Boustead Singapore

some thought about energy-related engineering business.

does current oil price support a better upstream and downstream oil & gas investment? (don't know any company in the mid stream business)

upstream: both Keppel and SembCorp Marine have fast depleting order book. there are few and few orders for rigs. bad upstream invetment.

downstream: from recent hiap seng's result announcement as well as hai leck's and backlog order of rotary, and smaller order book of Boustead, it does not seem that downstream investment are increasing.

so do oil majors expect oil price to continue rise? will they continue to invest into upstream and downstream business?

I am not an industry expert. But it should take some time to filter from upstream to downstream. Depleting order book in upstream may mean good prospects for downstream too as it means there are plenty of oil & gas that supports the current demand and supply situation that will need to be further processed.

Nonetheless, I am still considering divestment on Hiap Seng due to my fear on market crash although I am quite relieved to see that the company reported the magic key word "lower revenue recognition" in their reports. I believe Hiap Seng should outperform next year onwards but not sure I can wait till then or not... If you look at their earnings cycle you can see a pattern, understand their revenue recognition policies and take note that most of their projects are actually now in the Middle East as described in the Edge interview, meaning different biz environment.

dydx has yet to feedback me on his view of the big squeeze on oil companies though..

upstream directly affects downstream.

no upstream investment, little need for downstream investment except upgrades, which is relatively small. since current capacity and production facility is enough.

new sucessful upstream findings will attract more downstream investment simple because nowadays, oil and gas normally is found in places where no or limited downstream facilities.

Thanks for the info, guys.

From my limited understanding of the Company, they have businesses which deal with BOTH upstream (US) and downstream (DS) oil and gas, through their energy-related Engineering Services Division. This includes Controls & Electrics (DS) and Boustead International Heaters (BIH) [US].

Boustead Maxitherm does solid waste energy recovery which is not so related to O&G per se.

(12-02-2011, 02:50 PM)Musicwhiz Wrote: Thanks for the info, guys.

From my limited understanding of the Company, they have businesses which deal with BOTH upstream (US) and downstream (DS) oil and gas, through their energy-related Engineering Services Division. This includes Controls & Electrics (DS) and Boustead International Heaters (BIH) [US].

Boustead Maxitherm does solid waste energy recovery which is not so related to O&G per se.

I am aware that they are doing both. but, seems that both not doing well in term of order book, but there were quite some big orders for both in 2008 - 2009. so it means less revenue for the future?

coupled with lower revenue and margin for hiap seng/hai leck and reducing order book for Keppel, SembCorp Marine and Rotary, so does the current higher oil price really offer a better future for Boustead? does current higher oil price benifit both upstream and downstream investment? it seems not.

To be honest I don't understand the relationship of high oil prices and business for upstream/downstream very well, so I will not speculate. From Boustead's latest press release (1H FY 2011), I will quote thus:-

"With global crude oil prices stabilising above US$80 per barrel, negotiations by the division for small to medium-sized contracts are expected to be facilitated."

So now that prices are around US$100 per barrel, it would imply negotiations should be even more "advanced", since the press release seems to indicate so. Note that the last contract clinched was a S$16 million one in Jan 5, 2011.

I would think this division will probably see somewhat of a slowdown for FY 2011 and for some of FY 2012 too, but as Boustead Maxitherm is still restructuring in Australia, perhaps the solid waste energy sub-division can pull up the total performance of this division.

Also note that Boustead has sizeable contracts for their Design and Build, and also recurring revenues from their Design, Build and Lease projects under Boustead Projects (91.7% owned). The real-estate solutions division contributes quite significantly to profitability and cash flow, and now Salcon is also coming on-stream to contribute. In addition, they have their stable cash cow Geo-Spatial Division under ESRI.

All in all, I won't lose sleep over the fact that O&G projects may slow down for the Company, as their diverse business divisions can probably mitigate the impact, if any.

*Boustead will be releasing their 3Q FY 2011 results on Feb 14, 2011 (Monday), so stay tuned for an update on the Energy-related Engineering Division if you are interested.

I am speculating that current high oil price is simply because FED is keeping printing money like crazy instead of real demand from all over the world. that could be the reason why although oil price keeps going higher, no new downstream investment to increase production to meet supposedly new demand. also no new upstream investment to increase oil reserve.

oil price nowadays more relies on financial trading of crude future rather than physical supply and demand...

(12-02-2011, 04:17 PM)freedom Wrote: I am speculating that current high oil price is simply because FED is keeping printing money like crazy instead of real demand from all over the world. that could be the reason why although oil price keeps going higher, no new downstream investment to increase production to meet supposedly new demand. also no new upstream investment to increase oil reserve.

oil price nowadays more relies on financial trading of crude future rather than physical supply and demand...

Your discussion seems to be more focused on oil demand and oil prices, and is not in relation to Boustead's business. Since this is a thread on Boustead, would appreciate if you could create a new thread for this discussion unless you wish to tie your comments directly to the discussion on the Company too.

Thanks!

if you put all my last few posts together, what I mean is oil price did not really benefit Boustead's upstream and downstream energy related business. and should investors keep their high hope on higher oil price will bring more profit?

or I should re-phrase, is high oil price a catalyst for Boustead?

(12-02-2011, 04:27 PM)freedom Wrote: if you put all my last few posts together, what I mean is oil price did not really benefit Boustead's upstream and downstream energy related business. and should investors keep their high hope on higher oil price will bring more profit?

or I should re-phrase, is high oil price a catalyst for Boustead?

I think my previous post has answered this to some extent. In addition, I would say "yes" until the Company indicates otherwise.

Since negotiations may take time to materialize as a result of recent high oil prices, perhaps the flow through effects will only be apparent say 3-6 months from now?