LHN is transferring to the Main Board: 7 Things to know about this Property Management Operator

Property management operator LHN Limited (“LHN”) offers space optimisation solutions, property development, facilities management and energy services in Singapore and other Asian countries.

The Group currently has 4 main business segments, namely:

Space Optimisation
Property Development
Facilities Management
Energy

It has announced its FY2023 results ended 30 September 2023 and declared a final and special dividend in FY2023. On top of that, LHN announced that from it is moving from the Catalist board to the Mainboard of the SGX-ST on 13 December 2023.

With this in mind, here are 7 things investors should know about the company.

1. Growth driven by Co-living Brand Coliwoo

According to the latest FY2023 results, the Group’s main source of revenue and key driver of growth comes from the Space Optimisation Business, constituting 64.5% of the Group’s total revenue.

Revenue generated from this business segment saw a year-on-year increase of 46.1%, reaching S$60.4 million in FY2023, as compared to S$41.4 million in FY2022.

As seen from the table above, the Group’s residential properties managed a total of 2,064 keys as of September 2023, primarily fuelled by Coliwoo’s co-living business.

The ongoing renovation projects for 404 Pasir Panjang, as well as 48 and 50 Arab Street, are progressing as planned and are anticipated to contribute to the co-living business’s performance in FY2024.

In FY2023, the occupancy rates for key Coliwoo projects within the Group remained robust. Coliwoo Orchard reported an occupancy level of 93%, while Coliwoo Lavender and Coliwoo 298 River Valley achieved occupancy rates of 86% and 100%, respectively, as of September 2023.

Singapore’s co-living industry continues to thrive, driven by a confluence of factors that include surging rents and prices in the broader residential property market, higher adoption of hybrid work, as well as accelerating demand for flexible housing options by locals and expatriates, including singles and young couples.

2. Newly Added 4th Business Segment – Energy

In FY2023, the new Energy Business made its maiden contribution. This sector offers renewable energy services to industrial clients, encompassing electricity supply, the installation of solar power systems, and the provision of electric vehicle (“EV”) charging stations.

The firm has successfully deployed solar panels in 3 internal and 6 external locations throughout FY2023. Despite this segment representing only a small 0.5% share of the Group’s overall revenue, it is profitable from the onset – achieving an adjusted segmental profit of S$0.4 million for the same year.

3. Healthy Revenue and Operating Cashflow Growth

The Group experienced an 10.9% Y-o-Y increase in total revenue from continuing operations to S$93.6 million due to a broad-based growth in all business segments.

In contrast, net profit attributable to equity holders was down 16.6% to S$38.2 million over the same period, primarily due to net fair value losses amounting to S$8.7 million, as compared to a sharp fair value gains in FY2022 of S$24.8 million.

One should also note that the FY2023 net profit comprises of a gain of S$19.7 million following the successful divestment of LHN Logistics Limited and its affiliated companies (referred to as the “Logistics Group”) on 28 August 2023. The Logistics Services Business segment will no longer contribute to the Group’s performance from the next financial year onwards.

On a bright note, net cash generated from operating activities increased from S$41.2 million in FY2022 to S$54.2 million in FY2023, underpinned by enhanced working capital management.

4. Improving Balance Sheet

As of 30 September 2023, the net gearing ratio of the Group decreased to 43.6% compared to 44.5% a year ago, largely due to a few divestments during FY2023 which include:

A 20% interest in associate in car-sharing platform GetGo Technologies Pte. Ltd. for S$7.9 million
50% interest in a JV of Amber 4042 Hotel Pte. Ltd. for S$23.3 million
05% controlling interests in LHN Logistics Limited for S$31.9 million

These capital recycling initiatives helped to shore up its financial position while funding the growth of its Coliwoo business.

5. Higher Dividends to boot

Notwithstanding the reduced profit attributable to equity holders, LHN has recommended a special dividend and final dividend of 1.0 Singapore cent each per share.

If we were to include the earlier interim dividend of 1.0 Singapore cent per share, the total dividend per share for FY2023 stands at 3.0 Singapore cents per share.

