KGI Research analyst Joel Ng has upgraded alternative investment firm Uni-Asia Group to “outperform” as Ng deems valuations for the group to be “attractive” amid the bulk carrier upcycle and resilient property markets in Japan and Hong Kong.

On that, Ng has also upped his target price estimate on the counter to 91 cents from 54 cents previously, based on sum-of-the-parts (SOTP) valuations.

To Ng, Uni-Asia Group could see “brighter days ahead” in 2021 after a “challenging” year in 2020, which saw a net loss of US$7.5 million ($10.0 million) in the FY2020 ended December.

The net loss, compared to the US$6.6 million net profit posted in the FY2019, was due to the negative impact on the group’s Japan hotel business due to the Covid-19 pandemic.

Uni-Asia Group ultimate exited the business in 1QFY2021 after trimming its stake from 99.0% to 49.5%.

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The bulk shipping business segment, the other major revenue contributor for the group, recognised some US$7.9 million in impairments due to a decline in charter rates in the 1HFY2020.

However, based on the group’s latest business update in the 1QFY2021, 2021 has seen a strong recovery in the group’s shipping business; the group has 10 direct-owned dry bulk carriers and eight dry bulks under its joint venture entities.

Ng also notes that the rally in commodity prices has made shipping the most expensive it has been in over 10 years since the start of 2021.

The recovery in commodities and dry bulk shipping, he says, is driven mainly by strong demand on the back of a broad-based economic recovery and massive stimulus measures around the globe.

“Earlier this month, the Baltic Dry Index (BDI) rose above 3000, the highest since 2010. UAG is a key beneficiary of this boom and managed to achieve average daily charter rates of around US$10,000 for its dry bulk carriers, a 34% y-o-y improvement from US$7,400 in 1QFY2020,” he writes.

To this end, Ng has upped the multiples for Uni-Asia Group’s shipping business to 0.5 times FY2021 price-to-book (P/B) from 0.2 times FY2020 P/B previously.

He has also kept 0.5 times FY2021 P/B for the group’s Hong Kong and Japan property business.

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“Balance sheet remains healthy as it continues to pare down debt, and we forecast dividends to recover to 3.5/3.0/3.0 cents for FY2021/FY2022/FY2023 (40-48% payout ratio), an implied 5% yield,” he adds.

The group will announce its 1HFY2021 results on or before Aug 31.

Separately, the company has been insiders buying. For example, on May 21, executive chairman Michio Tanamoto (picture) paid $33,250 for 50,000 shares, bringing his total stake to more than 2.47 million shares, or 3.14%.

As at 12.36pm, shares in Uni-Asia Group are trading 3.5 cents higher or 5.3% up at 70 cents.