SINGAPORE (Mar 16): KGI Research is maintaining Uni-Asia at "buy" given the group is well positioned to ride growth in its three business segments and surprise dividend uplift.

In a Friday report, analyst Joel Ng says Uni-Asia has completed of its second and third Hongkong property and will invest in its fourth and fifth property in the city-state in 1H18.

An uplift in Uni-Asia's hotel business is also expected ahead of Tokyo 2020 Olympics and Rugby World Cup 2019 and the group is expected to operate 21 hotels with 2,952 rooms by 2019.

This will be an important milestone as earnings contribution from hotel operations can potentially provide a recurring net profit of US$2.0-2.5 million ($2.6-3.3 million) p.a. when it achieves this scale, says Ng.

Meanwhile, the Baltic Dry Index (BDI) has continued to remain above 1,000 pts amid a recovery in iron ore and coal prices despite retracing back from its four-year high in Dec 2017.

Ng says the recovery in the BDI is also due to the better supply-demand balance of dry bulk vessels given orders as a percentage of total tonnage has declined to a more sustainable level.

To recap, Uni-Asia in 4Q17 reversed out of the red with earnings of US$1.4 million compared to the loss of US$13.6 million last year. Revenues in 4Q17 rose 39% y-o-y due mainly to 18% higher hotel income and a near quadrupling of investment returns.

Uni-Asia recognised a higher-than-expected US$6.8 million fair value gain for its second HK project, offset by fair value losses for its tankers and containership investments.

Excluding fair value losses from shipping investments, 4Q17 earnings could have more than doubled to US$4.3 million.

The group has declared a 6.25 cents full-year dividend - double that given out in 2016 – implying a 4.3% dividend yield.

KGI has a fair value of $1.81 for the stock, based on the sum-of-the-parts valuation of its three business segments. Its target price implies 0.5 times FY18 book value and 10 times FY18 earnings.

As at 11.46am, shares in Uni-Asia are trading at $1.45.