Based on the closing share price of $0.34 as of 26 November 2023, the dividend yield comes up to an enticing 8.8%, much higher than the estimated 3.5% yield of the STI ETF.

Looking at the dividends chart, LHN has been dishing out dividends consistently since FY2020. This shows the commitment of the management to continue rewarding shareholders – note that the management team happens to be the the Group’s biggest shareholder as well.

6. Management Team

From the table above, we can see that LHN Capital is the largest shareholder of the firm with a 54% interest. The holding company LHN Capital is in turn owned by the Lim family – Mr. Kelvin Lim and his sibling Ms. Jess Lim.

Mr. Kelvin Lim has been the Executive Chairman & Group Managing Director since July 2014 and possesses over 20 years of experience in the property leasing business, including over 10 years of experience in the logistics services and facilities management business.

Ms. Jess Lim, Executive Director & Group Deputy Managing Director, has over 20 years of extensive and varied experience in business and supply chain management, comprising of over 15 years of experience in the leasing and facilities management business.

Given that both of them own more than half the company, this aligns the interest of owner-management with minority shareholders.

7. Bright Outlook Ahead

In general, LHN expects a bright outlook for the company as its biggest segment stands to benefit from the rising demand for space optimisation solutions, as more people and businesses seek flexible and affordable space options.

Notably, the firm is gunning for substantial growth in the Coliwoo Co-living business as the ongoing renovation of properties at 404 Pasir Panjang Road, 48 and 50 Arab Street, and 99 Rangoon Road are on track for completion in FY2024. These developments are projected to contribute an estimated 121 keys to the Co-living portfolio.

Last but not least, the shift of its listing to the SGX Mainboard will bolster the Company’s standing both domestically and internationally, fostering greater visibility and recognition in the market and among investors.

Some industry background on the dynamics of Singapore’s co-living sector – for your consideration

Uni-Asia Group Limited is an alternative investment group specialising in creating alternative investment opportunities and providing integrated services relating to such investments.

The Group’s alternative investment targets are mainly Handysized Dry Bulk Cargo Ships and Property Investment.

Business Model

Their business model revolves around acquiring assets at competitive prices and offering solutions that meet client needs. After which, the company will operate and/or manage these assets to improve their value and boost the recurring income.

Maritime and Property Key Businesses

With that in mind, its easy to see why Uni-Asia focuses its portfolio on maritime and property investments.

A quick look at their asset allocation shows that their maritime investments contribute a major 60.5% of their portfolio as at 30 September 2023 whereas their property investments account for another 24.2%.

In the maritime sector, the Group maintains a fleet of 9 fully-owned and 7 jointly-owned dry bulk carriers, ensuring a consistent and reliable source of income through operational cash flows.

Their ongoing approach involves securing a blend of short-term and long-term charter agreements at varying rates, with the objective of optimising charter earnings during market upswings and fortifying against potential downturns.

In the latest earnings report, the Group has successfully concluded the sale of its oldest ship, M/V Uni Auc One, on November 10, 2023. It is noteworthy that the ship was free of any attached mortgage at the time of the sale, and all proceeds from the disposal have been seamlessly integrated into the Group’s cash balance.

As for the property segment, the Group invests in Hong Kong and Japan property projects.

In the first 3 HK projects, Uni-Asia had recovered capital and received/recorded strong positive returns in the past (i.e. HTR35, CSW650, and K83 in the picture above).

With economic activity in Hong Kong and China picking up post-Covid, it will provide a significant opportunity for the Group to generate substantial revenue by divesting its Hong Kong projects.

As for Japan, the Group typically invests and develops small residential property projects branded as the “ALERO” Series. This “ALERO” reputation has been established because every ALERO project that the Group invested in had been profitable since the Group started this series in 2011.

Stable Financial Position

Despite being in a high capex industry (shipping and properties), the Group’s total borrowings has declined steadily over the past few years due to scheduled repayment and prepayment of existing borrowings.

If you take a look at the chart above, Uni-Asia possesses a strong financial position with the debt/equity ratio coming in below 0.5x as of 1H2023.

