ESR Group announced a 7.1% y-o-y rise in revenue to US$821 million in FY2022, compared with the pro forma Enlarged Group's FY2021 revenue of US$767 million. Total Ebitda increased by 10.2% to US$1.15 billion from US$1 billion in the pro forma Enlarged Group's FY2021 Ebitda. Patmi grew 9.3% y-o-y to US$655 million in FY2022 from US$599 million pro forma Enlarged Group, On a standalone basis, ESR Group’s actual revenue growth in FY2022 was 127.7% y-o-y, Ebitda rose 63% and Patmi 73.5%.
In January 2022, ESR completed the acquisition of ARA Asset Management for US$5.2 billion and was able to report revenue and earnings of the enlarged group in FY2022.
“If not for the substantial weakness of most APAC currencies versus the US dollar in 2022, total Ebitda and Patmi would have risen by 20% and 24% compared to 2021, notes Jeffrey Perlman, chairman of ESR.
For local investors, the most interesting aspect of his presentation is ESR’s plans to have a simplified business structure. “We are transforming and simplifying the business, and focusing on new economy, alternatives and [scalable] REITs,” Perlman says.
The group is readying around US$700 million to US$1 billion of assets to divest, and to recycle the monies into better yielding assets in the businesses it is focusing on.
“We’re mentioned there is about US$700 million to US$1 billion of non-core assets we are looking to divest. We’re very clear. We are evaluating our stake in Cromwell, they have embarked on their own value maximisation exercise. We’ve said we will look at the other REITs we manage. We want to have scalable REIT vehicles. If those REITs can’t be scaled further, we are going to monetise those. That’s the top of our priority list and we see the opportunity to get that done this year,” Perlman says, adding that he would like to divest the REITs which are sub-scale.
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Cromwell refers to Cromwell Property Group which is listed in Australia. Interestingly, Cromwell sponsored Cromwell European REIT (CEREIT) when it listed on SGX. CEREIT has been busily rejigging its portfolio with the aim of having a greater focus on warehouses, but remains weighted in favour of offices in Europe.
ESR is the sponsor and major unitholder of ESR-LOGOS REIT or E-LOG. REITs that ESR inherited from ARA which ESR manages but is not sponsor to include Suntec REIT, and ARA US Hospitality Trust which is viewed as sub-scale. ESR also has stakes in AIMS APAC REIT and Sabana REIT, and owns Sabana REIT’s manager.
Perlman was pretty frank about ESR’s share price performance. “I am going to start and address the elephant in the room, we are very disappointed with our share price performance since our very strong 1H2022 results in August. We believe strongly in creating long term shareholder value and I will be laying out some additional steps shortly that we are laser focused on to further deliver on that unwavering objective,” he says in his opening remarks.
Among those steps are streamlining the business structure, with a more efficient use of capital such as holding around 7.5% in its private equty funds and growing AUM, planning the potential listing of a C-REIT, monetising assets such as its stake in Cromwell and recycling capital into better yielding assets.
