10 in 10 – Uni-Asia Group (SGX Code: CHJ)

10 Questions for Uni-Asia Group

Company Overview Uni-Asia Group (Uni-Asia or the Group) is an alternative investment group specialising in creating alternative investment opportunities and providing integrated services relating to such investments. The Group’s alternative investment targets are mainly handysize dry bulk ships and properties. Uni-Asia also has extensive know-how and networks relating to such alternative investments and provides services relating to these investments.

1. Describe Uni-Asia’s Main Business Segments and Revenue Drivers.

• Uni-Asia Is a Prominent Player in Two Main Business Segments: Shipping and Property Investment.
• In the shipping segment, Uni-Asia is engaged in vessel ownership and chartering, maritime asset management, and maritime services. The Group owns and operates a fleet of vessels, primarily focused on dry bulk carriers. The charter income generated from the Group's 10 wholly owned vessels is a significant driver of revenue for FY2022, accounting for 91% of the profit for the shipping segment.

• In the property segment, Uni-Asia's investments are primarily focused:
  o In-Japan, Uni-Asia develops small residential properties in Tokyo under the Group’s Alero brand properties typically consist of studio and maisonette type apartments and are normally sold en-bloc. In addition, the Group provides property asset management services in Japan. The total assets managed by the Group were close to JPY37 billion as at end of FY2022, and encompass hospitality, residential, and healthcare assets.
  o Outside of Japan, property investments are commercial and industrial buildings development projects in Hong Kong. Such projects are high-rise buildings development which the Group takes a minority stake, and would be sold strata titled upon development completion. The Group would recognise investment returns either via fair valuation adjustments or realised gain upon receipt of distribution from project companies.

2. Describe Uni-Asia’s FY2022 financial performance. What factors drove higher revenue and margin expansion?

• In FY2022, Uni-Asia achieved a great set of financial performance. Net profit surged by over 50% year-on-year (YoY) to a record high of US$27.9 million. This growth was primarily driven by a 24% increase in total revenue and expansion in net profit margins.

• The Group also generated operating cash flow of US$34.9 million, which further strengthened our financial position. Net debt to equity fell from 35.5% a year ago to 17.0% as of 31 December 2022, while net asset value stood at US$1.92 per share.

• Our shipping segment played a significant role in driving higher revenue in FY2022. The 30% YoY increase in shipping revenue was primarily attributed to higher average daily charter rates for dry bulk carriers. The average daily charter rate for the Group’s 10 consolidated dry bulk carriers reached US$18,841, marking a significant improvement from US$13,561 in FY2021 and 2.5 times higher than in FY2020.

• The property segment contributed US$14.6 million revenue in FY2022. While the property business in Hong Kong was adversely affected by the Covid-19 pandemic resulting in no significant gains realised, the Group’s property business in Japan continued to be robust and provided a stable profit base to the Group.

3. What Are Some of Uni-Asia Competitive Advantages That Set You Apart From Your Competitors?

• Uni-Asia’s business model revolves around acquiring assets at competitive prices, implementing effective management and operational solutions to enhance their value and generate recurring revenue. This adds significant value to clients while also generating revenue from various sources, such as charter income, administration fees and asset management fees.

• One of Uni-Asia’s trademark products is the ALERO series which includes small residential property development projects in Tokyo. Uni-Asia would acquire land or residential houses within the metropolitan Tokyo area and re-develop them into 4-5 storey walk-up apartments comprising of around 20 or more units. The selection of projects is based on proximity to train stations and amenities. Upon completion, the units are leased out to professionals from various parts of Japan who relocate to Tokyo for work.

• These projects are sold as a whole (en-bloc). Uni-Asia engages in these projects either independently or through partnerships with investment partners. In addition to investment activities, Uni-Asia leverages its development expertise to offer construction management services to clients. These services encompass various stages, ranging from land sourcing to appointment of contractors and architects, project oversight, and eventually leasing and sales.

