This article, written by Jennifer Tan (left, Director, Research & Products, Equities & Fixed Income, at the Singapore Exchange), originally was published in SGX's kopi-C: the Company brew series on 11 November 2016. The article is republished with permission.
For Michio Tanamoto, a catastrophe often presents hidden opportunities.
"With some Asian corporations - including Evergreen in Taiwan and Hopewell in Hong Kong - as our key shareholders, we began investing in Japanese properties and distressed assets, including non-performing loans from the Asian financial crisis."
Unique Value Proposition
Between the financial years ended 31 December 2011 and 2015, Uni-Asia averaged total income of US$70.8 million and net income of US$3.2 million. As at 30 June 2016, its assets were valued at US$341.1 million, up from US$314.2 million at end-2015. The stock has a market capitalisation of about S$47 million, and a book value per share of US$2.94.
In September, Tanamoto and Chief Operating Officer Masaki Fukumori both increased their shareholding in the company. Fukumori's three purchases during the month amounted to over S$36,000, lifting his stake to 2.16% from 2.08%. Tanamoto spent about S$37,600 on two separate occasions to boost his shareholding to 2.21% from 2.14%.
"Our vision is to create unique offerings for our clients - we want to be a comprehensive provider of alternative asset investment opportunities and related services," Tanamoto said.
"So far, we're the only player in the market that invests in and provides integrated services for both ships and properties."
Through its shipping unit and joint-venture firms, Uni-Asia owns a portfolio of 20 vessels, comprising 15 bulk carriers, four containerships and one product tanker. With an average age of less than five years, these ships have a higher reliability and greater fuel efficiency. Another four vessels will be delivered from 2018 onwards.
"By purchasing through joint-investment companies, and with delivery from 2018 onwards, we can limit our capital outlay and are well-positioned to benefit from the industry's future recovery," he noted.
"Most of our acquisition costs are competitive, with breakeven levels that are below that of our peers. Even if the market rebounds slightly, it will flow through to our bottom line."
Most of our acquisition costs are competitive, with breakeven levels that are below that of our peers. Even if the market rebounds slightly, it will flow through to our bottom line.
- Michio Tanamoto
With about 70% of its assets in ships, Uni-Asia's fortunes are entwined with the shipping market. This industry, and in particular, the dry bulk segment, is in its worst shape in three decades.
But Tanamoto believes the sector could start bottoming out next year, although a large gap will continue to exist between demand and supply.
"According to Clarkson order book data, deliveries for bulk carriers in 2017 are expected to fall sharply - by about 50% from a year ago - and the increase in total tonnage continues to slow significantly," he added.
"While we won't see a full-fledged recovery for another few years, there should be some definite signs of improvement next year."
|♦ Double-Edged Sword|
Many valuable lessons, however, can be gleaned during these tumultuous times, Tanamoto noted.
Uni-Asia's focus on developing small residential property projects also provides a competitive edge. These projects comprise four- to five-storey buildings with between 10 and 30 units of studio or maisonette-style apartments called Alero, located in metropolitan Tokyo.
Failures & Challenges
Over in Hong Kong, Uni-Asia, as part of a consortium led by First Group Holdings Ltd, clinched its third commercial property project in July. This involves the construction of an office building scheduled for completion in 2019.
"We're focused on commercial projects in Hong Kong because of the limited supply of land for office buildings in the territory," Tanamoto said.
"Due to the Hong Kong government's tight control over supply, this segment of the market has been very stable, and such projects offer good capital appreciation, even though competition is extremely stiff."
Looking back on the last 20 years, Tanamoto acknowledges Uni-Asia has made reasonable, even satisfactory progress. His passion, he says, is developing the business and rewarding clients and shareholders.
"My biggest worry is how to manoeuvre this market with all its challenges. We have a responsibility to staff and shareholders to run this business well, and these are some of the issues that weigh on my mind," he said.
Nevertheless, the 59-year-old, who enjoys golfing and reading historical non-fiction, remains steadfastly focused on taking Uni-Asia to the next level.
"People normally run from failures, but I prefer not to. We've not always been successful in our investment decisions, and I always remember the failures and mistakes of the past," said the father of a son, 24, and a daughter, 26, who are both studying in Tokyo.
"I think about how I might have done things differently, and I make sure I use those lessons and experiences to manage the next challenge or opportunity that arises."
|Year ended 31 Dec
|Attributable net profit||3,520||2,108||5,641||3,597|
|Quarter ended 30 Sep
|Attributable net profit||-777||-1,304||N.A.|
Source: Company data
Uni-Asia Holdings Ltd
Uni-Asia Holdings Ltd is an alternative investment company performing a variety of roles that include asset owner and manager, operator, co-investor, ship finance arranger, broker and fund manager. Its investments are focused on cargo vessels and properties in Hong Kong, Japan and China. To improve investment returns, Uni-Asia also provides integrated services for the invested assets, including acting as operator for commercial maritime vessels and invested properties, which are in commercial, residential and hotel segments. Listed on Singapore Exchange in 2007, Uni-Asia strives to achieve sustainable growth through a prudent approach. Their offices are located in Hong Kong, Singapore, Tokyo, Taiwan, China and South Korea.
The company website is: www.uni-asia.com
Click here for the company's StockFacts page.
For its third quarter results ended 30 Sep 2016, click here.