Dear Valued Shareholders,
On behalf of the Board and management, I am pleased to 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 2014 ("FY2014"). In FY2014, the Group achieved an after tax profit of US$2.1 million. The Group has experienced numerous peaks and troughs in the volatile business environment since its founding in 1997. While FY2014's result was not a trough for the Group, neither was it a peak that management has worked hard for. However, the Group is determined that with our strong business foundation, as well as our dedication and resilience, our best days lie ahead of us. With this confidence, the Board has proposed an ordinary dividend of 0.625 Singapore cents per share, the same dividend amount as last year, subject to your approval at the forthcoming Annual General Meeting on 29 April 2015.
Overview of FY2014
Shipping market has been sluggish for a prolonged period. The Baltic Dry Index, which is a barometer of health of the dry bulk industry as well as the broader global economy, had remained weak in 2014 due to depressed commodity prices and lower Chinese iron ore and coal imports. Most of our vessels under Uni-Asia Shipping Limited ("Uni-Asia Shipping"), the Group's ship owning subsidiary, are contracted to charterers with medium term fixed time charter rates. Such contracts are less susceptible to market fluctuations and had helped to buffer the dismayed performance of the few vessels in Uni-Asia Shipping's portfolio with index-linked floating time charter rates. In 2014, Uni-Asia Shipping took delivery of an additional newly ordered dry bulk carrier. After tax profit of Uni-Asia Shipping was US$2.2 million for FY2014.
Global container shipping market has been hit hard by severe tonnage glut. I nflow of ultra-large Post- Panamax vessels contributed to the rapid expansion of global container fleet. While the Group has not been investing in container vessels in recent years, the container vessels in the Group's existing portfolio have not been spared from the current adverse container market. In particular, the valuation of three 3,500 TEU container vessels purchased in 2007 and held by Akebono Fund, in which the Group has 36.45% interests, were severely hit, resulting in the Group recognising additional fair valuation losses in FY2014.
Property and Hotel
While shipping market was difficult in 2014, it proved to be another good year for our property segment. The Group's investments in small residential property projects continue to contribute to the Group's bottomline as we sold 3 projects in 2014 with good returns due to the rising property market in Tokyo. Other than small residential property investments, the Group had also disposed of hotel and residential projects held under investment funds and investment companies in Japan. Such investment funds and investment companies, in which the Group has a minority stake, are managed by Uni-Asia Capital (Japan) Limited ("UACJ"). As a result of such disposal, UACJ was able to earn arrangement and incentive fees, as well as enjoy capital returns. In addition to managing investments, UACJ utilised her small residential property project management expertise to help our clients with construction management of similar projects. UACJ would source for suitable land, develop the property and find tenants for the property. For FY2014, UACJ recorded an after tax profit of US$1.8 million.
In Hong Kong, the Group joined a consortium with other third party non-related investors led by First Group Holdings Limited in a bid and won the land at 650 Cheung Sha Wan Road. The land is currently being developed into a commercial office building to be completed by 2017. The Group's proportionate share in this investment is around 13.3% at US$10.4 million.
Meanwhile in China, the Group disposed of 5 of the 14 office units in China Shine Plaza in G uangzhou, China. The Group is now looking to dispose of the remaining of these office units.
Turning to our hotel business in Japan, our hotels enjoyed good average occupancy rates throughout the year and recorded an after tax profit of US$0.1 million for FY2014 as Japan witnessed increased tourist arrivals in 2014 due mainly to the weak Japanese yen. Our hotel operating subsidiary in Japan, Vista Hotel Management Co., Ltd, clinched a new hotel operating contract in 2014 for Hotel Vista Sendai. This hotel is currently under construction and is slated to open in the spring of 2016.
FY2015 and Beyond
Uni-Asia aims to be a truly trusted partner for our clients as a producer of alternative investment opportunities and an integrated service provider relating to alternative investments so as to deliver value to the Group's shareholders, clients and employees.
To achieve this vision, we strive to improve the quality of our services to our clients, develop innovative new products to expand our clients' base for further growth, and strengthen our investment portfolio so as to generate recurrent returns.
As part of this strategy, Uni-Asia Shipping has been building up its fleet with newer and better newbuilding vessels over the past years. Uni-Asia Shipping owns nine dry bulk carriers, of which six were delivered and chartered out as at 31 December 2014 and two more vessels were delivered on 9 February 2015 and 2 March 2015. The last of the nine will be delivered in 2016. In addition, Uni-Asia Shipping will commercially manage three dry bulk carriers held by three joint investment companies which Uni-Asia Holdings Limited owns 18% in each of these companies. Together, Uni-Asia Shipping will boast a fleet of twelve vessels. Our strategy of having Uni-Asia Shipping providing a stable recurrent income base is slowly taking shape and will bear dividend in the coming years.
In the current shipping markets and the outlook of rising interest rate, we see potential in our structured finance arrangement business in arranging cost effective financing solutions for our clients. Our team is working hard to source for new deals and create innovative solutions to our clients so as to boost our structured finance arrangement business.
In property market arena, we will continue to expand our small residential property project portfolio and our construction management business in Japan, as well as explore new business opportunities with our expertise in Japan property. While we disposed of our property investments that had generated good returns, we will continue to allocate resources to property investments so our portfolio can be continually renewed to generate recurrent profit and cash flow.
Acknowledgement and Appreciation
In 2014, my co-founder and good friend, Mr K azuhiko Yoshida decided to retire as the Chairman and CEO of the Group as he believes that it is important for a company to have a continual renewal of new blood so as to reach greater heights. On behalf of the Board and management, I wish to thank Mr Yoshida for his leadership, vision and many valuable contributions to the Group.
I would also like to take this opportunity to thank Uni- Asia's Board of Directors, management and employees for the hard work, dedication and commitment, as well as to thank our clients, business partners, bankers and our shareholders for the constant faith and support in Uni- Asia.
Chairman and CEO
Uni-Asia Holdings Limited
18 March 2015