With news of shipping companies paying generous bonuses widespread on social media in the last few months, there’s little doubt that the industry as a whole has done well since 2021. One such local beneficiary is alternative investment group Uni-Asia, which reported its best financial year in 26 years for FY2022.
Listed on the Singapore Exchange (SGX) since 2007, Uni-Asia (SGX Code: CHJ) relies on two uncorrelated engines of growth, allowing it to stay resilient regardless of market cycles.
One of its core businesses is providing handysize dry bulk carrier services through its wholly owned fleet of 10 vessels. With a tight supply of new handysize dry bulk vessels and the reopening of China, dry bulk shipping is expected to be resilient in 2023 despite softening economic conditions.
For its other core business, Uni-Asia is involved in the construction of small residential properties in Tokyo, Japan, under the Alero brand. Additionally, it also builds commercial and industrial buildings in Hong Kong. The group expects the Japanese property market to remain robust with the weakening of the yen, attracting more investors. Similarly, the group believes the reopening of China will uplift the depressed Hong Kong property market in the next couple of years, which will boost its property segment.
Here are 5 things to know about Uni-Asia Group and its businesses.
Describe Uni-Asia’s main business segments and revenue drivers.
Uni-Asia is a prominent player in two main business segments: shipping and property investment.
In the shipping segment, Uni-Asia is engaged in vessel ownership and chartering, maritime asset management, and maritime services. The Group owns and operates a fleet of vessels, primarily focused on dry bulk carriers. The charter income generated from the Group’s 10 wholly owned vessels is a significant driver of revenue for FY2022, accounting for 91% of the profit for the shipping segment.
In the property segment, Uni-Asia’s investments are primarily focused:-
In-Japan, Uni-Asia develops small residential properties in Tokyo under the Group’s Alero brand properties typically consist of studio and maisonette type apartments and are normally sold en-bloc. In addition, the Group provides property asset management services in Japan. The total assets managed by the Group were close to JPY37 billion as at end of FY2022, and encompass hospitality, residential, and healthcare assets.
Outside of Japan, property investments are commercial and industrial buildings development projects in Hong Kong. Such projects are high-rise buildings development which the Group takes a minority stake, and would be sold strata titled upon development completion. The Group would recognise investment returns either via fair valuation adjustments or realised gain upon receipt of distribution from project companies.
Interest rates are expected to stay elevated for the next two years. What impact does this have on the Group’s businesses and how is it managing this risk?
The Group has mitigated this risk by decreasing its net debt position over recent years, leading to lower financing costs. This strategic decision to strengthen its financial position has created room for the Group to venture into new investment opportunities. However, given the current higher interest rates, the Group has adopted a more cautious stance towards debt financing for potential ventures and investment opportunities. As the Group’s objective is to generate long-term shareholder value, the Group prioritizes prudent decision-making and avoids rushing into expansions or investments.
What are the most significant ESG risks or opportunities your company is facing? How are you meeting these needs?
One of the ESG risks faced by Uni-Asia is the potential impact of its operations on greenhouse gas (GHG) emissions and climate change. To address these risks, the Group has implemented several measures such as:
- Comply with the International Maritime Organization’s (IMO) Carbon Intensity Indicator (CII) regulation, which stipulates that vessels must maintain a minimum grade 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.
- 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 not only limits the inefficient use of energy but also allows the Group to optimise its fleet.
- Made a transition to solely using Low Sulphur Fuel Oils 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 growing shift towards sustainability and clean fuels. Accordingly, the Group strategically plans its investments in vessels to align with these principles so as to meet regulatory requirements while contributing to a greener and more sustainable future.
With many economists predicting a slowing economy and a possible recession in the near term, how is the Group preparing itself to ride out this storm?
The Group’s strong operational performance over the last few years has helped to significantly strengthen its financial position. This positions Uni-Asia favourably to capitalize on market opportunities by acquiring assets at competitive prices.
Depending on market conditions, the Group will look to recycle or redeploy its capital through mergers and acquisitions, as well as partnerships and joint ventures to expand or reduce exposure in its respective industries.
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 that the Group is more resilient to market conditions. The Group generates recurring income from charter income, asset management fees, and administration fees, forming a stable base layer. Additionally, it generates additional income from brokerage commissions, finance arrangement fees, and investment returns.
Moreover, this multi-disciplinary 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 that it is essential to recognise how the company has evolved over time 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.
Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 9 May 2023 and have been republished with permission. You can read more on Uni-Asia Group on the SGX website.