KGI rates Uni-Asia at Outperform, saying Japan hotels are ‘hot’

Novelty Japan pens at DaisoNovelty Japan pens at Daiso

KGI kept an Outperform call on Uni-Asia Group after a site visit to its Japan hotels and residential properties, pointing to upcoming catalysts for the country’s hospitality sector.

Hotels are hot in Japan,” KGI said in a note Thursday.

“We expect an uplift in hotel occupancy and rates over the next two years as Japan hosts the Rugby World Cup in 2019 and the Tokyo Olympics in 2020,” KGI said. “Even before the uplift from two of the world’s largest sporting events, tourist arrivals had already risen 9 percent year-on-year to a record 31.2 million visitor arrivals in 2018.”

Uni-Asia Group has 2,515 rooms under management in Japan, with plans to increase to 3,401 rooms by 2020, while occupancy was up at 83.9 percent in the second quarter, from 77.4 percent in the year-ago period, the brokerage said. Corporate clients make up around 54 percent of total guests, the note said.

KGI also pointed to Uni-Asia’s residential property developments in Tokyo, which are mainly low-rise buildings with 10-30 units.

“Often overlooked by investors, this business is highly profitable and provides a recurring income stream,” KGI said. “Furthermore, once the
projects are sold, UAG is able to earn recurring income by providing management services, which includes rent collection and property maintenance.”

Japan contributed around 55 percent to 61 percent of the company’s total income in 2017 and 2018, the note said.

KGI kept a target price of S$1.24 on the shares.

“UAG’s valuations are trading at distressed levels, which we believe is not justified given its diversified businesses and potential growth from its hotel operations,” KGI said.

Shares of Uni-Asia ended Friday up 2.82 percent at S$0.73.

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