Consistent Dividends

Uni-Asia Group has been delivering dividends to shareholders on a consistent basis since 2012. The Group’s gross dividends per share grew from 0.6 Singapore cents per share in FY2014 to 9.5 cents per share in FY2022.

The Group also dished out 2 cents and 5 cents in special dividends for the year 2021 and 2022 respectively, underpinned by the higher charter rates post-pandemic.

Taking into account the 5 cents in special dividends in FY2022, the total dividends per share would have exhibited a staggering 48% CAGR over the 8-year period from FY2014 to FY2022.

Last but not least, the Group has US$27.9 million cash on hand and generated operating cash flows of US$9.8 million for 9M2023. This is more than enough to pay out a decent 5 cents dividend per share amounting to an approximate US$4 million, and continue its debt reduction exercise in the long run.

Leadership Renewal

In the context of succession planning and leadership renewal, Executive Director Mr. Masahiro Iwabuchi will take on the role of Chief Executive Officer (CEO), succeeding Mr. Kenji Fukuyado. This transition will take place upon Mr. Fukuyado’s retirement on February 29, 2024.

The top 2 shareholders – YAMASA Co., Ltd and Evergreen International – are both in the property investment space, and own a 30% and 8.95% stake respectively in Uni-Asia. The similar nature of their businesses will harmonise effectively with Uni-Asia’s ongoing operations.

In addition, we can see that Chairman Michio Tanamoto and CEO Kenji Fukuyado both own a decent interest in the company. Incoming CEO Iwabuchi has also increased his stake in the firm by 7.63%.

Undemanding Valuation

Uni-Asia’s value is underpinned by its book value of ~S$2.30 per share as of 30 September 2023. At the time of writing, the firm’s share price is trading at roughly S$0.925/share, translating into an attractive 0.4x P/B ratio, significantly below the industry average of 0.9x.

It is worth highlighting that a significant portion of its balance sheet is supported by tangible assets, primarily consisting of property, plant, and equipment (mainly comprising the Group’s shipping vessels), along with investments, investment properties, and cash.

On top of that, this article points out that prices for bulk carriers have remained high, despite the declining trend in the dry bulk market. Increased newbuilding expenses, inflation, and substantial cashflows from high ship chartering rates have resulted in owners’ reluctance to sell vessels at reduced prices, and have led to buoyant second-hand prices in the market.

Hence, Uni-Asia may be able to lock in the positive gains by divesting its smaller vessels going forward.

Conclusion

In a nutshell, Uni-Asia remains a dividend favourite due to its focus on maritime and property investments, which will churn out recurring cashflows. An undemanding 0.4x P/B valuation also positions it as an attractive choice for investors seeking both capital and dividend returns in the realm of alternative investments.

The global Oil and Gas (O&G) industry has witnessed significant ups and downs in recent years. From the rise of renewable energy to the unrelenting impact of geopolitical tensions, the industry landscape is in a state of constant flux.

As we delve into the year 2023, it’s imperative to review the pivotal developments that have shaped the O&G sector and explore the implications for investors and stakeholders.

Shakeup in the Oil and Gas Industry

The O&G industry remains susceptible to market volatility, driven by factors such as supply disruptions caused by the COVID-19 pandemic and subsequent geopolitical tensions that resulted in huge price swings.

For instance, the West Texas Intermediate (WTI) crude oil futures’ price plummeted to a negative value for the first time on April 2020 as the COVID-19 pandemic spurred lockdowns all over the world.

However, the Russia-Ukraine conflict and subsequent events led to a rapid rebound in WTI crude oil futures’ price which hit a peak of US$139.13 per barrel on March 2022, the highest price since July 2008.

On top of that, the outbreak of the Israel-Hamas war has sent tremors through oil markets and stopped a decline in the oil prices triggered by a slowdown in the global economy.

The World Bank predicts that oil prices could skyrocket to a record high of US$150 if the ongoing conflict escalated into a scenario like that of the Arab oil embargo in 1973.

Although nobody can pre-determine the state of the O&G industry, market analysts expect oil and gas prices to remain elevated at current levels for the rest of the year and into 2024 at the time of writing this article.

