Alset Inc. (NASDAQ:AEI) is a diversified holding company with a wide range of business interests, including real estate development, financial services, digital transformation technologies, biohealth activities, and consumer products. Headquartered in Bethesda, Maryland, the company has a global footprint, with operations spanning the United States, Singapore, Hong Kong, Australia, South Korea, and the People's Republic of China.
Alset Inc.'s Beginnings and Expansion
Alset Inc. was incorporated in the State of Delaware on March 7, 2018, originally under the name Alset EHome International Inc. and later HF Enterprises Inc. In October 2022, the company underwent a reincorporation in Texas, adopting its current name, Alset Inc.
Over the years, Alset Inc. has evolved from a real estate-focused company to a diversified conglomerate, leveraging its expertise and resources to expand into various industries. A key milestone in the company's growth was the acquisition of an 85.7% stake in Alset International Limited, a public company traded on the Singapore Stock Exchange, in 2018. This strategic investment has enabled Alset Inc. to manage a significant portion of its three principal business segments - real estate, digital transformation technology, and biohealth - through its majority-owned subsidiary.
The company's real estate segment has been particularly active in developing projects near Houston, Texas through its subsidiary Alset EHome Inc. This focus on the Houston area has allowed Alset Inc. to establish a strong presence in the local real estate market and capitalize on the region's growth potential.
In its efforts to diversify and expand its operations, Alset Inc. has faced several challenges. One of the primary obstacles has been the need to improve revenue through cross-selling and revenue-sharing arrangements among its diverse group of companies. This challenge has required the company to develop innovative strategies to maximize synergies across its various business segments.
Another significant challenge for Alset Inc. has been attracting and retaining competent and skilled technical and sales personnel for each of its businesses at acceptable compensation levels while managing its overhead costs. This ongoing effort to balance talent acquisition with cost management has been crucial for the company's growth and operational efficiency.
Like many businesses, Alset Inc. has had to contend with the effects of public health issues such as the COVID-19 pandemic on the economy and its operations. The pandemic has presented unique challenges across the company's diverse portfolio of businesses, requiring adaptability and resilience in its strategic planning and execution.
Alset Inc.'s Diversified Business Segments
Real Estate: Alset Inc.'s real estate segment is primarily focused on the development of EHome communities and other residential projects, mainly in the Houston, Texas area. The company has also invested in single-family rental properties, further diversifying its real estate portfolio. This segment is Alset's primary revenue driver, accounting for $11 million, or 90.5%, of the company's total revenue in the first nine months of 2024. The segment focuses on land development and the sale of residential lots to builders. In late 2022 and early 2023, Alset entered into three contracts with builders to sell multiple lots from its Lakes at Black Oak project, which were expected to generate approximately $23 million in revenue. The sale of 335 lots closed in the first six months of 2023, generating around $18.1 million in revenue. The remaining lots were sold on January 4, 2024, generating an additional $5 million.
On November 13, 2023, Alset entered into two new contracts to sell approximately 142 lots from Lakes at Black Oak and 63 lots from the Alset Villas project. The sale of the first 70 lots from these new contracts closed on July 1, 2024, generating $3.8 million, and the remaining 72 lots closed on October 10, 2024, generating an additional $3.9 million. Alset plans to continue its focus on lot sales to regional and national builders, as these transactions will improve the company's liquidity, strengthen its financial position, and meet its working capital requirements.
The real estate segment also includes a rental business, which generated $2.15 million in revenue over the first nine months of 2024, up from $2.03 million in the same period of 2023. Alset owns 132 single-family rental homes in Texas, and the company expects revenue from this business to continue increasing as it acquires more rental properties.
Digital Transformation Technology: Through its subsidiaries, Alset Inc. provides business-to-business (B2B) solutions in areas such as e-commerce, collaboration, and social networking, catering to the evolving needs of its clients. However, this segment did not contribute any revenue in the first nine months of 2024 or 2023. This segment previously provided AI chatbot services to a related company, Value Exchange Intl Hong Kong Limited, on a monthly basis in 2022, but this service was terminated on June 30, 2023.
Biohealth: Alset Inc.'s biohealth segment includes the sale of consumer health and wellness products, particularly in the South Korean market, where it operates through its subsidiary, HWH World Inc. The biohealth segment generated no revenue in the first nine months of 2024 and $12,790 in revenue during the same period of 2023. HWH World operates based on a direct sales model for health supplements.
