Boustead Singapore

Quick Summary of Q1FY13 Results
- Revenue increased by 25% to $113.3M in Q1FY13 compared to Q1FY12. This is 14% lower than the revenue of last quarter Q4FY12.
- The gross profit of $40.5M 24% higher compared to Q1FY12 but 12.4% lower compared to Q4FY12.
- Profit before tax is $18.4M, which is 45% higher than Q1FY12 but 47.3% lower than Q4FY12.
- Cash and cash equivalents is $228.6M and debt is $81.9M, cash net debt is $146.7M compared to $170.5M in Q1FY12 and $170.4M in Q4FY12.
- Net cash used in operating activities is -$9.8M as compared to $34.5M in Q1FY12 and -$1.6M in Q4FY12.
- Outflow of 12.6M in investing activities, mainly due to increase in investment properties.
- Debt has increased by about $61M.
- EPS for Q1FY13 is 2.4 cents per share as compared to 1.7 cents in Q1FY12 and 6.4 in Q4FY12.
- The Energy related Engineering related division’s revenue declined by 11% to $24.6M due to a delay in the commencement of a few major projects.
- The Water and wastewater engineering division’s revenue declined by 39% to $5.2M due to the completion of a major project last FY and a slowdown in securing new large projects.
- Real-estate solutions division’s revenue increased by 83% to $51.6M.
- Revenue from geo-spatial technology division rose by 21% to $31.9M.
Order book backlog is $303M, order book backlog in Q4FY12 was $337M.
- $55M sales of a subsidiary is expected to complete in Q2FY13.
- The Group expects profitability to be sustained in FY13 – meaning flat or 11 cents per share?

A good set of results.

Main highlight is the quality of earnings at ESRI. After breaking $30m turnover in Q4 FY12, turnover was sustained above $30m for the Q1 FY13.

With higher volume of business for this year judging from the positive start to FY13, PBT from ESRI can be expected to reach S$35m, up from S$26.9m +8m.

With SDV Green sale to be concluded in Q2, maintaining earnings for FY13 should not be a big issue baring unforeseen circumstances.

It has been quite a while since Boustead incorporate project vehicles for new build and lease projects. Hope to see some initiatives on this end soon.

Thanks guys for summarizing the numbers, really appreciate it as it saves me a bit of work!

Just like to add the following points to what shn has already summarized, and what greengiraffe has mentioned:-

1) Energy-Related Engineering seems to be slowing down, and from what FF Wong said at the recent AGM, he is not averse to divesting this division as it is rather cyclical and much depends on the level of oil prices. Generally, an oil price above US$80/bbl would indicate that O&G majors would continue to invest in infrastructure and projects, and Boustead International Heaters and Controls & Electrics should continue to see contract wins. This quarter appears to be a timing blip as major projects have been delayed; this after Boustead announced winning some contracts last quarter.

2) Salcon continues to disappoint with revenues falling -40% and the division incurring a loss before tax of $400k. Without any significant contract wins; and with continually thin margins, it's a wonder if this division can even break even by year-end 2013. My main worry is that significant cash, manpower and resources may be pumped into Salcon and its water projects, while the returns have been dismal, to say the least. The resources and money could be channeled elsewhere to generate higher rates of return. Unless a miracle occurs and Salcon wins a significantly large project, I continue to have a very dim view of this division.

3) Real Estate Solutions got a boost from ongoing projects and the properties held for sale increased to $65.2m. The surprise was that Boustead took on a significant amount of debt in order to fund their industrial leasehold property development. The new loans are as follows:-

A) $38.4m secured on the Continental Alloys property at Pioneer Turn, Jurong Industrial Estate.
B) $10.35m secured on the Continental Automotive property at Kallang iPark, Boon Keng Road,
C) $4.65m secured on the Safran Electronics Property at 26 Changi North Rise,
D) $7.556m secured on the Hankyu Hanshin Property at 10 Changi North Way.

This totals about $61m in new loans, and one can observe from the balance sheet that ST bank loans increased by about $42.6m while LT bank loans increased by about $19.3m; which add up to about $61.8m of the new loans just mentioned.