3 O&G Stocks to Benefit

With that in mind, let’s take a quick look at 3 Singapore-listed stocks that stand to benefit in the tight global oil market.

1. Sinostar Pec

Sinostar Pec is a leading provider of services and solutions to the petrochemical and chemical industries in China. The key products of the company are Processed LPG, Propylene, Purified Isobutylene, Hydrogen, Methyl Tert-butyl Ether (MTBE), Polypropylene and Logistics and Transport.

For the 9 months ended September 2023, the Group delivered a decent 8.5% y-o-y growth in revenue to RMB3.77 billion.

On a brighter note, it recorded a net profit of RMB282.99 million in 9M2023, an increase of 313% compared to RMB68.51 million in 9M2022, underpinned by higher output and lower raw material costs.

The management remains upbeat on the stock’s prospects and commented:

“The Group’s business is driven by global economic recovery, demand growth, and rising crude oil prices. Barring unforeseen circumstances, the Group expects supply-demand dynamics to continue to improve. The board of directors remains optimistic about the Group’s long-term development.”

Based on a share price of S$0.15, Sinostar PEC trades at a modest 0.4x Price-to-Book ratio.

2. Dyna-Mac

Dyna-Mac is an offshore solutions provider, offering services to the oil and gas, marine, and petrochemical industries. The company is involved in the fabrication of topside modules for floating production storage and offloading (FPSO) vessels.

It provides engineering, fabrication, and construction of offshore FPSO and FSO (floating storage offloading) topside modules as well as onshore plants and other sub-sea products for the oil and gas industries.

For the 6 months ended June 2023, the Group reported revenue of S$182.3 million, up 47.0% compared to the previous year.

Net profit came in line, jumping over 200% from S$3.2 million in 1H2022 to S$10.2 million in 1H2023, attributable to better utilisation of capacity by intensifying land use, improved productivity and tighter cost controls.

On top of that, the firm has been securing new contracts aggressively, expanding its order book to S$630.7 million, with project delivery stretching into 2025.

The increase in orderbook is in line with the expected 8.0% CAGR growth of the FPSO market from US$11.91 billion in 2021 US$21.83 billion by 2028. This is being driven by significant demand in nations like Brazil, Mexico and Guyana, as well as exploration hotspots like Namibia’s Orange Basin and the East Mediterranean.

Drydocks World CEO Rado Antolovic has said he sees a strong pipeline for FPSOs and FSRUs for the next 5 to 10 years as the market pays more attention to offshore exploration and production operations, as well as rising deep- and ultra-deepwater exploration.

On this note, Dyna-Mac remains encouraged by the strong level of inquiries received for projects in both Singapore and China, indicating promising opportunities on the horizon. Dyna-Mac last closed at S$0.295, translating into a 15x P/E ratio.

3. Seatrium

Seatrium (formerly known as Sembcorp Marine) is a leading global marine and offshore engineering group with a track record of about 60 years. The company specialises in ship repair, shipbuilding, ship conversion, rig building, and offshore engineering and construction.

As seen from the picture above, Seatrium has achieved many commendable feats, such as delivering Singapore’s 1st LNG Bunkering Vessel and the World’s 1st Zero Emissions Ferry.

A buoyant O&G industry has also bolstered Seatrium’s orderbook – currently standing at a strong S$17.7 billion, comprising 33 projects with delivery schedules up to 2030.

Supported by a robust order backlog, the company’s revenue for 1H2023 jumped 160% to S$2.9 billion from a year ago, recording a notable increase of 164% from same period last year. It also registered positive EBITDA (before provision for contracts & merger expenses) of S$258 million for the same period, compared to negative EBITDA of S$19 million in 1H2022.

It is noteworthy that Seatrium has improved on its sprawling debt with net gearing coming in 0.17x as at 1H2023 vs 0.26x as at end Dec 2022.

Given that Seatrium is still reporting losses, we will take the valuation from a P/B point of view. Seatrium last traded at S$0.109 with a 0.9x P/B ratio.

