Boustead Singapore

Yes MW, now we know why.
My guess is fortunately right.
But wondering why they even need to setup a new entity for this purpose (BP-SDV). more coming? finger crossed.

Anyway, anyone can share the difference between:
1. Design & build
2. Design, Build & Lease
3. Other types?

Wondering how the revenue and cost is recognized for each of the above project type?
Thanks in advance.

(vested)

(17-03-2011, 09:39 AM)valuestalker Wrote: Yes MW, now we know why.
My guess is fortunately right.
But wondering why they even need to setup a new entity for this purpose (BP-SDV). more coming? finger crossed.

Anyway, anyone can share the difference between:
1. Design & build
2. Design, Build & Lease
3. Other types?

Wondering how the revenue and cost is recognized for each of the above project type?
Thanks in advance.

(vested)

Design and Build is a specific project whereby Boustead designs and builds for a fixed contractual sum (e.g. SDV for S$55 million). After this, the project is over and there is no more revenue flow. Recognition should be based on % of completion basis for construction contracts, along with costs associated with contractors' progress billings.

For Design, Build and Lease, Boustead designs and builds the building but then owns the building and leases it to the client for recurring revenue/cash flow over a period of time. Usually, there is an option for the client to buy over the property at a certain price should they wish to, rather than pay rental. One recent example was the sale of IBM Singapore Technology Park for S$67.8 million and completed only in 1Q FY 2011. FF Wong lamented the loss of revenue but Boustead managed to book a gain on disposal as a result. From what I understand from DB&L, the revenue is recognized once the building is completed and the tenant occupies the premises, and it is consistent and recurring revenues.

Hence, it would be beneficial for Boustead Projects to try to snare more DB&L projects which would provide visibility to Boustead's income and cash flow stream, rather than the "lumpy" nature of Design and Build Contracts.

Thanks a lot MW for the explanation.
Appreciate that.

I guess if everything being the same, DB&L project value will be a lot lower than D&B?

For the purpose of discussion, consider the following example:
Project A:
1. D&B method = $55 M (building is not owned by Boustead?)
2. DB&L method = $10 M (the amount includes payment for leases for first few years?
hence the additional recurring revenue won't be there in the first few years?)

Googling from just now, but couldn't find any useful info yet.

Hi valuestalker,

From what I know, DB&L projects are lower in value compared to D&B mainly due to the lease portion, which ensures revenue over a period of time.

But you can't really take a specific project and hypothetically assume either D&B or DB&L - it's not comparing apples to apples and may not be a fair representation of the differences between the two types.

Perhaps for more clarity, you can bring up this question at the next Boustead AGM?

MW, yes i agree.
The project values in the example are just to illustrate the different between d&b and db&l.

I am not good in explaining and hence normally NOT asking question in AGM.
More like a behind-the-screen type person.
Watching how management react to questions and their body language.

Cheers,

(17-03-2011, 10:49 AM)valuestalker Wrote: I am not good in explaining and hence normally NOT asking question in AGM.
More like a behind-the-screen type person.
Watching how management react to questions and their body language.

Hi, no problem.

I will remember to help you ask this question should I be available to attend this year's AGM.

Thanks a lot man,
I hope i will be able to attend also (and if i see ppl asking that question, i know that it is you. )
Anyway, that will be my first Boustead AGM.
Looking forward to it.
Note: I only watched one of FF wong's appearance from youtube and browsed through the recorded AGM streaming.

DB & L normally does not have a price tag. the investment of the property is solely made by Boustead. there would be an agreed lease rental, but normally Boustead does not disclose that value.

Hot on the heels of yesterday's announcement is another announcement made during lunch hour today. Boustead has secured its 4th DB&L contract within the last 12 months, and has increased its portfolio of DB&L facilities to Eight (8) currently.

As stated in the attached announcement, the contract is a DB&L and thus will NOT be added to their order book, but will instead provide growing recurring income for the Group.

With the recent release of a land parcel in Jurong Lake District for tender by URA, I expect more industrial space will be created for MNC to establish their foothold here, and they will require Boustead Project's expertise to design a technologically advanced and environmentally-friendly (Green Mark) building for them.

Should we expect more of such contracts from Boustead Projects in the near future?

Thanks for the update MW. Their real estate development division will be busy for the next 1 year ! Any idea how much of their revenue comes from recurring rental ? The margins will definitely be high but is the returns good ? Overall, a mixture of EPC works backed by recurring income would be a good business model to ensure profitability even when the orderbook is completely depleted in bad times.