4. How Does Uni-Asia Plan to Bring in Additional Revenue Streams to Create Value for Shareholders?

• The Group has identified five key areas to achieve a sustainable long-term return on equity in 2022.
  i. Implementing more active marketing strategiesto attract potential business opportunities.
  ii. Expanding talent pool within the Group's marketing team.
  iii. Increasing assets under management to generate higher fee incomes, rental incomes, and investment returns from existing and new businesses.
  iv. Continuously enhancing operational efficiencies, which may involve investmentsin IT infrastructure.
  v. Fostering development of younger employees and promoting them to management roles as part of the Group's succession plan.

• The Group is also monitoring the sale and purchase market for opportunities to dispose of older 28,000 deadweight tonnage (DWT) ships and reallocate resources into more profitable projects. By optimising asset portfolio, Uni-Asia can maximise profitability and create additional value for shareholders.

5. Uni-Asia proposed a dividend of S$0.145/share for FY2022, more than double from FY2021. How do you plan to sustain this growth for future dividend payouts?

• The Board of Uni-Asia carefully considers a range of factors including the availability of earnings, the Group’s financial position, various sector risks and potential outlook before making dividend recommendations. Uni-Asia aims to fairly reward shareholders, subject to relevant commercial, reinvestment necessities and considerations, and balances it with the Group’s funding needs for expansion plans and readiness to capitalise on available opportunities. Based on these principles, the Group paid a dividend of S$0.01 per share in FY2020 despite recording a loss. In FY2022, when the Group achieved record performance, the Group declared a total dividend of S$0.145 per share.

• Uni-Asia's strong balance sheet and steady cash flow generated from our shipping division in FY2022 provided a solid foundation for sustaining dividend growth in the future. We are committed to maintaining our track record of paying consistent and sustainable dividends, while pursuing opportunities for expansion and investment.

6. What are some ongoing market opportunities/trends and how is Uni-Asia leveraging them to strengthen your businesses?

• Shipping – According to Clarksons Research, the outlook for the bulk carrier market remains cautious in 2023 and 2024. However, the reopening of China post-pandemic is expected to drive growth and demand for seaborne trade, including the bulk carrier market. The supply-demand factors driving dry bulk shipping are also projected to remain favourable.

• Property sector in Hong Kong (HK) – It is expected that the re-opening of HK’s borders, resumption of business activities and foreign investments may help to drive industrial and commercial properties. According to the HK Land Registry, the total number of property transactions in March 2023 surged 124.6% YoY and 43.8% month on month (MoM) to 8,599, with the value of these transactions jumping a similar 97.7% YoY and 57.2% MoM to HK$68.88 billion. The overall positive trend bodes well for Uni-Asia as the Group has successfully concluded four property projects and is presently involved in another project under construction.

• Property sector in Japan (JP) – We believe that Japan’s strong domestic economy and low interest rates relative to the rest of the world has created a favourable environment for Uni-Asia’s current ALERO properties to continue performing well. We aim to leverage the Alero brand and take advantage of Singapore’s strategic location as a financial hub to attract foreign investors for co-investing in JP’s property development projects. In addition, the Group’s property asset management subsidiary continues to explore new opportunities with an ESG focus, including group homes for the disabled. By expanding the arrays of properties in Japan, Uni-Asia aims to increase its assets under management, thereby increasing recurring asset management fees and expanding its property investment exposure in Japan.

7. Explain What Are Some of Uni-Asia’s Growth Strategies.

• Currently, Uni-Asia has a fleet of ten bulk carriers, comprising five older 28,000 DWT bulk carriers and five newer 37,000 DWT bulk carriers. The Group is seeking opportunities to replace its older vessels with more environmentally friendly alternatives, and is willing to invest in this initiative through joint ventures.

• Uni-Asia's strengthened balance sheet and cash reserves have positioned the company to pursue further growth opportunities. By disposing older ships at appropriate times, the Group will be able to generate additional cash flow, which can be utilised for organic expansion or potential acquisitions of other businesses. By continuously investing profits across different alternative assets, Uni-Asia aims to sustain its growth trajectory and maximise returns for its shareholders.

