Orams Group direction

The performance of some of ARA’s investments has been disappointing in recent months. Clearview saw a significant decline in November, while Hillgrove Resources has been trending down. On the other hand, Coast Entertainment has been tracking upwards, with the buyback providing support. Hopefully, we’ll see some positive news from the council regarding the land redevelopment, which could further boost its value.

Despite these mixed performances, there are strong positives. The value of our investment in Orams, along with our cash reserves, is worth more than 50 cents per share alone. This, along with ARA’s discount to NTA, reinforces my confidence in holding a solid position in the company.

We have an impressive team of dealmakers at Ariadne, and they are building Orams into something special. As a minor shareholder, I was both surprised and impressed by the time Dr. Gary Weiss took to personally update me on Orams and other investments. He’s a sharp operator and a true gentleman. He even arranged for Neven, the CEO of Orams Marine, to give me and some friends a tour of the marina—an experience that showcased just how impressive the operations really are.

Orams Group Overview

Orams operates across three divisions:

1. The Marina Business – A highly profitable and growing segment.
2. The Commercial Property Development Division.
3. The Residential Development Division.

Ariadne currently owns 60.1% of Orams Group (prior to the Precinct Properties deal). The recently announced partnership with Precinct Properties is a smart move, as it strengthens the development potential while keeping full ownership of the marina business. Under this deal:

• Precinct takes 24.9% of the commercial development division.
• Precinct takes 50% of the adjoining residential land.
• Ariadne retains full ownership of the profitable marina operations.

Marina Business Performance

The marina business is performing strongly, with a history of solid earnings. In 2019, it generated NZD 5M EBITDA, though construction and COVID disruptions impacted profits in recent years. Forecasts for FY25 anticipate NZD 6.6M EBITDA, rising above NZD 9M in FY26. From July to October 2024 alone, EBITDA reached NZD 2M.

Occupancy remains at full capacity, and expansion has dramatically increased marina capacity. The boat storage service is also fully booked with a waitlist—an excellent revenue stream. For those using it, the process is seamless: call the day before, and your boat will be in the water, ready to go in the morning. When you return, they handle the storage for you.

All signs point to continued growth and strong profitability in the marina business, making it a valuable long-term asset.

Recent Developments & Debt Reduction

We have sold 25% of the Commercial Property division to Precinct, which generated NZD 2.23M EBITDA between July and October 2024.

Two images down, you’ll see the four 20-metre clearance work sheds completed in January 2023. To the right of this image, construction was beginning on Orams Marina Stage 1, with the render of the proposed plans shown further down. It’s great to see that work has officially started.

The Precinct deal has been a strategic move, allowing us to reduce debt and free up capacity for further development. The Marina Business will play a key role in the next stage of expansion, increasing its capacity further.

We are also sitting on a significant amount of residential land, which will take time to develop. Selling 50% of this to Precinct at close to book value allows us to take some money off the table while reducing debt.

Orams & ARA’s Stronger Financial Position

One of the biggest benefits of the Precinct deal has been Orams' debt reduction, which has dropped from NZD 103M to just NZD 17M. As a result, ARA’s NZD note will be repaid.

While debt will likely increase again as we progress through the commercial and residential developments, this gives us a strong financial position to move forward.

Over the last six months, New Zealand has seen three interest rate reductions, with rates dropping from 5.25% to 4.25%. Hopefully, we’ll see further cuts, which would be a positive tailwind for Orams and ARA.

Exciting times ahead for Orams and ARA!