Boustead Projects

The Business Times Singapore, April 22, 2015 Wednesday - Higher rentals, occupancies boost Mapletree Industrial's Q4 DPU (extract)

The Reit's average portfolio passing rent rose to S$1.84 per square foot per month (psf/mth) from S$1.83 psf/mth in the preceding quarter, thanks to positive rental revisions for renewal leases.

"Overall rents for multi-user industrial developments are expected to ease further due to supply pressures, while rents for business parks and higher specification buildings are expected to strengthen on the back of a tightening in supply," it said.

___________________________

Even if we just use $1.5 PSF
Potential Recurring revenue = 2mil sq ft x $1.5 PSF x 12 mth = ~$36mil
Assuming NPM (net profit margin) for recurring revenue of 50%, recurring net income = ~$18mil or recurring EPS 5.6 cents or dividend yield of 5.8%, bearing in mind that both the bases in terms of space (Sq ft) and rate (PSF) have yet to reach a steady state. They are still increasing.

All this is before considering its development profits.

Of the 2mil Sq ft of industrial space, ~30% or so was only completed recently. Hence, full rental has not been accounted for.
And most of the rates were contracted quite a few years ago.

One can refer to JTC website for a rough idea of the annual $PSF
http://www.jtc.gov.sg/industrial-land-an...tries.aspx


On the point about weakening DBL recurring income, I observed the following.
DBL completed in FY2015 = 40,259 sqm. FY14 - 26,290 sqm.

"With the addition of the MRO Facility, Boustead Projects’ portfolio of industrial leasehold
facilities (both completed and under construction) increases to 16 properties (including
those with partners) with an anticipated gross floor area in excess of 185,000 square
metres."

The point about industrial segment being highly competitive again is a very "sweeping" statement. e.g. Similar to saying those living in 3-room flats are all poor and cannot afford cars?? (just joking)

We need to examine the segment that BP is operating in.
a. MNCs brought in by EBD; established renowned players in the various sectors (e.g. IBM, etc)
b. Specialized buildings - not the usual tom-tick-harry ones that any ah beng and ah seng can learn to build overnight.
c. Being hit by property cooling measures????? No need to compete for land tender - just need to cultivate "good" relationship with EDB/MNCs/sovereign wealth funds, etc.

Not sure if any ah-beng and ah-seng can do this overnight?
Again I would say (IMHO) - this is the kind of core stocks Warren Buffett would very likely hold
BP is working hard to achieve their eventual target of doubling their DBL portfolio. i.e. 4mil sq ft. I would leave u to calculate the recurring EPS by then. tks.

(4 mil sq ft x $1.5 PSF/mth x 12 mth = $72mil. Recurring net profit = $36mil or 11 cents recurring EPS.)

The Edge Singapore, May 18, 2015 (extract)
Personal Wealth: Cover Story: Appeal of real assets

Next cycle story? U need to know exactly which segments are u referring to.

__________
"When interest rates are rising, it doesn't mean you should sell real estate securities," says Tom Walker, head of global property securities at UK-based fund management firm Schroders.

Higher US interest rates indicate that the GDP in the US is growing, and when there is "economic confidence", it is good for rental growth, argues Walker, who recently gave a presentation on the outlook of global property securities at the Schroders Asia ­Media Conference in Seoul.

He explains that when an economy is expe­riencing robust growth, offices and shops tend to have more confidence to lease a larger space for their businesses. "Therefore, if you are a landlord and real estate is in demand, you could grow your rent when the economy is growing strongly. That's why there is a strong correlation between GDP growth and rental growth," says the portfolio manager who runs the ­Schroder ISF Global Property Securities Fund, which is sold to retail investors in Singapore.

"For me, whether interest rates in the US go up today, tomorrow, next year or two years later, I don't really care. What I do care about is that I own the right real estate companies in the US where there is rental growth."

____________

With US bond yields expected to move higher as the Fed normalises interest rates sometime in 2H2015 or early 2016, regulated utilities and energy pipelines companies that have higher gearings or debt could also be affected. When interest rates go up, the interest expenses of infrastructure companies with high gearings will rise. As such, equities of these higher-geared infrastructure companies could underperform in a rising interest rate environment. Indeed, on average, electric-utility stocks in US have declined more than 10% since late January, on the back of a recent rise in Treasury yields.

Nonetheless, over a longer term, REITs could continue to outperform even in a rising interest rate environment, says Walker. He points out that from mid-2004 to July 2006, when the Fed raised interest rates 17 times, the listed US real estate securities market measured by the FTSE EPRA/NAREIT USA Index still managed to go up by 80%.

_______

"Investors are increasing their allocation to global real estate and they are investing a lot of money in this asset class," observes ¬Walker, pointing out that the Norwegian sovereign wealth fund (SWF) and Japanese Government Pension Investment Fund (GPIF), for instance, have targeted a 5% allocation to global real estate. That means billions of dollars will flow into physical properties as well as listed property securities such as REITs and ¬property stocks, he notes.

Thanks for the reminder...

Actually i didn't even bother to read that section since I m a fund mgr myself and hence there is no need to bother with what other FUN mgr has to say.

I have been saying all this while - initial rate hike will not burst asset bubble as no central bankers will undo what they have done to get the real economy going - its not in their interests.

We are transitioning into the last phase of the bull cycle - a wild phase where everyone makes easy $ and everyone is an expert.

As a self owned fund mgr its my duty to read ahead and not to follow the crowd.

I maintain my view that BP and Boustead Sing are both next cycle stories. I have known FF Wong since the time i started investing in his company back in 2002.