Conclusion

While the world continues to grapple with heightened geopolitical tensions like the Russia-Ukraine conflict and Israel-Hamas war, higher oil prices will give a boost to the overall Oil & Gas sector.

Hence, the 3 stocks mentioned above: Sinostar Pec, Dyna-Mac, and Seatrium are likely to enjoy better margins and ride on the tailwinds of this O&G upcycle even as the industry adapts to the evolving energy landscape.

As someone who has lived through the Covid-19 period, one thing I would never leave home without is the TraceTogether token.

This has greatly benefitted the home-grown manufacturer of the TraceTogether Token – iWOW Technology. Its revenue jumped from S$4.4 million in FY2020 to FY2021 in FY2021 when Singapore adopted this technology islandwide.

But the question here is: what will happen to iWOW now that the TraceTogether Token has been phased out after the pandemic?

In this article, we will dive into how iWOW continues to ride on the Internet of Things (IoT) wave and expand its solutions to bag contracts worth S$100.4 million as of 31 October 2023.

One-Stop IoT Shop

To better understand iWOW, we take a closer look at their 2 main business segments and the types of solutions they provide.

As you can see from the picture above, revenue from the TraceTogether Token is delivered on a project basis. On the other hand, iWOW’s higher-margin IoT-as-a-Service segment provides high earnings visibility given its recurring subscription model.

Point to note: iWOW has developed this electronic monitoring system (EMS) which supplies ankle bracelets to young offenders and prisoners to monitor their whereabouts, and this contract provides sale visibility till 2027 (with the option to extend 2 years).

Tapping on the Expanding IoT market

Internet of Things (IoT) has emerged as a pivotal technology in the 21st century. The ability to connect everyday objects such as security cameras, kitchen appliances, doors, and thermostats to the internet through embedded devices has enabled seamless communication among people, processes, and things.

As per data from marketsandmarkets.com, the global Internet of Things (IoT) market is anticipated to expand from USD 300.3 billion in 2021 to USD 650.5 billion by 2026, demonstrating a Compound Annual Growth Rate (CAGR) of 16.7% from 2021 to 2026.

Within the local landscape, the Internet of Things (IoT) connections in Singapore have grown to approximately 63 million, surpassing the previous year’s figure of around 54 million connections. According to Statista, it is projected that the number of IoT connections will persist in its upward trajectory, reaching an estimated 143 million by the year 2028.

According to the Economic Development Board, Singapore has actively championed the widespread adoption of IoT by continuously upgrading its IT infrastructure, data collection & analytics.

One particular area where Singapore is looking to harness the power of IoT is in its road transport ecosystem. For example, Singapore is set to launch its next-generation electronic road pricing (ERP) system, utilizing IoT to monitor and oversee traffic conditions across the entire island.

In addition, iWOW has been enhancing its portfolio of IoT solutions, aiming to assist seniors in maintaining an active and secure lifestyle. Under the Age Well SG programme, iWOW has rolled out a wireless alert alarm system which will be progressively expanded to all seniors living in public rental housing, many of whom lack family support.

You can also read more here: https://www.todayonline.com/singapore/better-living-conditions-seniors-emergency-buttons-rental-flats-2306471

As Singapore moves towards the development of a Smart Nation, it bodes well for iWOW Technology given its strong foothold in the city-state. The Group’s entry into IoT growth markets in Asia and the Middle East, such as Japan, Thailand, Malaysia, Indonesia and UAE, will provide yet another growth impetus. In fact, iWOW has registered a 181% CAGR in revenue between FY2020 to FY2022 by tapping on its solid track record and the tailwinds of fast-growing IoT adoption globally.

Stable Topline for 1H2024

iWOW’s revenue for 1H2024 inched up 1.2% to S$17.3 million as compared to S$17.1 million in the previous year.

Notably, this growth was achieved despite a 96.8% y-o-y decline in revenue from its Smart City Solutions segment, primarily due to the absence of TraceTogether Tokens sales and a delay in tenders for expected projects.

On a brighter note, the drop in revenue is mitigated by strong revenue contribution from the Smart City Infrastructure (“SCI”) segment with a top-line contribution of S$12.2 million in 1H2024 (versus “zero” in 1H2023).