• The Group is also expanding its property business particularly in Japan, by co-investing with partners from Singapore and HK, and exploring new opportunities, including property domains not previously invested in.

8. What Are Uni-Asia’s Key Considerations When Expanding Into a New Market or Business Vertical?

• Uni-Asia's journey began in 1997 as a company specialising in structured finance arrangement services and investing in distressed assets. Despite not owning any ships, HK properties, or ALERO projects at the time of its listing on the Singapore Exchange in 2007, Uni-Asia has consistently pursued growth and revenue diversification over its 26-year history.

• When Uni-Asia seeks to evolve its business, it prioritises the acquisition of expertise through small investments or joint ventures. The company endeavours to gain as much experience as possible before expanding its headcount, client network and capital investment. This approach has played a pivotal role in Uni-Asia's achievement of record profits in FY2022. The Group remains committed to building upon its strengths, ensuring it is positioned favourably through collaborative teamwork rather than relying solely on chance. Uni-Asia is committed to strike a balance between prudence and calculated risk-taking to capitalise on potential expansion opportunities.

9. What are the most significant ESG risks or opportunities your company is facing? How are you meeting these needs?

• One of the ESG risks faced by Uni-Asia is the potential impact of its operations on greenhouse gas (GHG) emissions and climate change. To address these risks, the Group has implemented several measures such as:
  i. Comply with the International Maritime Organization’s (IMO) Carbon Intensity Indicator (CII) regulation, which stipulates that vessels must maintain a minimum grade C. We have implemented a Ship Energy Efficiency Management Plan which enabled us to monitor energy consumption and emissions for our fleet of 18 bulkers. This allowed us to take proactive steps to enhance our environmental management practices.
  ii. Identify less energy-efficient vessels nearing the end of their lifecycle, with plans to retire them and reallocate resources into more profitable investments. This approach not only limits the inefficient use of energy but also allows the Group to optimise its fleet.
  iii. Made a transition to solely using Low Sulphur Fuel Oils and Low Sulphur Marine Gas Oil. This has significantly reduced carbon dioxide, hydrocarbons, nitrogen oxide, and sulphur oxide emissions, in line with regulatory standards.

• Uni-Asia is committed to sustainable shipping practices and has recognised the growing shift towards sustainability and clean fuels. Accordingly, the Group strategically plans its investments in vessels to align with these principles so as to meet regulatory requirements while contributing to a greener and more sustainable future.

10.What is Uni-Asia’s value proposition to its shareholders and potential investors? What do you think investors may have overlooked about it?

• Uni-Asia's value proposition to its shareholders and potential investors lies in its multi-layered revenue income strategy and its ability to adapt and evolve into new business opportunities. Unlike businesses with a dominant segment, Uni-Asia aims to establish a diverse income stream, ensuring that the Group is more resilient to market conditions. The Group generates recurring income from charter income, asset management fees, and administration fees, forming a stable base layer. Additionally, it generates additional income from brokerage commissions, finance arrangement fees, and investment returns.

• Moreover, this multi-disciplinary business structure enables Uni-Asia to swiftly adapt and seize new business opportunities, making it versatile. To fully evaluate Uni-Asia's potential, investors should go beyond the confines of a traditional single business segment model. We believe that it is essential to recognise how the company has evolved over time and consistently delivered dividends to shareholders, even during challenging periods. Uni-Asia is not a traditional listed company, but rather an alternative investment solution. By understanding Uni-Asia's strategic approach and recognising its unique value, investors can fully appreciate its potential as a valuable asset.

10 in 10 – 10 Questions in 10 Minutes With SGX-listed Companies

Designed to be a short read, 10 in 10 provides insights into SGX-listed companies through a series of 10 Q&As with management. Through these Q&As, management will discuss current business objectives, key revenue drivers as well as the industry landscape. Expect to find wide-ranging topics that go beyond usual company financials.

This report contains factual commentary from the company’s management and is based on publicly announced information from the company. For more, visit sgx.com/research.

For More Company Information, Visit Https://www.uni-asia.com/.

Click Here for Uni-Asia Group’s FY 2022 Financial Results.