Friday, 8 March 2019

Uni-Asia Group Limited (SGX:CHJ) Results Briefing



Uni-Asia Group held its results briefing on 8 May. The turnout this time is surprisingly high, in my previous 2 times the number was around 10-20 but there were roughly 40 people this time round.

Key Takeaways from the briefing (Do note that i could have misheard some parts somewhere and noted down wrongly so do not take everything i say as 100% accurate)

These should be read in tandem with the results presentation and my previous write-up on it.

1. Results release for 1Q 2019 results will be on 15 May 2019

2. 1Q 2019 results will be the first time it incorporates IFRS 16 Leases into its balance sheet and income statement.
It will be interesting to see the impact it has on the overall income statement as well as on the hotel management segment (which has the most changes due to IFRS 16).
This is coupled by the seasonal factor of a lower occupancy rate in hotels in 1st quarter usually.  Management reiterated that it should be seen on a full year basis instead
The hotel numbers will 'unlikely be nice'

3. Fair value of containerships are 0 and management will  be looking to dispose them off at the right time.
Fair value for the rest of the portfolio which are dry bulk ships amounted to US$5.8 million.

4. Onerous contract for sale and leaseback was due to paying price for lease is higher than current charter rates. Management could have waited till towards end of contract to impair but decided to do so in end 2018.

5. The 3rd HK Property Project has finished constructing and there will be gains to be recognized this year but it is unsure how much as of now. The project is being inspected by government now and waiting for approval. Currently a rough estimation would be 2nd or 3rd quarter for the proceeds to flow in,

6. Hotel listed on balance sheet to be sold is the Hotel Vista Nagoya Nishiki, has been sold in Feb 2019 and according to management there should not be any impairments as the hotel has been money making.
Hotels are poised to ride the trend of increasing tourism in Japan. A forecast found on the Japan Tourism Board estimates that there would be a 13.8% year on year increase in tourist numbers as 2018 numbers were affected by natural disasters. Furthermore tailwinds such as Rugby World Cup are likely to contribute to the increase.

7. Company was awarded the first negotiation right of PFI Project in Wako City. Management explained that they have been trying to get such projects for quite some time hence it is a milestone to be awarded such project. The cost of construction will be borne by the government so the risk is close to no risk. The company will be paid a recurrent fee as a construction manager and asset manager upon completion. The sum is likely to be not significant but this opens up to more of such opportunities for the company to be involved in.

Conclusion

All in all i believe the fair value losses are likely a matter of the past and the maximum fair value losses to be recorded would be 5.8 million from the dry bulks but this would be compensated from the leases cost as a result of new accounting measures.
Hence it is difficult to assess whether the profit would improve as much in 1Q 2019.
Given past track record of the 1st hk and 2nd hk property investments, the 3rd hk property investments should come out with a investment multiple of 2 to 3 times hopefully.

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