Alset Inc.

(NASDAQ:AEI) is a diversified holding company with a unique business model that has enabled it to establish a strategic foothold across a wide array of industries. From real estate development and financial services to digital transformation technologies and biohealth, the company has systematically expanded its reach, leveraging its management expertise and capital resources to identify and acquire promising businesses with significant growth potential.

Business Overview

The company’s origins can be traced back to 2018, when it was incorporated in the state of Delaware as Alset EHome International Inc. and HF Enterprises Inc. In 2022, the company underwent a reincorporation in Texas, solidifying its legal foundation as it continued to execute on its ambitious growth strategy.

Under the leadership of Chairman and CEO Chan Heng Fai, Alset has evolved into a diversified holding company with four key operating segments: real estate, digital transformation technology, biohealth, and other business activities. The company’s 85.7% owned subsidiary, Alset International Limited, plays a central role in managing a significant portion of these principal businesses. Since its inception, Alset has established a presence in multiple countries, including the United States, Singapore, Hong Kong, Australia, South Korea, and the People’s Republic of China through various subsidiaries.

In the real estate segment, Alset has been actively developing EHome communities and other real estate projects, particularly in the Houston, Texas area. The company’s subsidiary, Alset EHome Inc., acquired approximately 19.5 acres of partially developed land near Houston in 2021, which was used to develop the Alset Villas community. Additionally, Alset’s subsidiary, 150 CCM Black Oak Ltd., entered into two contracts in November 2023 to sell a total of 205 single-family residential lots in the Lakes at Black Oak project, generating anticipated revenue of approximately $10.7 million.

Alset’s digital transformation technology segment focuses on serving business-to-business (B2B) needs in e-commerce, collaboration, and social networking functions. The company’s biohealth segment includes the sale of consumer products, which it operates through its subsidiary, HWH World Inc.

The company’s strategic acquisitions have also included a 36.9% equity interest in American Pacific Financial, Inc. (formerly American Pacific Bancorp, Inc.), a 44.4% equity interest in DSS Inc., an indirect 48.7% equity interest in Value Exchange International Inc. (VEII), a 0.5% equity interest in New Electric CV Corporation (NECV), and a 29% equity interest in Sharing Services Global Corporation (SHRG). These investments have allowed Alset to gain exposure to new markets and industries, although the company has recorded losses on some of these equity investments in subsequent years.

Financials

Alset’s financial performance has been marked by volatility, with the company reporting a net loss of $58.95 million in the fiscal year ended December 31, 2023, compared to a net loss of $40.49 million in the prior year. This was primarily attributable to significant unrealized losses on its investment securities, as well as a $21.66 million loss on the consolidation of its subsidiary, Alset Capital Acquisition Corp. The company has faced various challenges throughout its history, including a $5.2 million impairment charge on its capital assets in 2019 and the impact of the COVID-19 pandemic on its business activities in 2020.

For the fiscal year 2023, Alset reported revenue of $22.09 million, with an operating cash flow of $7.48 million and free cash flow of $7.45 million. However, the company’s performance has shown signs of improvement in recent quarters. In the third quarter of 2024, Alset reported revenue of $4.96 million and a net income of $1.47 million, although operating cash flow and free cash flow remained negative at -$2.85 million and -$2.89 million, respectively.

Looking at the first nine months of 2024, Alset’s total revenue was $12.17 million, compared to $21.07 million in the prior year period, representing a 42% decrease. This decline was primarily due to lower property sales from the Lakes at Black Oak project. However, the company’s net loss improved from $27.16 million in the first nine months of 2023 to $6.99 million in the same period of 2024.

Breaking down the performance by segment for the first nine months of 2024:

Digital Transformation Technology Segment: Did not contribute any revenue, compared to $28.09 thousand in the prior year period. The segment reported an operating loss of $421.54 thousand.

Biohealth Segment: Did not generate any revenue, compared to $12.79 thousand in the prior year period. The segment reported an operating loss of $913.76 thousand.

Other Segment: Generated $1.18 million in revenue, compared to $802.74 thousand in the prior year period. The segment reported an operating loss of $6.50 million.

Liquidity

Despite these challenges, Alset has maintained a strong balance sheet, with $55.46 million in current assets as of December 31, 2023, and a current ratio of 6.66. The company’s cash and cash equivalents stood at $26.92 million at the end of the fiscal year 2023, providing it with the financial flexibility to pursue additional strategic acquisitions and investments.

As of September 30, 2024, Alset reported $16.68 million in cash and cash equivalents. The company’s financial position remains solid, with a debt-to-equity ratio of 0.017, a current ratio of 16.94, and a quick ratio of 16.94. Alset previously had a revolving line of credit with MT Bank, which expired during 2022, with only outstanding letters of credit remaining as of September 30, 2024, and December 31, 2023.

Future Outlook

Looking ahead, Alset’s management team remains focused on capitalizing on emerging trends and opportunities across its diverse business segments. In November 2023, the company announced the signing of a binding term sheet to acquire 100% of New Energy Asia Pacific Inc. (NEAPI), which owns a 41.5% stake in New Energy Asia Pacific Limited. New Energy is a company focused on distributing all-electric versions of special-purpose and transportation vehicles, charging stations, and batteries, a move that aligns with Alset’s commitment to sustainable and eco-friendly solutions.

The company’s real estate segment continues to show promise, with recent contracts to sell additional lots from the Lakes at Black Oak and Alset Villas projects. The first 70 lots are scheduled to close on July 1, 2024, for $3.80 million, with the remaining 72 lots closing on October 10, 2024, for $3.90 million. These sales are expected to contribute positively to the company’s revenue in the coming quarters.

While the digital transformation technology and biohealth segments have faced challenges, Alset’s management continues to explore opportunities to leverage its expertise in these areas. The company’s diverse portfolio of equity investments in various industries also provides potential for future growth and value creation.

The company’s ability to navigate the challenges of the past and its willingness to pursue bold, strategic initiatives have positioned Alset as a dynamic force in the diversified holding company landscape. As it continues to execute on its growth strategy, investors will be closely watching the company’s ability to translate its acquisitions and investments into sustainable, long-term value creation.

Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.