Other Business Activities: Alset Inc. also has a diverse portfolio of investments and business ventures, including financial services, food and beverage operations, and new technology initiatives. This "Other" category generated $1.18 million in revenue during the first nine months of 2024, up from $802,740 in the same period of 2023. This increase was driven by revenue from Alset's Korean, Singaporean, and Chinese café shops and restaurants.
Financial Performance and Liquidity
Alset Inc.'s financial performance has been marked by volatility in recent years, with significant fluctuations in revenue and profitability across its business segments. In the nine months ended September 30, 2024, the company reported revenue of $12.17 million, a decrease of 42% compared to the same period in the prior year. This decline was primarily driven by a slowdown in real estate sales from the Lakes at Black Oak project.
The company's net loss for the nine-month period ended September 30, 2024, was $6.99 million, compared to a net loss of $27.16 million in the same period of 2023. This improvement in the bottom line was primarily due to a reduction in losses from investments and a decrease in the impact of foreign exchange rate fluctuations.
For the most recent quarter, Alset Inc. reported revenue of $4,960,711 and a net income of $1,716,363. The company's operating cash flow (OCF) for the quarter was -$2,854,167, while its free cash flow (FCF) stood at -$2,886,265.
Alset Inc.'s liquidity position remains relatively stable, with cash and cash equivalents of $16.68 million as of September 30, 2024, down from $26.92 million at the end of 2023. The company's total assets have decreased from $126.31 million as of December 31, 2023, to $98.79 million as of September 30, 2024, primarily due to a decrease in cash held in a trust account after shareholders of HWH International Inc. redeemed their shares.
The company's financial ratios provide further insight into its financial health: - Debt/Equity ratio: 0.03972132536482164 - Current ratio: 16.937252646889693 - Quick ratio: 16.936347947974323
These ratios suggest that Alset Inc. has a strong liquidity position and a low level of debt relative to its equity, which could provide financial flexibility for future growth initiatives.
Navigating Challenges and Exploring New Opportunities
Alset Inc. has faced several challenges in recent years, including the impact of the COVID-19 pandemic on its various business segments, volatility in its financial performance, and the need to continuously adapt to the evolving market landscape. The company has responded by focusing on cost optimization, diversifying its revenue streams, and exploring new growth opportunities.
In 2023, Alset Inc. completed the merger of its indirect subsidiary, HWH International Inc., with Alset Capital Acquisition Corp., a transaction that has positioned the company for future growth in its lifestyle-focused business segments, including Hapi Marketplace, Hapi Cafe, Hapi Travel, and Hapi Wealth Builder.
Looking ahead, Alset Inc. is actively exploring new avenues for growth, such as its planned acquisition of New Energy Asia Pacific Inc., a company focused on the distribution of electric vehicles and charging infrastructure. This strategic move aligns with the company's commitment to advancing sustainable and eco-friendly solutions for the future.
Conclusion
Alset Inc. is a diversified conglomerate that has navigated a challenging economic landscape in recent years, leveraging its broad portfolio of business interests to weather the storms. As the company continues to evolve, it faces both risks and opportunities, requiring a nimble and strategic approach to positioning itself for long-term success.
The company's real estate segment remains its primary revenue driver, with a focus on lot sales to regional and national builders. This strategy is expected to improve liquidity and strengthen Alset's financial position. The rental business within the real estate segment shows promise, with revenue increasing as the company acquires more rental properties.
While the digital transformation technology and biohealth segments have not contributed significantly to revenue in recent periods, they represent potential areas for future growth. The "Other" business activities category, particularly the food and beverage operations, has shown positive growth and may offer further diversification opportunities.
Alset Inc.'s financial performance reflects the challenges it has faced, with declining revenue in the most recent reporting period. However, the company has managed to reduce its net loss, indicating some success in cost management and operational efficiency. The company's strong liquidity position and low debt levels provide a solid foundation for future growth initiatives.
As Alset Inc. continues to navigate the complex landscape of its diverse business segments, investors will undoubtedly be watching closely to see how the company leverages its strengths, addresses its challenges, and capitalizes on new opportunities in the evolving market. The company's ability to execute its growth strategy while maintaining financial stability will be crucial in determining its long-term success and value creation for shareholders.