While it was not stated specifically the reason for the additional loans, Boustead may be leveraging on its existing property portfolio to borrow more money as working capital for i) SDV Green Warehouse, ii) other Design and Build Projects and iii) the Bombadier and Jabil Circuit Projects which are slated for completion in 2013. I speculate that the funding could also be for contracts (DB&L) which have yet to be announced, but as FF Wong continues to pursue the strategy of increasing recurring income, shareholders can be sure of some good news ahead.

4) Geo-Spatial continues to surprise me with its strength, resilience and consistency. Revenues at $31.9m represent the second highest of all the divisions except Real Estate Solutions, and PBT was a very impressive $10.2m, which exceeds Real Estate's PBT by about 50%! A simple calculation shows that the PBT margin for Geo Spatial is an extremely high 32%, and this division has shown a yoy growth of +57%. Moving forward, I will call Boustead simply a GeoSpatial and Real Estate company as the other two divisions do not make any meaningful contributions to PBT at all.

5) There was no news at all on either Hankore or OMH, presumably because plans are still underway to improve the fortunes of the former, and undertake the appropriate financing for the latter's Sarawak Project.

6) This is one of the rare quarters where Boustead has shown a -ve OCF, and also has -ve FCF; quite a disappointment to me as a shareholder. But Boustead's business is cyclical and therefore one quarter will not be sufficient to judge the quality of the cash flows. Since the SDV Warehouse ($55m) will be sold in 2Q 2013, we should be able to expect pretty good cash inflows from this transaction, and Boustead should also record a gain under "Other Income".

7) It remains to be seen if Boustead can continue to maintain its interim dividend of 2c/share (as per 1H FY 2012), which will cost the company about $10.1m. Assuming cash flows are strong, would it be possible to hope for an increased dividend of say, 2.5c?

A) $38.4m secured on the Continental Alloys property at Pioneer Turn, Jurong Industrial Estate.
This should be for SDV Green warehouse.
Since it will be sold in Q2, the loan will be cleared by then.
From my rough calculation:
Total cost of building about $40M, to be sold $55M.
Gross other income to recognise around $10M++

The Continental alloys' property is classified under properties held for sale (no 9 in ar2012).
I guess most probably because CA got option to buy on TOP.
Notice that there is another property (61 ubi avenue) to be sold in FY2014 for $38M.

(14-08-2012, 07:06 AM)valuestalker Wrote: A) $38.4m secured on the Continental Alloys property at Pioneer Turn, Jurong Industrial Estate.
This should be for SDV Green warehouse.
Since it will be sold in Q2, the loan will be cleared by then.
From my rough calculation:
Total cost of building about $40M, to be sold $55M.
Gross other income to recognise around $10M++

The Continental alloys' property is classified under properties held for sale (no 9 in ar2012).
I guess most probably because CA got option to buy on TOP.
Notice that there is another property (61 ubi avenue) to be sold in FY2014 for $38M.

Thank you for the info!

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*For the full article, please visit the website.

The Business Times
Published August 14, 2012
Boustead Q1 earnings up 43%
Engineering and technology units make major contributions

By Ven Sreenivasan

STRONG performances by its core Engineering Services and Geo-Spatial Technology units enabled listed engineering group Boustead Singapore to lift its first-quarter net profit attributable to shareholders by 43 per cent to $12.19 million, from $8.51 million a year earlier

Revenue for the April-June 2012 quarter rose 25 per cent to $113.35 million, from $90.69 million.

Boosting the topline was a 27 per cent rise in revenue by its Engineering Services divisions to $81.4 million.

And within the Engineering Services divisions, it was the real estate solutions unit which was the star performer, accounting for $51.6 million in revenue.

The Geo-Spatial Technology unit's revenue rose 21 per cent to $31.9 million.

Boustead's gross profit margin remained steady at approximately 36 per cent during the quarter, despite a decline in gross margins in current projects under the Real Estate Solutions Division amid intense market competition.

But margins at its Geo-Spatial Technology and Energy-Related Engineering divisions widened.
-----------------------------------

I do expect a very good year for Boustead considering the number of real estate projects to be delivered in FY 2013 if you check back all the past contract win.

