careful. From their actions and news, I see those guys at ARA are way smarter than me.

  6. where did you get the piece on ARA from?
    anyway, if you understand how the media industry works, you will try your best no to believe a single word they say..

    to me, more objective sources are foreign brokerage reports and SPH news… simply because foreign brokerage can afford to offend people if they write not so positive stuff as they don’t get to underwriter alot of IPOs or do placement.

    as for SPH, while the political tone is definitely nuanced, business news is very critical again, as they, unlike the smaller publications, dont have to depend on the companies for news and it is the company’s loss if they don’t even get to appear as a small column in BT…

    just some thoughts

  7. well… they managed to get the editor to do a writeup on him so i guess there must be some form of kick back… how to write critical stuff?

    the most critical stuff in print media come from BT… and they like to fry the small S-Chips…

    S-Chip if you look closely like to appear on theEdge and claim they are undervalued…. I remember one article on Oriental University… the guy said that the cash pile he is sitting on is for M&A purposes… lying in the press but it is alright cause we cant catch him in China…

    Same goes for ChinaMilk… caveat emptor applies most to S-Chips

  8. sgxstockpicker,

    From The Edge Singapore. And from the way you put forward, I simply don’t understand how media industry work. And I am not interested to go down that road.

    This writer is a seasoned writer and I have been reading her articles for years and she is good. And If my thinking is right, this particular article on ARA show exactly why she is good.

    Those critic articles from BT make those writers look lazy, without depth and without legwork and trying to be authority.

    There is nothing to do with S-chips and if you want to throw mud on them, go other place.

  9. hey don,

    sorry if i seem mudslinging cause i realized only just now that i posted two consecutive comments, most probably due to a poor connection or pending approval.

    well, i found the article you mentioned and i agree that it is unlikely that the writer did not know what she was asking, before being “waved off”. she even wrote at length ARA’s source of revenue.

    hence i agree that it is unusual to state that the acquisitions don’t matter and that they are intending to go for more ADF if the current one gets fully invested.

    on s-chips, i meant to say i agree that companies on magazines don’t give negative news even though the reporter/journalist states the obvious, which unfortunately the clearest example i remember was oriental.

    i read this post because i like your breaking down the whole message from the CEO, much like how you analyzed in Amazing Ezra.


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