UNI-ASIA GROUP LIMITED (SGX:CHJ)
Uni-Asia Group - Earnings Spike In 1H22
- Uni-Asia Group (SGX:CHJ)'s 1H22 revenue and PATMI were 64%/68% respectively of our FY22e forecast. Results were above expectations due to a surge in charter rates. 1H22 PATMI spiked 128% to U$16.4mil. The interim dividend more than tripled to 6.5 cents.
- Average charter rate per day in 1H22 jumped 78% y-o-y to US$19.4k. This is above our modelled US$18.k assumption. Vessel operating days declined 5% y-o-y due to dry docking.
- Despite the earnings beat, we are maintaining our FY22e forecast.
- The Baltic Exchange handysize index in July and August has slipped around 25% against the 1H22 average. It points to a much weaker charter rate in 3Q222.
- Another drag in 2H22 will be the 110 days of dry docking for 4 of the 10 dry bulk vessels. There was a 6% decline in operating days.
- Our BUY recommendation and target price of S$1.26 for Uni-Asia Group is unchanged. The target price is pegged to 3x P/E FY22e, in line with industry peers. Supply of dry bulk vessels remains constrained with new orders at only 7% of fleet capacity, a 30-year low.
The Positives
Surge in charter rates.
- Charter revenue rose 70% y-o-y to US$34mil, driven by a 78% jump in average daily charter hire rates to US$19.4k. Vessel operating days were 5% y-o-y lower due to a containership that was disposed of in 1Q21.
- Margins expanded as vessel operating expenses rose only 14% y-o-y to US$10.6mil. Higher cost was from crew salary, crew logistics and other expenses. Fuel cost is borne by the shipping company, not Uni-Asia Group.
Returning spike in cash flow to shareholders.
- Uni-Asia Group's free cash flow (FCF) in 1H22 tripled to US$20.9mil (1H21: US$7.2mil). There are no current plans to order vessels. Net debt has halved to US$31mil (1H22: US$61mil) from a year ago.
- Uni-Asia announced an interim dividend of S$0.065 cents per share, a payout ratio of 23% (or S$5mil).
The Negative
Lower pipeline of properties in Japan.
- In 1H22, Uni-Asia Group sold 2 units of its residential projects (i.e. Alero) located in Tokyo. The pipeline or ongoing projects is down to 8 from 13 a year ago. This implies fewer available projects to lease or for sale in the coming quarters.
Outlook
- The Baltic Exchange Handysize Index started to roll over since June 2022. The index in 3Q22 is likely to be weaker than a year ago, albeit still elevated than 2019/20 levels. Weakness in charter rates is due to softness in demand for commodities in China. Shipping lines are cautious and delaying their commitments of hiring vessels.
- We believe the medium-term outlook is still positive for charter rates. New orders for dry bulk vessels are at 30-year lows due to multiple factors. These include shipyard capacity already filled by container vessel orders, port congestion, slow steaming and uncertainty over future emissions standards and fuel type for dry bulkers.
Maintain BUY recommendation on Uni-Asia Group
- We expect the dry bulk shipping cycle to be resilient in the coming two years as the new supply remains modest at multi-decade lows. We also cut our dividend forecast for Uni-Asia Group from S$0.12 to S$0.095 as we assume a lower payout ratio of 23% from 30%.
- See
- Our BUY recommendation and target price of S$1.26 for Uni-Asia Group is unchanged. The target price is pegged to 3x P/E FY22e, in line with industry peers.
Phillip Research Team
Phillip Securities Research
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https://www.stocksbnb.com/
2022-08-19
SGX Stock
Analyst Report
1.260
SAME
1.260
