Dear Valued Shareholders,
On behalf of the Board and management, I present to you the annual report of Uni-Asia Holdings Limited and its subsidiaries (the “Group” or “Uni-Asia”) for the financial year ended 31 December 2016 (“FY2016”).
The shipping industry continues to be plagued with troubles and 2016 could be deemed one of the worst years for the shipping industry on record. The collapse of South Korea’s biggest shipping line, Hanjin Shipping Co., Ltd showed us that even big companies may not be spared the cruelty of the current distressed shipping downturn. The Baltic Dry Index reached historical low levels in 2016 although it recovered some grounds towards the latter half of 2016. Against this background, we relooked at some of the assumptions which we used in the valuations of our ship investments and took noncash fair valuation and impairment losses in our books for 2016. On the other hand, our property and hotel operation business continued to do well and its profits in FY2016 helped to buffer the losses sustained by our shipping business. The Group recorded a net loss after tax of US$12.2 million for FY2016. Notwithstanding the loss, the cashflow of the Group remains healthy. The Board has therefore proposed an ordinary dividend of 3 Singapore cents per share for FY2016. While this dividend per share is lower than that of FY2015, it reflects the Group’s balance between prudent cash management and commitment to the returns of our shareholders.
Our Group’s shipping portfolio currently comprises 24 ships. These include 9 small handysize dry bulk carriers under Uni-Asia Shipping Limited (“Uni-Asia Shipping“), 1 wholly-owned dry bulk carrier, 1 wholly-owned containership, and 13 ships under joint-investments including 1 product tanker, 3 containerships and 9 dry bulk carriers. Our focus for FY2016 had been to ensure our ships are chartered to credible charterers with fair charter rates as well as to ensure cost effective upkeep of our ships. Our team has also been working hard to source revenue from ship related service businesses, including brokerage and finance arrangement. While we do not expect the shipping market conditions to improve drastically in the coming 12 months, we believe that slowly but surely the shipping market would recover, as it is still the most cost efficient mode of transportation for cargoes around the world. We have positioned ourselves and are ready to capitalise on the recovery when it comes.
While we adopted a more defensive approach in managing our shipping portfolio in the past year, we are more aggressive in expanding our property investments. On 13 July 2016, the Group, as part of the consortium led by our investment partner, First Group Holdings Limited, won a bid to develop a commercial site at 517 Tai Lin Pai Road in Kwai Chung, New Territories in Hong Kong. This is the third Hong Kong property project investment by the Group. The Group invested HK$50 million or around US$6.4 million in this project. The existing structure on the land has been demolished and the construction of a commercial office building on the site is scheduled to be completed by 2019. Meanwhile, construction of the Group’s second Hong Kong property investment at 650 Cheung Sha Wan Road is progressing well and is scheduled for completion in 2017 with realisation of proceeds expected in 2018.
In Japan, the Group’s investment and construction management of small residential property projects continue to generate good returns for the Group. Our expertise in this niche sector attracted several coinvestors including Singapore-based CPG Investments Pte Ltd. While the returns from small residential projects are good, we are cautious in the selection of projects. At the same time, we are also looking for suitable opportunities to expand our property asset management business in Japan. One such initiative undertaken by the Group was the setting up of a fund by UACJ/UAI to invest in a hostel business project, where the Group rented a building in Nihonbashi-Yokoyamacho, made the necessary applications/renovations to convert the building into a hostel and sub-lease it to a hostel operator. This new initiative allows the Group to explore new businesses and gain new property expertise.
For our hotel operating business, occupancy and daily room rates remain favourable. In April 2016, the 10th hotel operated by the Group, Hotel Vista Sendai had its grand opening. This is the first time the Group operates Hotel Vista in Tohoku area. In the summer of 2017, two new hotels (Hotel Vista Premio Yokohama Minato-Mirai and Hotel Vista Nagoya Nishiki) are scheduled to open. Another 4 hotels are scheduled to open in 2018. 3 of these hotels include hotels in Tokyo Akasaka, Kyoto Takoyakushi and Hiroshima. With these additions to the Group, we will be operating 16 hotels with around 2,650 rooms, closing in on the Group’s mid-term target of 3,000 rooms under operation.
Uni-Asia was founded on 17 March 1997 and 2017 marks the Group’s 20th anniversary. In the first 10 years of founding, the Group built up its assets and revenue stream for listing in Singapore on its 10th anniversary year in 2007. However, the 10 years after 2007 proved to be turbulent, starting with the Lehman crisis in 2008 and ending with the shipping downturn. We had weathered many troughs since our founding. We had been resilient and we have emerged stronger. 2017 is the beginning of a new decade for the Group, a new 10 years which I believe shall be brilliant for the Group. This is because we have very strong support from our clients, business partners, bankers, shareholders, and a very dedicated and hardworking team across the different countries that the Group operates. I would like to thank you all. We shall build on our capabilities to make the Group stronger, and together, we shall build a better Uni-Asia in the coming years.
Chairman and CEO
Uni-Asia Holdings Limited
(This statement first appeared in Uni-Asia Annual Report FY2016. Following the Group’s restructuring, Mr. Michio Tanamoto is the Chairman and CEO of Uni-Asia Group Limited.)