Bank of America (BofA) Securities has downgraded ESR Cayman to “neutral” from “buy” with a lower target price of HK$26.50 ($4.63) from HK$31 previously following its announced bid on ARA Asset Management on Aug 4.

See: ESR Cayman acquires ARA Asset Management for US$5.2 billion and Why ESR Cayman is acquiring ARA at multiples of NAV

The downgrade is based on a lower EBITDA multiple of 21 times (from 23 times) for its funds under management (FUM) platform (ex-ARA) and expected dilution valuation on a higher share base, while the target price downgrade implies a FY2022 EV/EBITDA of 18 times, say BofA analysts Donald Chua and Chan Xian Ning in an Aug 6 report.

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