Boustead Singapore

[VIChris]

Lets hope they win more deals.

[Musicwhiz]

Business Times - 14 Nov 2011

Boustead's Q2 net profit rises 13%, sees strong 2H2012

By YEO AIQI

Boustead Singapore Limited on Monday announced that its net profit for second quarter ended Sept 30, 2011 rose by 13 per cent to S$9.1 million from a year ago.

Revenue dipped by 30 per cent to S$90.96 m from a year ago due to a 41 per cent drop in its engineering services unit, arising from slower revenue recognition on major projects and the strategic shift in business model in favour of more design-build-and-lease projects.

Bottomline was lifted by a greater proportional contribution from geo-spatial technology as well as achievement of better gross margins across several major projects under the industrial real estate solutions business.

The company declared interim dividend, payable in cash of 2 cents, to be paid on Dec 16, 2011.

Going forward, the company will continue to pursue business development activities, and acquistion and investment opportunities across the Asia Pacific and has the capability to do so with its strong net cash position. Boustead continues to enjoy a steady recovery in new contract awards, having secured $272 million in turnkey contracts since the start of FY2012, surpassing the total for the whole of FY2011.

In addition, the group signed sale agreements for a $55 million logistics facility and $38 million strata divided building, which are expected to be completed in FY2013 and FY2014 respectively.

Enquiry pipelines across all four core operating divisions remain healthy and the group expects 2H FY2012 performance to be stronger than 1H FY2012.

(Vested)

[Gregg]

Hi

There is increase of investment property in this quarter that resulted negative cash flow, any idea what kind of property?is it use for leasing?

Interest to invest this counter because of attractive stock price because of Libya.

[Musicwhiz]

Hi

There is increase of investment property in this quarter that resulted negative cash flow, any idea what kind of property?is it use for leasing?

Interest to invest this counter because of attractive stock price because of Libya.

These are additions to their leasehold property portfolio, as part of Boustead Project's Design, Build and Lease contracts. This form of contracts requires upfront capital commitments (in the form of progress payments in cash to vendors) before the properties can start to generate recurrent cash flows. And yes, it is used for leasing - please refer to Boustead's announcements on their DB&L portfolio.

Not sure what you mean by attractive stock price due to Libya. Libya has been fully written off and they are now exploring options on how to recover some monies back.

In the meantime, their Geo-Spatial Division is doing very well compared to the other three divisions, with a +65% rise in PBT and contributing to the stronger gross margin of 38.8% for the Group.

I will be doing an analysis (most likely 3-parts) on my blog soon and will list down the growth drivers and other pertinent factors for Boustead, as well as highlight the weaker aspects and risks (for a balanced viewpoint). The review will cover financials, margins, divisions, balance sheet, cash flows, dividends, prospects and plans. I have attached a report on Boustead by Kim Eng which states a target price of $1.32 (overly optimistic as the business is still being built up). But I find that the report is not comprehensive enough as it does not delve into many details.

Cheers.

[Musicwhiz]

Dear all, Part 1 of Boustead's 1H FY 2012 Analysis and Review is now up on my blog. Please feel free to visit and leave comments, thanks!

A snippet as follows:-

"Boustead’s Balance Sheet displays some changes since 6 months ago (March 31, 2011), and the focus now would be to comment on these changes and how they will impact the Group moving forward. For current assets, cash has fallen by about $17 million (more on this later), while trade receivables has seen a large drop of $30 million, offset by an increase in other receivables and prepayments of $9 million. The most significant increase, however, is that of investment properties under non-current assets – it had increased from $13.5 million to $41.4 million in just six months. Obviously, a lot of progress had been made on the construction of Boustead’s industrial leasehold properties and this was reflected in the increased capitalization as witnessed on the Balance Sheet. AFS investments also increased as part of Boustead’s Cash Management program, which involves the purchase of short-term blue-chip bonds with yields higher than bank fixed deposits."

[freedom]

better profit margin in industrial real estate solution could be just because lower revenue contribution from design and build projects and higher industrial rental income profit margin.

tracing back to 2006, industrial design and build project margins has been thinner and thinner. If not for the sale of industrial properties in recent years, the margin in industrial solution could be much lower than what showed in the financial statements.

[Musicwhiz]

better profit margin in industrial real estate solution could be just because lower revenue contribution from design and build projects and higher industrial rental income profit margin.

tracing back to 2006, industrial design and build project margins has been thinner and thinner. If not for the sale of industrial properties in recent years, the margin in industrial solution could be much lower than what showed in the financial statements.

Agreed. But the fact that they are doing niche projects means the revenue will still flow in - what they have to control are the costs. But from what I understand, the contracts are cost-plus in nature and thus Boustead has a buffer in terms of cost overruns. The profit margin may not be hugely attractive but at least there is still some meat. Of course, the rental portfolio is still the one to watch out for!

[VIChris]

Musicwhiz, thanks for sharing your view on Boustead.
At this instance, how much do you think this company fair value is?
And how you value it?

Cheers

[Musicwhiz]

Musicwhiz, thanks for sharing your view on Boustead.
At this instance, how much do you think this company fair value is?
And how you value it?

Cheers

Hi Chris,

Paiseh I don't really compute fair values for companies, and therefore I will not give a fair value for Boustead.

Regards.

[VIChris]

Hi Musicwhiz,
in such case, when will you decide to sell the share?
Or you are going to hold long term even though if the price shoot up to say $2.0 (over value based on current intrinsic value or Financial figures)?

This is a great company with great management
Cheers