Phillip Securities has kept its “buy” call and $1.26 target price on alternative investment company Uni-Asia Group.
The bulk of Uni-Asia’s revenue comes from its ship chartering business but it has a significant property development arm as well.
In his Nov 23 report, the brokerage’s Paul Chew notes that the shipping industry’s benchmark Baltic Exchange Handysize index has dropped 45% y-o-y in the third quarter of 2022 but Uni-Asia has already locked in “attractive” rates.
For 3QFY2022 ended Sept, Uni-Asia reported average charter rate of US$19,609 per day, up 37% y-o-y. “We believe the jump in freight rates will drive similar growth rates for charter income,” says Chew.
Nonetheless, Chew has lowered his FY2023 earnings estimate by 13% to US$19.2 million to take into account the lower rates.
He cautions that the soft economic conditions in China have led to softer demand for bulk commodities carriers.
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“Unless freight rates recover in 1Q23, there is a risk the next renewal cycle will be a major drag to revenue,” says Chew.
Having said so, he also notes that new dry bulk vessels are at just 7% of total fleet capacity – a 30-year low. As such, Chew sees the longer-term freight rates enjoying a certain level of support.
His target price of $1.26 is pegged to 3 times FY2022 earnings, a valuation in line with industry peers.
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Elsewhere, Chew notes that Uni-Asia has made progress in its Hong Kong commercial property business. The company holds minority stakes in a series of commercial developments.
The company, in its most recent 3QFY2022 update, said it has sold 11% of its fourth project and that sales of its fifth project has increased from a third to half.
Back in Japan, the company has built up a bigger pipeline of seven boutique residential projects under its Alero branding, from three, in the previous quarter.
As indicated in its report, Phillip Securities Research received monetary compensation for the production of the report from Uni-Asia.
Uni-Asia Group shares last traded at 81 cents, down by 34.55% year to date.
