+ Growth in charter revenue. Charter revenue in 2H22 grew 12% YoY to S$31.2mn as the average charter rate per day expanded 10.6% to US$18,256. The company managed to lock in attractive rates in 1H22 despite a weaker environment. Uni-Asia wholly owns 10 dry bulk ships with another 8 as investments (~18% ownership stake in each vessel).
+ FY22 dividends more than doubled. Final and special dividends in FY22 jumped a combined 60% YoY to 8 cents per share. FY22 dividends more than doubled from 7 cents to 14.5 cents (or S$11.4mn). The payout ratio was around 30% (FY21: ~22%)
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– Decline in property sales. 2H22 property revenue declined significantly due to weaker Japanese currency and most of the projects sold were on a joint venture basis. We estimate the number of Alero projects sold in 2H22 was 5, down by 10 in 2H21. To recap, Uni-Asia will purchase land, builds 4-5 storey buildings with 10-30 unit apartments in Tokyo (named Alero), secures tenants and disposes the building to investors with a rental yield.
From the recent peak in March 2022, the Baltic Exchange Handysize Index has corrected by 60% to current levels of around 700 (Figure 1). Any renewal of charters at spot rates by Uni-Asia in 1Q23 will be the weakest in more than 2 years. A positive has been the gradual rise in rates this year since the lows in January. The company has also been able to lock in medium-term charters at rates far higher than spot. It is a possible indication of higher rates in 2H23 as the recovery and re-opening of China builds momentum.
Supply of new handysize vessels remains muted. An issue is uncertainty over fuel type when ordering new vessels. If dual fuel is used for a vessel, it implies two tanks on the ship -1 fossil fuel and 1 alternative fuel (e.g. methanol or ammonia). However, there is insufficient space to accommodate both tanks. If only alternative fuel is deployed, vessel owners worry about sufficient supply or refuelling centres for such fuel. Another impediment to new vessels is the tightening of financing conditions and higher interest rates.
In the property division, no new funds will be deployed into Hong Kong before realizing proceeds from the existing five projects. Total investments in these five projects are US$23mn. On Alero, we expect a recovery in units sold as on-going projects (or pipeline for eventual sale) is 12 (FY21: 10).