Alset Inc. (NASDAQ:AEI) is a diversified holding company with a diverse portfolio of businesses spanning real estate, digital transformation technology, biohealth, and other ventures. The company has demonstrated resilience in the face of market challenges, reporting annual revenue of $22,088,507 and annual net income of -$58,946,381 in its latest fiscal year. Despite the net loss, the company's annual operating cash flow of $7,478,823 and free cash flow of $7,449,718 highlight its ability to generate strong cash flows to fund its operations and growth initiatives.

Business Overview

Alset Inc. operates through its 85.5% owned subsidiary, Alset International, a public company traded on the Singapore Stock Exchange. The company is actively developing real estate projects near Houston, Texas, with a focus on its Lakes at Black Oak project. In the digital transformation technology segment, Alset serves the business-to-business (B2B) market, providing e-commerce, collaboration, and social networking solutions. The company's biohealth segment includes the sale of consumer products, primarily through its HWH World subsidiary in South Korea.

Outside of Alset International, the company holds significant equity stakes in several other companies, including a 36.9% interest in American Pacific Financial, Inc., a 13% stake in Holista CollTech Limited, a 44.4% stake in DSS Inc., a 48.7% stake in Value Exchange International Inc., a 0.5% stake in New Electric CV Corporation, and a 33.4% stake in Sharing Services Global Corporation.

Recent Developments

Alset Inc. recently completed the merger of its indirect subsidiary, HWH International Inc. (formerly known as Alset Capital Acquisition Corp.), with Alset Capital Acquisition Corp. The combined entity, now known as HWH International Inc., is focused on implementing a new membership model for its HWH Marketplace business, which is expected to resume membership sales in the second quarter of 2024.

In December 2022, Alset Inc. reorganized the ownership of its home rental business, becoming the direct owner of 112 single-family rental homes in Texas that were previously owned by its subsidiaries. The company also acquired Hapi Travel Limited, an online travel business, in June 2023.

Financials

Operational Highlights

For the three months ended March 31, 2024, Alset Inc. reported revenue of $6,086,207, a significant increase from $926,936 in the same period of the prior year. This growth was primarily driven by a surge in revenue from the company's real estate segment, which generated $5,752,994 in the first quarter of 2024, compared to $633,811 in the same period of 2023. The increase in real estate revenue was largely attributable to the sale of multiple lots in the Lakes at Black Oak project.

The company's biohealth segment, which includes the operations of its HWH World subsidiary in South Korea, generated revenue of $535 in the first quarter of 2024, down from $12,786 in the same period of the prior year. The digital transformation technology segment did not generate any revenue in the first quarter of 2024, compared to $14,040 in the same period of 2023.

The company's other business activities, which include corporate and financial services, food and beverage, and new venture businesses, generated revenue of $332,678 in the first quarter of 2024, up from $266,299 in the same period of the prior year.

Cost of revenues increased from $689,281 in the first quarter of 2023 to $4,658,367 in the first quarter of 2024, primarily due to the increase in sales in the Lakes at Black Oak project. Gross margin improved from $237,655 in the first quarter of 2023 to $1,427,840 in the first quarter of 2024, driven by the higher revenue from the real estate segment.

Operating expenses increased from $2,327,385 in the first quarter of 2023 to $3,694,354 in the first quarter of 2024, mainly due to the recording of goodwill and investment impairment charges.

The company reported a net loss of $7,313,792 in the first quarter of 2024, compared to a net loss of $4,323,182 in the same period of the prior year. The increase in net loss was primarily attributable to higher operating expenses and other expenses, including unrealized losses on securities investments.

Liquidity

As of March 31, 2024, Alset Inc. had cash and cash equivalents of $23,727,542, down from $26,921,727 as of December 31, 2023. The company's total assets decreased from $126,314,028 as of December 31, 2023, to $96,710,288 as of March 31, 2024, mainly due to the decrease in cash held in the trust account after the shareholders of HWH International Inc. redeemed their shares.

The company's real estate assets decreased from $42,137,152 as of December 31, 2023, to $39,883,629 as of March 31, 2024, reflecting the sale of multiple lots in the Lakes at Black Oak project during the first three months of 2024.

Alset Inc.'s total liabilities decreased from $9,066,700 as of December 31, 2023, to $6,670,132 as of March 31, 2024. The company's management believes that the available cash and favorable cash revenue from real estate projects are sufficient to fund its operations for at least the next 12 months.

Risks and Challenges

Alset Inc. faces several risks and challenges that could impact its future performance. These include its ability to identify and profitably integrate complementary businesses, attract and retain skilled personnel, control operating expenses as it expands its businesses, and navigate the effects of public health issues, such as the ongoing COVID-19 pandemic.

The company's reliance on its real estate segment, particularly the Lakes at Black Oak project, exposes it to risks associated with the real estate market and development timeline. The company's ability to secure additional financing and government reimbursements will be crucial in determining the pace of development for this project.

The company's diverse portfolio of businesses and investments in other publicly traded companies also exposes it to market volatility and the performance of these entities, which could impact Alset Inc.'s financial results.

Outlook

Alset Inc. has demonstrated resilience and adaptability in navigating the challenges of the past year. The company's focus on developing its real estate projects, expanding its digital transformation technology offerings, and exploring new business opportunities in the biohealth and consumer sectors suggests a diversified growth strategy.

Conclusion

While the company's recent net losses and the ongoing risks it faces warrant close monitoring, Alset Inc.'s strong cash flow generation, liquidity position, and strategic initiatives position it for potential future growth and value creation for shareholders.