SINGAPORE (Dec 18): KGI Securities believes that Uni-Asia Group’s recent share price decline has opened an opportunity to accumulate as the ship and hotel owner is “well-positioned for growth”.
“Uni-Asia’s share price has declined around 15% since its recent peak in November following the announcement of its 3Q17 results. The sell-off may be unjustified given that results were in-line with our estimates,” says KGI analyst Joel Ng.
“Furthermore, Uni-Asia continues to make good progress in all three of its business units,” Ng adds.
KGI is keeping its “buy” recommendation on Uni-Asia with a lower fair value estimate of $1.85, from $1.92 previously. This represents an upside of more than 50% from Uni-Asia’s last traded price.
“Our fair value is an attractively implied 0.5x FY17 P/B and 8.2x FY17F P/E,” Ng says.
On the shipping front, the group’s bulk shipping fundamentals are steadily improving, with the Baltic Dry Index rising to the highest level in more than three years on the back of a recovery in iron ore and coal prices.
See also: Suntec REIT biggest beneficiary from MAS’s ‘looser’ leverage, ICR rules: OCBC
Meanwhile, Uni-Asia’s hotel business is set to be lifted as Japan prepares to host two of the world’s largest sporting events – the Rugby World Cup 2019 and the Tokyo 2020 Olympics.
“In its hotel business, Uni-Asia will be operating 16 hotels with 2,650 rooms in Japan by FY18, in-line with the group’s target of having 3,000 rooms under its management by FY19,” says Ng. “This will be an important milestone as earnings contribution from hotel operations by itself can potentially provide a recurring net profit of US$2.0-2.5 million per annum when it achieves this scale.”
At the same time, Uni-Asia’s properties segment, comprising investments in two commercial buildings in Hong Kong and small residential properties in Tokyo, is also expected to improve.
See also: Sea’s profit draws bullish analyst calls after US$43 bil rally
“One Hong Kong property project is expected to be completed in 2H17 and the other office property to be completed by FY19,” says Ng.
Shares of Uni-Asia last closed at $1.23 on Dec 13, implying an estimated price-to-earnings ratio of 5.5 times, a price-to-book ratio of 0.3 times, and a dividend yield 3.3% for FY17.
