UNI-ASIA: Pace of increase in vessel charter income to pick up

Fleet8.14 Source: Company
AT ITS CORE, Uni-Asia Holdings is a ship owner-cum-charterer -- but it also has its fingers, in a relatively small way, in the property business in Japan and Hong Kong as well as in the hotel business in Japan.

The thing to note about this company is, its recurrent charter income (or revenue) is on the move, and is picking up speed.

The driver for that is simply the addition of vessels to its wholly-owned fleet.

Thus, in 2Q14, its charter income rose to US$4.39 million from US$3.62 million in 2Q13. In the former period, it had contribution from a vessel which joined the fleet in June 2013.

In 1H14, the charter income was US$9.0 m from 5 vessels, up from US$7.1 m in 1H13. That works out to US$10,000 a day per vessel on average in 1H14.

The income would have been higher if not for the 10-day docking of an older ship and a decline in index-linked charter rates for two ships, said CFO Lim Kai Ching at a results briefing this week.

Going forward, the charter income is expected to rise in 3Q14 y-o-y and q-o-q from the contribution of a new vessel that was chartered out from July 2014.

And more good news: In 1Q15, two more new vessels will join the fleet and in 1Q16, one more vessel, expanding the total to 9.

That would complete the current fleet expansion programme under the Uni-Asia Shipping segment.

Feecompose8.14 Contribution from recurrent charter income to Uni-Asia's total fee income has increased from 56% to 72% while ad hoc arrangement and agency fee income’s contribution decreased. Source: Company

Proposed acquisition of GAT vessel

cfo_coo L-R: CFO Lim Kai Ching and Chairman & CEO Michio Tanamoto.
Photo: CompanyOn July 14, Uni-Asia announced that its newly-acquired subsidiary, Arena GK, would purchase a newbuilding GAT ship, which can be used for transporting construction materials within Japanese waters.

The total consideration is JPY920 million (USD9.1 million).

The seller, Minato Kaiun Co., Ltd, will bareboat charter the vessel for five years at the end of which the seller will purchase the vessel.

Uni-Asia Holdings has another business segment that deals with vessels.

Here, it derives various fees for its services -- some recurrent, some not -- but no charter income.

Results1H2014 Uni-Asia Holdings reported US$2.71 m in net profit for 1H2014. The stock (18.9 cents) trades at only 50% of the book value.Uni-Asia, for example, can arrange financing for a ship transaction for third parties, and gets paid a fee.

The recurrent fees come from managing vessels which it has co-invested in under joint ventures or shipping funds.

This sort of fee will go up when three new vessels, which were ordered last year, are delivered in 1H2015, 2H2015 and 1H2016.

Including these three, Uni-Asia has minority stakes in 14 vessels for which fair value gains and losses are determined every quarter in Uni-Asia's books.

Asked about newbuilding prices of handysize bulkers, Chairman & CEO Michio Tanamoto said that they are now about 10% higher than when Uni-Asia ordered 7 vessels last year.

"Although the charter rates are still weak, newbuilding prices are not declining. Most of the handysize suppliers are Japanese yards and they are full until 2016-2017."

On the charter market, he said that rates are expected to recover at the end of this year or early next year.

Reasons he gave: The handysize bulker population is aging and many such ships will be retired over the next few years, while China's large inventory of iron ore, coal and steel products is declining and will need to be replenished (which needs bulkers for sea transportation).

Following its capital commitments for the 7 new vessels last year, Uni-Asia is "now looking for new opportunities to set up and manage JVs or shipping funds, where we don't have to put in a large amount of money, and earn recurrent income," said Mr Lim.

"We are discussing with shipyards and potential investors. From this year, this is our focus," said Mr Tanamoto.

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UNI-ASIA: Pace of increase in vessel charter income to pick up

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