1. Describe Uni-Asia’s main business segments and revenue drivers.
Uni-Asia is a prominent player in shipping and property investment. UniAsia, led by CEO Kenji Fukuyado (pictiure) is engaged in vessel ownership and chartering, maritime asset management, and maritime services. We own and operate a fleet of vessels primarily focused on dry bulk carriers. The charter income generated from the 10 wholly owned vessels is a significant revenue driver for FY2022 ended December 2022, accounting for 91% of the profit for the shipping segment.
Uni-Asia’s property investments are primarily focused on two markets: In Japan, Uni-Asia develops small residential properties in Tokyo under the Alero brand, which typically consist of studio and maisonette-type apartments and are normally sold en bloc. In addition, we provide property asset management services. The total assets managed were close to JPY37 billion ($363.2 million) at the end of FY2022, encompassing hospitality, residential, and healthcare assets.
2. Describe Uni-Asia’s FY2022 financial performance. What factors drove higher revenue and margin expansion?
In FY2022, Uni-Asia reported a net profit of US$27.9 million ($37 million), up over 50% y-o-y. This growth was primarily driven by a 24% increase in total revenue and an expansion in net profit margins. The group also generated an operating cash flow of US$34.9 million, further strengthening our financial position. Net debt to equity fell from 35.5% a year ago to 17% as of Dec 31, 2022, while net asset value stood at US$1.92 per share.
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Our shipping segment played a significant role in driving higher revenue in FY2022. The property segment contributed US$14.6 million in revenue in FY2022. While the property business in Hong Kong was adversely affected by the pandemic resulting in no significant gains realised, our property business in Japan remained robust and provided a stable profit base.
3. What are some of Uni-Asia’s competitive advantages that set you apart?
Uni-Asia’s business model revolves around acquiring assets at competitive prices and implementing effective management and operational solutions to enhance their value and generate recurring revenue. This adds significant value to clients while generating revenue from various sources, such as charter income, administration fees and asset management fees.
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One of Uni-Asia’s trademark products is the Alero brand of small residential projects in Tokyo. Uni-Asia would acquire land or residential houses within the metropolitan Tokyo area and re-develop them into four to five-storey walk-up apartments comprising around 20 or more units. These projects are close 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, we leverage our 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 increase revenue streams to create shareholder value?
The group has identified five key areas to achieve a sustainable long-term return on equity. First, implement more active marketing strategies to attract potential business opportunities. Next, expand the talent pool within our marketing team. Thirdly, increase assets under management to generate higher fee incomes, rental incomes, and investment returns from existing and new businesses.
Fourthly, continuously enhance operational efficiencies, which may involve investments in IT infrastructure. Last, we foster the development of younger employees and promote them to management roles as part of our succession plan. The group also monitors the sale and purchase market for opportunities to dispose of older 28,000 deadweight tonnages (DWT) ships and reallocate resources into more profitable projects. Uni-Asia can maximise profitability and create additional shareholder value by optimising our asset portfolio.
5. Uni-Asia proposed a dividend of 14.5 cents per 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, our 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 our funding needs for expansion and readiness to capitalise on opportunities when they come by. Based on these principles, the group paid a dividend of one cent per share in FY2020 despite recording a loss.
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In FY2022, when we achieved record performance, a total dividend of 14.5 cents per share was declared. Uni-Asia’s strong balance sheet and steady cash flow generated from our shipping division in FY2022 provided a solid foundation for sustained 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 and trends, and how is Uni-Asia leveraging them to strengthen your businesses?
• Shipping: According to Clarksons Research, the outlook 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: The re-opening of Hong Kong’s borders may help to drive industrial and commercial properties. According to the HK Land Registry, the total number of property transactions in March surged 124.6% y-o-y and 43.8% m-o-m to 8,599, with the value of these transactions jumping a similar 97.7% y-o-y and 57.2% m-o-m to HK$68.88 billion ($11.6 billion). The overall positive trend bodes well for Uni-Asia as we’ve successfully concluded four property projects and are presently involved in another project under construction.
• Property sector in Japan: We believe Japan’s strong domestic economy and low-interest rates relative to the rest of the world have created a favourable environment for UniAsia’s current Alero properties to continue performing well. By expanding the properties in Japan, Uni-Asia aims to increase its assets under management, thereby increasing recurring asset management fees and expanding its property investment exposure.
7. What are some of Uni-Asia’s growth strategies?
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. We are seeking opportunities to replace the older vessels with more environmentally friendly alternatives, and we are willing to invest in this initiative through joint ventures. Uni-Asia’s strengthened balance sheet and cash reserves have positioned us to pursue further growth opportunities. By disposing of older ships at appropriate times, we can generate additional cash flow, which can be utilised for organic expansion or potential acquisitions of other businesses.
By continuously investing profits across alternative assets, Uni-Asia aims to sustain its growth trajectory and maximise shareholder returns. We are also expanding our property business, particularly in Japan, by co-investing with Singapore and Hong Kong partners 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, Hong Kong properties, or Alero projects at our listing on the Singapore Exchange in 2007, Uni-Asia has consistently pursued growth and revenue diversification over its 26-year history. As our business evolves, we prioritise acquiring expertise through small investments or joint ventures.
We endeavour to gain as much experience as possible before expanding our headcount, client network and capital investment. This approach has played a pivotal role in Uni-Asia’s achievement of record profits in FY2022. We remain 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 balancing 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 Uni-Asia faces is the potential impact of its operations on greenhouse gas emissions and climate change. We have implemented several measures to address these risks, such as compling with the International Maritime Organization’s (IMO) Carbon Intensity Indicator (CII) regulation, which stipulates that vessels must maintain a minimum grade of 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.
We will 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 limits inefficient energy use and allows the group to optimise its fleet.
We have also transitioned to solely using low-sulphur fuel 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 shift towards sustainability and clean fuels. Accordingly, we strategically plan our investments in vessels to align with these principles 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 we are more resilient to market conditions. The group generates recurring income from charter, asset management, and administration fees, forming a stable base layer. Additionally, it generates additional income from brokerage commissions, finance arrangement fees, and investment returns.
Moreover, this multidisciplinary 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 it is essential to recognise how the company has evolved 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.
Candace Li is a research analyst with the Singapore Exchange
