Uni-Asia Group provided its latest 9MFY2021 ended September update, which highlighted a potential record FY2021.
With that, UOB Kay Hian is keeping its “buy” call on Uni-Asia with a target price of $2.34.
Analyst Clement Ho says, “The incoming 4Q winter heating season in the northern hemisphere is expected to keep the dry bulk market busy; beyond that, we believe freight rates will stay elevated at least until end-2022 given the favourable demand-supply imbalance.”
Uni-Asia reported 3QFY2021 operating cash flow (OCF) of US$11.0 million, exceeding US$2.9 million last year and 1HFY2021’s US$8.1 million. For 9M21, OCF of US$19.1m more than tripled y-o-y from US$4.8 million last year.
See: UOBKH starts coverage on Uni-Asia with 'buy' call citing benefits from high freight rates
Assuming stable depreciation, finance charges and absence of any one-offs in working capital, Ho estimates 9MFY2021 net profit to be in the range of US$10-12 million, almost matching the group’s record-high net profit of US$12.1 million in 2007 since its IPO.
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Additionally, the analyst sees a high probability of an upside surprise in its 2021 dividend payout ratio. As a gauge, a 30% dividend payout of Ho’s FY2021/22 estimates net profit forecasts of US$17.1 million/US$19.6 million translates to 8.8/10 cents DPS, or 6.7%/7.6% FY2021/22 yield respectively.
With the dry bulk market expecting to remain strong in 4Q2021 during the winter heating season in the northern hemisphere, many countries will look to alternative fuel sources, such as coal, due to disruptions in gas supplies and increasing gas prices.
With that, the seaborne dry bulk demand is expected to grow and charter income is anticipated to continue northward.
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Overall, Ho notes that the stock is trading at a FY2021 PE of 4.5 times and FY2022 PE of 3.9 times, which is inexpensive, especially for a stock with strong earnings profile going forward.
KGI Securities on the other hand is keeping its “outperform” rating on the stock with a target price of $1.56.
“The favourable supply-demand dynamics for handysize dry bulk carriers should benefit the group over our forecast period,” says analyst Joel Ng, as he also expects higher full-year dividends from Uni-Asia, as the group continues to pare down debt.
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As at 3.20pm, shares in Uni-Asia are trading at $1.29 or 6.4 times FY2021 PE with a dividend yield of 3.1%, according to KGI’s estimates.
Photo: Uni-Asia
