Uni-Asia Group, a Singapore Exchange-listed company, is focusing on the Japanese real estate market, particularly in Tokyo, due to urbanisation and demographic shifts. The company is diversifying its portfolio beyond residential projects, investing in group homes, resort land, and public infrastructure projects (PFIs). While optimistic about Japan&rsquo s stable market, Uni-Asia is cautious about Hong Kong and China due to oversupply and weakening demand, and is evaluating opportunities in Singapore with a disciplined approach.

 

 

Uni-Asia Group' s results looks to normalise in FY2024 and beyond following FY2022' s port build up-fuelled boom. 

SAC Capital analyst Matthias Chan is maintaining his &ldquo buy&rdquo call on Uni-Asia Group CHJ 2.01% with an unchanged target price of $1.02 as the group&rsquo s weaker FY2023 ended Dec 31, 2023, points towards a &ldquo normalising&rdquo of the shipping industry following its &ldquo unprecedented boom&rdquo from chronic port congestion globally in FY2022.

 

For the FY2023, Uni-Asia&rsquo s net profit came in 82% lower y-o-y at $5.1 million, while revenue dropped 33% y-o-y to $58 million.

 

The Baltic Handysize Index (BHSI), a leading indicator of economic activity of spot freight earnings for smaller dry bulk vessels, is currently trading close to US$800 ($1,078.16), close to the US$831 high in December 2023 and more than double the trough recorded in August last year. 

 

Chan notes that macroeconomic conditions suggest that rates &ldquo will hover&rdquo at current levels, with a probable upside. 

 

&ldquo Chinese seaborne dry bulk imports, especially coal, which makes up a third of global imports, remain robust. Rerouting of trade flows on longer voyages via the Cape of Good Hope has increased travel by more than a week. The long-standing slow steaming regulations to reduce harmful gas emissions also support rates,&rdquo writes the analyst.

 

Chan also understands Uni-Asia is active in managing its fleet to optimise returns, which he remarks as being similar to an investment manager.

 

He explains: &ldquo It has successfully divested two old ships recently to meaningfully reduce the blended age of its portfolio of ships for optimal charter rates. In addition, the sales managed to be net book value neutral/positive and generate positive cash flows.&rdquo

 

Similarly, the group&rsquo s properties in Hong Kong and Japan are actively managed to optimise returns, such as in the case of several of its Hong Kong property assets currently being put on the market for strata-titled sales.

 

Beyond this, Chan writes that Uni-Asia is &ldquo not just&rdquo an alternative investment manager, noting that the group&rsquo s asset management arm, Uni-Asia Capital Japan (UNCJ), has increased its assets under management (AUM) by nearly seven times to JPY38.7 billion ($343.8 million).

 

Besides holding hospitality, residential and healthcare assets, he adds UNCJ is also invested in sustainability assets, pointing to its managing of JPY1.3 billion in solar power assets since 3QFY2023 and its plans to build a public use facility comprising of a fitness centre, park, pool and bathhouse utilising residual heat from an existing waste treatment plant in Saitama Prefecture. The private finance initiative (PFI) will be UNCJ&rsquo s second.

 

&ldquo This is in line with the company&rsquo s commitment to good corporate citizenship and sustainable business practices, while contributing back to society,&rdquo adds Chan.

 

Moving forward, the analyst expects Uni-Asia&rsquo s profitability to improve from FY2023, anticipating a 60% y-o-y net profit increase in FY2024 and a further 35% y-o-y improvement in FY2025. 

 

His revised target price implies a &ldquo fair&rdquo price-to-book value ratio (P/BV) of 0.4 times, and reflects a 60% discount to the P/BV of listed global asset managers.