As for Geo-Spatial's much higher profit margin, I don't think we should treat it as recurring for the rest of FY13 and the years after. The only time when Geo-Spatial hit such abnormal margin was in FY 2009 with a net margin of 28.29% where 4Q2009 hit a profit margin of 35% and 1Q 2009 30%. It is likely due to revenue mix as well as lower amount of professional service in FY 2013 Q1. 25%-26% should be the average margin in the long run for Geo-Spatial unless something drastic has happened.

With regard to engineering, I do not think that it will be a concern as I remembered FF Wong saying in the webcast for FY 2012 that their capacity is very tight and the margins are better than those clinched in FY2011. As for water treatment, the lack of visibility in orderbook is obviously a concern though it seemed like FF Wong still has the intention to turn it around instead of selling it off.

In any case, I was secretly hoping that a very poor quarter will be reported...

(vested)

OMH has just announced yesterday that they will be having a 3-for-10 rights issue of shares at A$0.40 per share to raise funds for the equity portion of their Sarawak Smelter Project.

Links:-
http://www.asx.com.au/asx/statistics/dis...d=01323410
http://www.asx.com.au/asx/statistics/dis...d=01323411

Boustead held 50m shares in OMH (8.6%) at a price of AUD 0.35/share prior to this rights offer.
Assuming full subscription, Boustead is entitled to 15m rights shares at AUD 0.40/share.

This will increase their total to 65m shares in OMH at a new (and higher) average price of AUD 0.362/share.

Looking at the presentation, the rights offer is NOT conditional on OMH obtaining bank financing for the project, so I am not particularly optimistic that this Sarawak project can take off smoothly without any bumps.

As to whether Boustead will take up the full entitlement, FF Wong has been very bullish on OMH so I think they will. It will cost Boustead an additional AUD 6 million (about SGD 7.86 million) to subscribe for their full entitlement.

For info, OMH goes Ex-rights on Aug 20, 2012 and is current trading at the rights price of AUD 0.40/share.

http://info.sgx.com/webcoranncatth.nsf/V...10033D57F/$file/Boustead_Announcement-Boustead_Energy-Related_Engineering_Division_Awarded_SGD39M_Contract-21.08.2012.pdf?openelement

New contract $39million for the Energy unit.

(17-08-2012, 10:46 AM)Musicwhiz Wrote: OMH has just announced yesterday that they will be having a 3-for-10 rights issue of shares at A$0.40 per share to raise funds for the equity portion of their Sarawak Smelter Project.

Links:-
http://www.asx.com.au/asx/statistics/dis...d=01323410
http://www.asx.com.au/asx/statistics/dis...d=01323411

Boustead held 50m shares in OMH (8.6%) at a price of AUD 0.35/share prior to this rights offer.
Assuming full subscription, Boustead is entitled to 15m rights shares at AUD 0.40/share.

This will increase their total to 65m shares in OMH at a new (and higher) average price of AUD 0.362/share.

Looking at the presentation, the rights offer is NOT conditional on OMH obtaining bank financing for the project, so I am not particularly optimistic that this Sarawak project can take off smoothly without any bumps.

As to whether Boustead will take up the full entitlement, FF Wong has been very bullish on OMH so I think they will. It will cost Boustead an additional AUD 6 million (about SGD 7.86 million) to subscribe for their full entitlement.

For info, OMH goes Ex-rights on Aug 20, 2012 and is current trading at the rights price of AUD 0.40/share.

i can see where this is going. the ROI of the project is going down the drain while boustead is going to pump in more and more money.
just step back and ask why do you think even the banks do not want to finance such a venture?
im stunned they can't even get a loan as the malaysia banking landscape is extremely competitive and bankers are extremely desperate to make loans. and yet they can't get funding from the banks?
no wonder the stock is trading at such cheap valuations considering the kind of risk this company is engaging in.

let me quote what i said previously in the beginning of the year.

Quote:with this kind of management, im really not sure about their investment in OM Holdings, or what kind of crazy things they r going to do with the cash.
being in the investment industry in malaysia, i can say a lot of things are not what it seems, particularly in the east malaysia, and particularly when money is involved, and definitely when dealing with people in the steel or smelting or construction industry in malaysia! im appalled that he is even dealing with these people at all!

May I know whether OMH unable to secure a bank loan or they chose a right instead?