Despite a stable 1H2024 topline, the Group witnessed an 88.2% Y-o-Y decline in net profit to S$0.3 million, largely due to a shift in product mix and higher costs from increased headcount. The latter will reinforce the Group’s R&D and business development capabilities to capture near-term growth opportunities and accelerate project completion.

Confident of 2H2024 with Record High Order Book

iWOW Technology’s order book experienced a nearly twofold increase, rising from S$54.4 million as of 30 September 2022 to S$100.4 million as of 31 October 2023. Consequently, the Group is cautiously optimistic about its revenue performance for the second half-year ending 31 March 2024 (“2H2024”).

In particular, the Group foresees a jump in revenue in 2H2024, led by its Smart City Infrastructure segment as it fulfills the majority of installation tasks for an estimated S$20.0 million contract announced on July 21, 2023 – inclusive of 10 years of recurring maintenance services.

The Group believes that the steadfast focus on expanding the Group’s higher-margin subscription-based business will allow iWOW to benefit from improving future earnings visibility.

Mr. Raymond Bo, Chief Executive Officer and Executive Director of iWOW Technology, remains sanguine about the company’s prospects:

“We have been strategically boosting our R&D investment to strengthen our position and enhance our ability to capitalise on potential opportunities. We are also constantly leveraging on our network and strategic partners in our pursuit of regional opportunities.”

High Insider Ownership

Based on the ownership table above, it indicates that management interests are well aligned with that of retail shareholders. For instance, Mr Kee Wee Soo, Chairman of iWOW Technology Limited, owns a sizable 46.59%.

If you move down the list of top shareholders, you can see that they are also part of the management team. Even Mr. Ashokan Ramakrishnan, the Head of Marketing, owns a good 2.8% interest worth S$1.6 million.

This strong alignment of interests can potentially retain key employees and encourage executives to make decisions that are in the best long-term interests of the company and its shareholders.

Conclusion

In conclusion, iWOW Technology has established a solid track record and become a trusted IoT solution provider for Singapore government agencies and B2B customers such as Singtel, 3M and Mapletree over the years.

As evident from its increase in its order book, especially in the Smart City Infrastructure segment, iWOW’s revenue is not solely supported by the success of the TraceTogether Tokens, but by a wide array of solutions.

Moving forward, iWOW is well-positioned to ride the IoT wave with further investments in its R&D capabilities to develop new wireless technologies i.e. LoRaWAN, 5G and NBIOT.

As someone who has lived through the Covid-19 period, one thing I would never leave home without is the TraceTogether token.

But the question here is: what will happen to iWOW now that the TraceTogether Token has been phased out after the pandemic?

In this article, we will dive into how iWOW continues to ride on the Internet of Things (IoT) wave and expand its solutions to bag contracts worth S$100.4 million as of 31 October 2023.

One-Stop IoT Shop

To better understand iWOW, we take a closer look at their 2 main business segments and the types of solutions they provide.

Tapping on the Expanding IoT market

According to the Economic Development Board, Singapore has actively championed the widespread adoption of IoT by continuously upgrading its IT infrastructure, data collection & analytics.

You can also read more here: https://www.todayonline.com/singapore/better-living-conditions-seniors-emergency-buttons-rental-flats-2306471

Stable Topline for 1H2024

iWOW’s revenue for 1H2024 inched up 1.2% to S$17.3 million as compared to S$17.1 million in the previous year.

Confident of 2H2024 with Record High Order Book

The Group believes that the steadfast focus on expanding the Group’s higher-margin subscription-based business will allow iWOW to benefit from improving future earnings visibility.

Mr. Raymond Bo, Chief Executive Officer and Executive Director of iWOW Technology, remains sanguine about the company’s prospects:

High Insider Ownership

This strong alignment of interests can potentially retain key employees and encourage executives to make decisions that are in the best long-term interests of the company and its shareholders.

Conclusion

Moving forward, iWOW is well-positioned to ride the IoT wave with further investments in its R&D capabilities to develop new wireless technologies i.e. LoRaWAN, 5G and NBIOT.