CEO's Business Review
Dear Valued Shareholders,
Following the strong momentum that we enjoyed in FY2021, the Group logged another year of record profit, where net earnings surged more than 50% yearon- year to US$27.9 million in FY2022 on the back of higher revenue and margin expansion. With the positive operational performance, we are declaring a final and special dividend totalling S$0.08 per share. Including the interim dividend paid in 2022, the total dividend for FY2022 amounts to S$0.145 per share, more than double our payout from a year ago and the highest dividend level in the history of the Group.
Shipping Business to Stay Resilient
The shipping market started the year on a strong footing with the Baltic Handysize Index (“BHSI”) averaging 1,432 for 1H2022, compared to 1,084 for 1H2021. However, as seaborne dry bulk trade demand started to soften, and with the easing of port congestion, the bulk carrier market began weakening in 2H2022, with the BHSI index dropping to an average of 940 in 2H2022, compared to 1,766 for 2H2021. Despite the sharp decline in the BHSI index in 2H2022, the Group turned in a relatively resilient performance, thanks to our active risk management strategy, which incorporated a blend of short and long-term charters for our vessels. The average daily charter rate for the Group’s 10 consolidated dry bulk carriers was US$18,841/day for 2022, as compared to US$13,561/day in 2021, and was 2.4 times that in 2020. Consequently, the Group achieved a charter income of US$65.3 million in 2022, a 37% increase from 2021. Profit after tax for our shipping business surged more than 48% y-o-y to US$32.5 million in 2022.
Looking ahead, while the bulk carrier market started the new year on a weak note, industry experts are cautiously optimistic of an improvement through 2023. One of the key factors include the re-opening of China, which is expected to boost growth in the world’s second largest economy, and help spur demand for seaborne trade, including the bulk carrier market. Supply-demand factors driving dry bulk shipping are also expected to remain positive, with dry bulk tonnemiles trade demand projected to grow by 2.0% and 2.2% in 2023 and 2024 respectively, while handysize dry bulk ship supply is projected to decline by 0.2% in 2023 and 1.7% in 2024. New emissions regulations could also further reduce supply in the market through slower speeds and retrofit time. Despite the recent drop in the BHSI, the resale value for handysize dry bulk ships has remained relatively resilient due to tight supply for vessels, according to data compiled by Clarkson Research1. The Group continues to monitor the Sale and Purchase market for opportunities to realise disposal gains from our older 28,000 DWT ships, as we look to potentially recycle and reallocate our resources into more profitable projects to optimise profitability.
The Hong Kong property market continued to be impacted by the COVID-19 pandemic in 2022, which resulted in the segment recording a profit of US$0.4 million, a far cry from the hay days of Hong Kong property boom times before the pandemic. Nonetheless, Hong Kong remains a major financial hub in Asia, and is home to many multinational corporations. The reopening of China has also helped to lift sentiment for the sector, with property deals in Hong Kong rising to a threemonth high2. The total number of property transactions in January 2023 rose 24% from December 2022 to 4,427, with the value of the transactions increasing 26% to HK$32.5 billion (US$4.1 billion), a five-month high. We are cautiously optimistic that this positive trend will continue to boost the Group’s property investments in Hong Kong, as we work closely with our partners to identify opportunities for divestment gains.
The Group’s 4th, 5th, 6th and 7th Hong Kong property projects are in the market for strata sale. The Group’s 8th property project in Hong Kong has also recently completed its foundation construction and is scheduled to be completed by 2024.
Japan Property Business Records Robust Performance
Despite the impact of the COVID-19 pandemic, the Tokyo property market has been robust, driven by a strong domestic economy and low interest rates. The Group’s trademark small residential property projects – the “ALERO” series, as well as property asset management and related property businesses, have continued to perform well, chalking up a profit of US$1.7 million in 2022.
The Group’s property assets under management by subsidiary Uni-Asia Capital (Japan) Ltd (“UACJ”) had continued to grow, reaching JPY36.9 billion as at end of 2022. Its assets include Hotel/Hostel/Resort property assets (JPY12.3 billion), Residential property assets (JPY8.7 billion), as well as Healthcare/Medical/Group Home property assets (JPY15.9 billion). The Group will continue to build on its reputation to increase property assets under management in Japan, including introducing foreign investors to co-invest in Japan to boost our asset management fee income.
Driving Sustainable Growth for Years to Come
The surge in profits over the last two years has been a blessing for the Group, as the robust cashflows helped to significantly strengthen our balance sheet. Our net debt3 position dropped drastically from US$78.5 million in 2020 to US$25.6 million in 2022. Coupled with our strong equity base of US$151.2 million, this gives the Group ample room to leverage on our capital structure to increase returns for shareholders.
Looking ahead, the Group has set a target to achieve a sustainable long-term return on equity (“ROE”). To achieve it, the Group has set forth the following goals:
- More active marketing to source for potential business opportunities;
- Increase the Group’s marketing team talent pool;
- Increase assets under management (“AUM”) to drive higher fee incomes, rental incomes and investment returns from existing/new businesses;
- Continuously improving operational efficiencies, including through IT investments; and
- Promoting younger employees to management level over the next few years as the Group implements its succession plan.
As CEO, I am proud of what Uni-Asia has accomplished in FY2022, and look forward to all that lies ahead of us as we embark on the next stage of our expansion journey. As an investment management group specialising in alternative assets, it is our goal to create new investment sources and products, so as to boost our AUM as well as strengthen our investment portfolio. We are also committed to strengthening our balance sheet through opportunistic divestments, deleveraging and enhancing our liquidity position. We will continue to strive to optimise our profitability, by evolving, adapting and capitalising on the right opportunities that will generate sustainable long-term returns for our stakeholders and shareholders through capital appreciation and/or stable dividend yields.
As we conclude another financial year, I would like to take this opportunity to express my gratitude to the Board, management and all employees for their hard work, commitment and dedication, as well as to our clients, business partners, bankers and shareholders for their continued trust and support. The road ahead is filled with uncertainties. Let us navigate together to build a much stronger and profitable Uni-Asia!
Uni-Asia Group Limited
16 March 2023