1H21 results beat; resilient growth in total AUM

ESR’s core profit increased 38% YoY to US$167 mn in 1H21, representing 48% of our revised full-year earnings estimate (vs 47% in 1H20). The earnings beat was mainly driven by its higher-than expected income from its investment in South Korea.

The company’s pace of scale expansion remained resilient. Total AUM grew 22% HoH to US$36.3 bn and the newly raised capital amounted to US$2.5 bn. This, together with its accelerating construction schedule, well supported its EBITDA from fund management to grow 51% YoY to US$97 mn in 1H21.

The company was relatively quiet in capital recycling in 1H21 and completed divestment value of ~US$67 mn. In 2H21, management expects it to accelerate amid the divestment of more projects in Australia and mainland China.

ESR’s share price pulled back by 13% MTD amid investors’ concern about the acquisition of ARA. We take a more positive view and expect it to benefit from the enhanced position in new-economy projects. Also, the solid 1H21 results should provide investors more confidence. We raise FY21-23E earnings by 4-5% on higher associate income. Lift TP to HK$31.9 (from HK$31.6).