FF Wong is a conservative businessman and it is highly unlikely that he will chase assets for the sake of doing it. The environment globally is characterised by the low of funds (albeit rising) chasing assets that are already hugely inflated due to repeated QE globally.

I think FF Wong is setting stage for Boustead Sing and BP for the next cycle. If you are a shrewed businessman, patience is gold.

Unfortunately for many of us, we are merely ticker investors that fail to appreciate the real world of business.

I think u must have vested lorry loads of Boustead Projects - time to come clean with your interests.

Vested with share cert
GG

(24-05-2015, 04:12 PM)Curiousparty Wrote: The Edge Singapore, May 18, 2015 (extract)
Personal Wealth: Cover Story: Appeal of real assets

Next cycle story? U need to know exactly which segments are u referring to.

__________
"When interest rates are rising, it doesn't mean you should sell real estate securities," says Tom Walker, head of global property securities at UK-based fund management firm Schroders.

Higher US interest rates indicate that the GDP in the US is growing, and when there is "economic confidence", it is good for rental growth, argues Walker, who recently gave a presentation on the outlook of global property securities at the Schroders Asia ­Media Conference in Seoul.

He explains that when an economy is expe­riencing robust growth, offices and shops tend to have more confidence to lease a larger space for their businesses. "Therefore, if you are a landlord and real estate is in demand, you could grow your rent when the economy is growing strongly. That's why there is a strong correlation between GDP growth and rental growth," says the portfolio manager who runs the ­Schroder ISF Global Property Securities Fund, which is sold to retail investors in Singapore.

"For me, whether interest rates in the US go up today, tomorrow, next year or two years later, I don't really care. What I do care about is that I own the right real estate companies in the US where there is rental growth."

____________

With US bond yields expected to move higher as the Fed normalises interest rates sometime in 2H2015 or early 2016, regulated utilities and energy pipelines companies that have higher gearings or debt could also be affected. When interest rates go up, the interest expenses of infrastructure companies with high gearings will rise. As such, equities of these higher-geared infrastructure companies could underperform in a rising interest rate environment. Indeed, on average, electric-utility stocks in US have declined more than 10% since late January, on the back of a recent rise in Treasury yields.

Nonetheless, over a longer term, REITs could continue to outperform even in a rising interest rate environment, says Walker. He points out that from mid-2004 to July 2006, when the Fed raised interest rates 17 times, the listed US real estate securities market measured by the FTSE EPRA/NAREIT USA Index still managed to go up by 80%.

_______

"Investors are increasing their allocation to global real estate and they are investing a lot of money in this asset class," observes ¬Walker, pointing out that the Norwegian sovereign wealth fund (SWF) and Japanese Government Pension Investment Fund (GPIF), for instance, have targeted a 5% allocation to global real estate. That means billions of dollars will flow into physical properties as well as listed property securities such as REITs and ¬property stocks, he notes.

If one were to add up all the valuation of the 15 industrial properties under the DBL model, it is already more than $400mil. And this is before including the 16th property recently announced. (Pls check prospectus and company announcement)

Mr Market is only pricing it at $300mil (market cap)?


Besides, Mr Market also chooses to forget that there is an existing book order for DB contracts of ~$300mil, and more to come due to the recent strategic partnership with the sovereign wealth fund..

I like Mr Market because it is so irrational and inefficient

Hi Cp,

As I remember boustead projects does not make fair value revaluation on its properties, hence the gap. The business is more on recurring income rather than property buy/sell, hence the valuation method may not be suitable.

I am of agreement of the mgmt approach; in such a case I would not use valuation to measure fair value of share price.

Please correct me if my memory is failing me (which recently it has..)

Vested.

Sent from my D5503 using Tapatalk

Hi Thor

Recurrent income (forecast) = 2mil sq ft x $1.5 PSF x 12 mth = $36mil.
Net recurrent income = $18mil or 5.6 cents.

Assuming 5% yield, 20X of EPS = $1.12 (fair value).

e.g. St****** - DPS has been constant at 3 cents for many years. Share price has been rather stable at ~ 60 cents
_____________

Target recurrent income = 4mil sq ft x $1.5 PSF x 12 mth = $72mil.
Net recurrent income = $36mil or 11.2 cents.

Assuming 5% yield, 20X of EPS = $2.24 (fair value).

Your accounting absolutely fantastic.

BP Portfolio comprises of 13 wholly properties totalling 160088 sm

The remaining are 50% owned with corporate HQ jointly owned with Tat Hong and the 2 new facilities under BDP totalling 27259 sm (attributable to BP 13629.5 sm)

So BP effectively own 173717.5 sm

BP is no reit and hence pays taxes and has to factor in depreciation. I think that is a realistic picture given that properties are leasehold.

As to how u want to value it, its up to you.

I think you have lorry loads until you blur liao.

GG

(26-05-2015, 03:26 PM)Curiousparty Wrote: Hi Thor

Recurrent income (forecast) = 2mil sq ft x $1.5 PSF x 12 mth = $36mil.
Net recurrent income = $18mil or 5.6 cents.

Assuming 5% yield, 20X of EPS = $1.12 (fair value).

e.g. St****** - DPS has been constant at 3 cents for many years. Share price has been rather stable at ~ 60 cents
_____________

Target recurrent income = 4mil sq ft x $1.5 PSF x 12 mth = $72mil.
Net recurrent income = $36mil or 11.2 cents.

Assuming 5% yield, 20X of EPS = $2.24 (fair value).

You must be one of spore most brilliant fund managers . Will get all my friends to register with u . My greatest respect for your next cycle view

Give u a SG 50 hug!