Recently had the chance to attend the 3Q2018 results
briefing for Uni-Asia Group
Will jot down my observations and thoughts here. This is an add-on to the previous post found here
Hong Kong Property Projects
- 2nd project will still have gains to be recognized in 2019
as there are 2 floors left not sold (2nd and 3rd floor retail related) and some money is still with the consortium the
group invested in.
- The current aim would be to invest in more projects but at
a lesser amount than their 2nd project which they invested USD 10.4M.
-This way the income would be more recurrent as the projects
are slated to complete in 2019,2020,2021 and etc if more projects are invested
into
Japan Property Projects (Alero Series)
-IRR of each project is minimum 20% so far, the invested
amount is roughly 3 to 5 million USD.
- Aiming for 6-8 projects a year. (This could imply perhaps
around 3 million USD profits per year?)
- Would only focus on having projects in Tokyo as that is
where population is increasing.
Japan Vista Hotel Management
- Operates on a 'management' basis hence they take into
account the revenue and expenses of each hotel. Expenses do include paying to
owners of the hotel a fixed or variable cost.
- The invested equity is roughly 3 million and hence the
returns on equity is good although on a revenue basis the returns look mediocre
(48.9 million revenue in 9 months of 2018 but 171'000 profits)
-5 Hotels opened this year and accounted for 1146'000 pre
opening fees. There would be no pre-opening expenses in 4Q as the next hotel
opens in end 2019.
- Current year of operations is not in a stable stage which
the company hopes to achieve and aim for 2.5m USD profits in a year.
-However with IFRS 16 to be implemented in January 2019,
this will result in higher upfront cost and affect P&L of hotel operations.
This is due to incorporation of assets on the balance sheet along with lease
liability which results in right of use depreciation + Interest expense
Shipping Operations
- Group aims to focus on dry bulks in the long run and move
away from containerships
-Currently has 4 containerships. 1 is on the balance sheet as
cost-impairment basis. Book value estimated to be 14 million. Market value
slightly lower at the moment but has not hit impairment levels. The current
market for containers does not seem to bode well and further impairment losses
would likely occur across 2018 and 2019.
-As for the dry bulks, the ships are on a mix of spot+ long
term charter basis.
-As IMO 2020 approaches, ships will have to use low sulphur
oil or install scrubbers. On handymax vessels which account for all but 2 of
Uni-Asia's dry bulks(which are supramax), installer scrubbers are impossible
due to size of ship being too small. Hence low sulphur oil has to be used and
the cost is likely to be shared among various parties despite Uni-Asia being an
owner.
-1 of the supramax ships will be installed with scrubbers
which is requested by the current charterer of the ship. A scrubber is
estimated to cost 2-3 million dollars. There is likely not much financial
impacts arising from this as the increase in charter income would likely be
offset by depreciation arising from the installation.
Final words
The Positives
Currently 4Q 2018 dry bulk charter rates are still higher
than 4Q 2017.
2nd HK Project and 3rd HK Project will still have gains
recorded.
Hotels likely to see a 4th quarter of earnings not impacted
by opening cost
The Negatives
Containerships might see impairment/ fair value losses
IFRS 16 to affect balance sheet ratios as well as P&L
negatively.
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