|As dry bulk charter rates normalise, FY22 will be remembered as a year of exceptional dividends for Uni-Asia Group:
Excerpts from Phillips Research report
Analyst: Paul Chew
|From the recent peak in March 2022, the Baltic Exchange Handysize Index has corrected by 60% to current levels of around 700.
A positive has been the gradual rise in rates this year since the lows in January. The company has also been able to lock in medium-term charters at rates far higher than spot.
It is a possible indication of higher rates in 2H23 as the recovery and re-opening of China builds momentum.
Supply of new handysize vessels remains muted.
An issue is uncertainty over fuel type when ordering new vessels. If dual fuel is used for a vessel, it implies two tanks on the ship -- 1 fossil fuel and 1 alternative fuel (e.g. methanol or ammonia).
However, there is insufficient space to accommodate both tanks. If only alternative fuel is deployed, vessel owners worry about sufficient supply or refuelling centres for such fuel.
Another impediment to new vessels is the tightening of financing conditions and higher interest rates.
In the property division, no new funds will be deployed into Hong Kong before realizing proceeds from the existing five projects. Total investments in these five projects are US$23mn.
On Alero, we expect a recovery in units sold as on-going projects (or pipeline for eventual sale) is 12 (FY21: 10).
Industry peers are trading at 6.5x 1 year forward PE.
We attached a 40% discount to Uni-Asia due to its lower market capitalization. Average market cap of peers is around US$1.3bn.Maintain BUY with lower TP of S$1.19 (prev. S$1.26).
Full report here.