On Mar 16, Uni-Asia Group Uni-Asia Grp : CHJ +2.73% executive director and CEO Kenji Fukuyado acquired 50,000 shares of the company for a consideration of S$55,993.

 

At S$1.12 per share, this took his total interest in Uni-Asia Group from 1.72 per cent to 1.78 per cent.

 

His preceding acquisition was back on Dec 2, 2020 with 50,000 acquired at an average price of 63.3 cents per share.

 

Fukuyado was appointed Uni-Asia Group CEO in April 2020.

 

He joined the group in 2001 and has over 30 years of experience in the finance industry, including structured finance such as tax lease, asset finance, loan syndication, corporate finance, and asset management.

 

On Feb 28, Uni-Asia Group reported a net profit of US$18.0 million in FY21 (ended Dec 31), the highest net profit recorded since its listing and this was a strong recovery from the loss of US$7.5 million in FY20.

 

The alternative investment company, asset manager and integrated service provider of vessels and properties also noted that the group continued to cut its borrowings, reducing debt levels from US$114.0 million a year earlier to US$83.8 million as at Dec 31.

KGI Securities on Thursday (Mar 3) maintained its " outperform" rating on Uni-Asia Group (UAG) Uni-Asia Grp: CHJ +3.54%, following the alternative investment company posting a net profit of US$18 million for the financial year ended Dec 31, 2021, its highest since its initial public offering in 2007.

 

In a research report, the brokerage increased its target price on the investment company to S$1.66 from S$1.56, as its valuations remain attractive amid the stronger-than-expected bulk carrier upcycle. UAG invests in cargo ships and real estate.

 

The price implies a " very conservative" 0.67 the forecasted FY2022 price-to-book value (P/B) ratio, which is more than a 30 per cent discount to international peers who are trading at more than 1 times their P/B ratio, said KGI analyst Joel Ng.

 

He added: " UAG now trades at almost half its book value, which we believe severely undervalues the market value of its bulk carriers."

 

The counter was trading at S$1.14, up 0.9 per cent or S$0.01, as at 3.36 pm.

 

Ng noted that UAG has an existing fleet of 10 wholly-owned handysize carriers with an average age of 10 years and charter renewals slated for 2022 and the first quarter of 2023, which is likely to be a significant beneficiary of this upcycle.

 

This is based on the group posting higher average charter rates for 6 consecutive quarters and the favourable supply-demand dynamics for dry bulk carriers, particularly for handysize vessels as they are in short supply.

 

UAG, as a handysize bulk carrier specialist, is therefore at the right place at the right time, Ng said, adding that the current upcycle seems to be more robust than previous bull markets in the handysize dry bulk shipping market.

 

However, he noted that the group' s 5 Hong Kong commercial properties, which will be completed progressively over the next 3 years, are likely to only start contributing from FY2023, instead of the previously projected second half of FY2022, due to the current Covid-19 situation in Hong Kong.

 

Nonetheless, Ng forecasts that UAG will continue to increase its property assets under management to drive up its asset management fees through its Japan residential business, as its projects are progressing as planned with stable rent and property prices in Tokyo.

Uni-Asia is maintaining its &lsquo outperform&rsquo call on Uni-Asia at a higher target price of $1.56. This is up 14 cents from its previous $1.42 cent call and is expected to give the counter a 47% upside from it $1.09 price, analyst Joel Ng writes in an Aug 17 note.

 

&ldquo Valuations are attractive amid the stronger-than expected bulk carrier upcycle. Our target price implies a 0.7x FY2021 P/B (price-to-book), which is still a conservative 30% discount to international peers who are trading above 1.0x P/B,&rdquo he explains.

 

Ng&rsquo s move follows the &ndash in his words &ndash higher and stronger profits of US$7.0 million ($9.5 million) in 1HFY21, a reversal from the $3.9 million loss seen in the year before.

 

This follows a 46% y-o-y increase in its charter income to $20 million, thanks to a rise in its average daily charter rate to US$10,900 in 1HFY21, compared to around US$7,000 in the year before.

 

With this, the group&rsquo s shipping reversed into the black with profits of US$9 million in 1HFY21.

 

Meanwhile, Ng believes that Uni-Asia has the right assets at the right time. For one, the broad-based increase in commodity demand as well as the tight supply of vessels have pushed Baltic Freight rates to the highest they have been in over 10 years.

Furthermore, the market for handysize &ndash which the group specialises in &ndash is even more favourable as rates have risen to the highest they have been since 2008.

 

Charter rates are presently over US$25,000 per day.

 

Ng is expected charter rates &ldquo to remain resilient at these levels, or even increase, amid historically low order book, rising scrap rates and further cuts in operating speeds&rdquo .

 

Going forward, six of the group&rsquo s wholly owned dry bulks are slated for renewal in 2H2021, while three will renew in 1H2022 and one in 2H2022.

 

The group is now approaching its third quarter, which is traditionally a peak season due to the commencement of the northern hemisphere grain season.

 

Ng is also expecting stronger demand for steel and other construction materials following the passing of the US Senate&rsquo s US$1 trillion infrastructure plan. This he adds, will drive bulk shipping demand.

 

The dry bulk shipping market had gone through a challenging decade due to excess supply prior to the global financial crisis. 

The way Ng sees it, the &ldquo current decade is setting up for a much tighter market due to discipline among ship owners, led partly by the reluctance to build new vessels that may become obsolete in 2030 when ships are required to cut carbon emissions by 40%&rdquo .

 

Aside from ship chartering, Uni-Asia&rsquo s property business in Japan is growing with assets under management increasing from JPY30 billion ($0.37 billion) in end 2020 to JPY 32billion at the end of 1HFY21.

 

Ng reckons that the group&rsquo s five commercial properties in Hong Kong will likely only contribute from 2H2022, given the relatively high office vacancy rates and weak leasing demand there.

 

He adds that there will be &ldquo more colour on prices and demand&rdquo once the group starts marketing its fourth and fifth properties before the year ends.