Boustead Singapore

Oops paish.didnt know theres an attachment upload function, cat n paste fr the pdf..will do so when i back later

Attached is the report. Not surprising for sell-side analysts to be (forever) bullish - after all they want you to buy no matter what so they can earn your commission. I have yet to read an analyst report which mentions "margin of safety" using the proper definition of risk of permanent loss!

1. The earnings this year is 16.3 cts. Dividend is 7 cts. So the payout is < 50% Company has close to $200M cash. I believe they can be more generous in payouts, say 60% of earnings.

2. Can do a bonus issue, they have delivered many years of solid earnings. Generate some increased liquidity.
A consistent result with bonus issue and increased dividend, will get more investor interests. As in the case with ARA.

Geo-Spatial has been a steady growth engine in the past 5 years. Real estate was also a growth engine, but much bumpier. It quite surprised me that real estate division continued to perform in the last a few years. I never expected industrial properties to take off again. Kudos to Singapore government.

What's the next growth engine in the future? Will it come from the 200+ million cash? or it simply becomes a slow to non-growth company. No disrespect, FF Wong does not look enterprising to me now than before.

(01-06-2013, 12:05 PM)Musicwhiz Wrote: Attached is the report. Not surprising for sell-side analysts to be (forever) bullish - after all they want you to buy no matter what so they can earn your commission. I have yet to read an analyst report which mentions "margin of safety" using the proper definition of risk of permanent loss!

actually i tot the sell-side analysts giving both sell and buy calls are equally beneficial to them..worse for them is to publish hold calls...



Musicwhiz.
I only read abt margin of safety ref to intrinsic value...how to reference to permanent loss? reference to gearing analysis of the company?

(01-06-2013, 05:17 PM)evolance Wrote: actually i tot the sell-side analysts giving both sell and buy calls are equally beneficial to them..worse for them is to publish hold calls...



Musicwhiz.
I only read abt margin of safety ref to intrinsic value...how to reference to permanent loss? reference to gearing analysis of the company?

Hi Evolance,

Analysts' "Hold" call is usually a "Sell" call in disguise, no point spoiling relations with the Company in question by writing a "Sell" report and ruining the cosy relationship. They may have to revisit this some time again; some analysts just choose to "Cease Coverage" which is another way of saying "we give up on this one cos no one wants to buy it", or they use the excuse of "shifting resources" to cover other more promising companies.

And yes "Hold" or "Sell" usually pops up after a strong run-up, which essentially tells people to "take profit" as valuations are now demanding etc. In essence, they are promoting a trading mentality. How often do you see an analyst saying "you should hold on to this Company as everything is chugging along fine, while enjoying the growth in intrinsic value along the way along with the excellent yield"?

The very definition of "Margin of Safety" refers to buying significantly below intrinsic value in order to minimize the risk of permanent loss of capital. Sell-side rarely use this terms - and even when they do it is in reference to either operational factors or some historical price/valuation chart. This is just from my personal observations.

Musicwhiz,
Tks for the guidance..

I share the same thought on most anlyst reports too..most jus briefly put a target price,seldom seen one tt did extensive value and show u how they derive the intrinsic value via dcf etc and factor in the margin of safety for u..

(01-06-2013, 05:34 PM)evolance Wrote: I share the same thought on most anlyst reports too..most jus briefly put a target price,seldom seen one tt did extensive value and show u how they derive the intrinsic value via dcf etc and factor in the margin of safety for u.

When SIAS started issuing research reports, they tried to omit price targets in order to get readers to focus on the content. The feedback from their members was that they did want a price target.

So in a way retail investors as a group are getting what they want - "instructions" to buy/sell.

So much for investor education. On the other hand, this is good news for active investors... the fewer Graham-type "intelligent investors" out there in the market, the better.

For the sake of my stake holders of Boustead at home, I have reviewed Phillip Capital's analysis:

- Overall, all the divisional analysis are fair except for Boustead Project's D&B division (excluding the portfolio of leasehold properties). The analyst appeared to have factored in the numerous one-offs seen in FY3/13 as an extrapolation.

Using 10% pretax margins on the flattish turnover of S$174m and S$172m for FY3/14 and FY3/15, pretax should be S$17.4m and S$17.2m respectively. Rental income forecasted at S$9.6m and S$11.3m for FY3/14 and FY3/15 respectively appears fair and that will bring us to S$27.0m and S$28.5m.

Adjusted pretax will then be around S$74.8m and S$78.6m for FY3/14 and FY3/15 respectively. Recurrent earnings as % of PBT is being adjusted at 56.3% and 58.9% for FY3/14 and FY3/15.

Anyway a MM (Mad Mate) of mine came up with the following breakup value analysis on Boustead to help explain his comfort via "margin of safety":

i) ESRI - the geo spatial technology arm - http://esriaustralia.com.au/about

MM reckons that ESRI should be worth at least 20X PER with its monopoly positioning and the substantially bigger market penetration relative to Vicom (vehicle and testing $ generator in Singapore that trades on 15X PER). Using MM's valuation, ESRI is presently worth $0.83 on a breakup value basis.

ii) Oil & Gas - http://www.bihl.com/

Valuing O&G at 10x PER (vs competition's 15x PER), O&G is worth $0.27 on breakup value basis.

iii) Ind Real Estate Solutions - http://www.bousteadprojects.com/

Using a stapled REIT for the 9 leasehold prop (100,000 sm)and valued at 1x P/B S$300m (net off debts - S$34.4m), this division is worth $0.53

D&B is currently focussing on data centres and seeing a revival in logistics centres. It is also actively looking into developments in Iskandar, JB M'sia. Conservatively valuing D&B at 6x PER (Soilbuild Construction IPO equivalent), it is worth $0.17 on breakup value basis.

iv) Cash per share after factoring in recent sale of OMH total around $0.46/share.

Boustead is worth S$2.26 based on the above divisions with no value assigned to the long suffering but currently lean and mean water division and other special projects - Japanese solar venture. Baseline dividends remain at 5 cents, translating into a yield of 3.7% with potential for specials in store given the group's strong cash generating track record.

Good enough "margin of safety"? MM is indeed gila but not without basis.

FF Wong last sold QAF in 1995/6 and has been in Boustead for 18 years. He may have lose his touches in the opinion of some buddies but from the balance sheet and cashflows that I have been witnessing over the last 11 years - it is definitely not a con. My initial investments 11 years ago is already free and still giving me free $ - looks easy hor but the pains of going through the ups and downs over the last decade is difficult to put in just this page - will run out of space - buddies.


Biased, Vested and HU8TPPY
Not from Sell/Buy Side
Just GG

(01-06-2013, 11:27 PM)greengiraffe Wrote: Boustead is worth S$2.26 based on the above divisions with no value assigned to the long suffering but currently lean and mean water division and other special projects

Can i ask have you been buying consistently at current price $1.35 since the break up value is $2.26, a 67% below break up value?