Boustead Singapore

[Musicwhiz]

Yes correct, some of the leasehold properties are classified as "Properties Held for Sale" while others are under "Investment Properties". Key takeaway is that there are 4 additional leasehold properties under Investment Properties which are under construction. Once completed, they will add substantially to the recurring rental income for Boustead.

(Vested)

[freedom]

2. The total rental income stated in financial statement is about $8M, but in investment properties section, it is less than 1M?

Part of the rental income is derived from "investment properties" as pointed out, and the other part is from "properties held for sale". This is the explanation from Note 2, Pg. 76.

The question about the allowances for doubtful receivables is good though. The disparity between the two figures is not explained by the net loss on restructuring of the township project though, since that amounted to only slightly over S$1mn and not S$16mn.

during AGM, someone asked the same question, that's the reply. MW maybe can confirm on this?

since it is net loss on restructuring of the joint venture, it could be allowance offset by profit.


as for the rental income, investment properties of 13+ million with most are under construction, should not contribute much to rental income. properties held for sale of 50+ million, probably generated most of the rental income.

pg 76.

vi) Rental income
Rental income from investment properties and properties held for sale is recognised on a straight-line basis over the
term of the relevant lease.

[Musicwhiz]

Business Times - 11 Aug 2011

Company Briefs

Boustead secures $22m of contracts

BOUSTEAD Singapore's energy-related engineering division has secured contracts worth $22 million. They involve design and construction of large-scale process systems and waste heat recovery units for downstream oil refineries and gas processing plants in Australia, Canada and the United Kingdom.

(Vested)

[Musicwhiz]

Business Times - 12 Aug 2011

Boustead's unit wins S$42.45m job for Kerry Logistics Hub

By ANGELA TAN

Boustead Singapore Limited said on Friday that its subsidiary, Boustead Projects Pte Ltd, has been awarded a S$42.45 million contract to design and build a logistics facility for Kerry Logistics Hub (Singapore) Pte Ltd.

The facility, which will have a gross floor area of about 34,500 square metres spread over four floors, is located at the Tampines LogisPark in Singapore.

It is expected to be completed in 4Q 2012.

The contract is expected to have a positive material impact on the profitability and earnings per share of Boustead in the current financial year ending 31 March 2012.

[Musicwhiz]

Note that Boustead had released a somewhat downbeat 1Q FY 2012 set of financial results last Friday, with both revenue and net profit dipping. However, since their results are mostly contract-based and are thus "lumpy", full-year comparisons are more appropriate. I am very happy that their Balance Sheet remains strong and FCF is very high as well.

Today, Boustead resumed their share buy-backs with 189,000 shares purchased at 88 cents/share, spending $166,671.47. To date, a total of 11.176 million shares have been repurchased (about 2.2% of issued share cap) at an average price of 49.78 cents/share. Adjusted share capital less treasury shares now stands at 504.57 million shares. Market cap of Boustead at closing price of 88 cents today therefore stands at $444 million.

Rather under-valued for a company with 39.75 cents/share in cash and 3 very strong and growing divisions (Real Estate Solutions, Energy-Related Engineering and Geo-Spatial Technology) eh?

(Vested)

[Behappyalways]

Share buyback provides confidence especially during a confidence crisis when many people refrain from buying. Personally I feel that a company should initiate share buyback only when its share price is much lower than NTA although share buyback is a good tool for directors to influence share price or support share price when there is a confidence crisis.

But for Boustead, my personal view is that Share buyback in this case actually 'weakens' the company. With its latest NTA at 47 cents and share price of 88 cents, they are paying 88 cents for assets worth 47 cents on book(it might worth much more). So every buy decreases NTA.

Like they have 39.75 cents/share in cash, every share buyback will reduce NTA and the cash/per share for the remaining shareholders although remaining shareholders would have a higher stake in the company.

But nevertheless, company has only share buyback mandate to buy 5% of the issued shares.

[Musicwhiz]

Personally I feel that a company should initiate share buyback only when its share price is much lower than NTA although share buyback is a good tool for directors to influence share price or support share price when there is a confidence crisis.

But for Boustead, my personal view is that Share buyback in this case actually 'weakens' the company. With its latest NTA at 47 cents and share price of 88 cents, they are paying 88 cents for assets worth 47 cents on book(it might worth much more). So every buy decreases NTA.

Like they have 39.75 cents/share in cash, every share buyback will reduce NTA and the cash/per share for the remaining shareholders although remaining shareholders would have a higher stake in the company.

But nevertheless, company has only share buyback mandate to buy 5% of the issued shares.

I'd like to respectfully disagree with the above. In the first place, share buy-backs are done because cash cannot be deployed effectively at higher rates of return, thus the cash used to buy back the shares is being deployed to reduce the drag on returns which cash is providing (by being left in the bank or time deposit). Mopping up the share float also means a lower number of issued shares, which translates into not only higher EPS, but also means the Company will spend less to pay out dividends (ceteris paribus) as the issued share cap has now become smaller (note: dividends are NOT paid on treasury shares).

Another point is that NTA is often not a very accurate measure of the true value of a Company, as many assets on the Balance Sheet are reported at historical cost (a good example would be buildings, of which Boustead has at least 5 under construction in its latest AR FY 2011). Hence, the reported NTA and NAV may be much lower than in actuality. NTA and NAV also discount the future cash-flow generation and earnings potential of the business itself, thus the current market price per share may still be considered a suitable "bargain" if one factors in such intangible aspects. These are factors which Management is more apt to be aware of, as they are running the business and handle the operational aspects of it.

Note too that NTA does not automatically reduce just because shares are being repurchased. It's a rather simplistic view because you assume the business remains static, while in reality the business is a going concern which generates cash and revenues/profits; and also books in more assets even as it may shed others. In short, the dynamic nature of business would mean that the NTA may change daily, and not just at every reported quarter. Shares repurchase are just one aspect of doing business, and must be thus taken in context.

Lastly, the Company has the mandate to buy-back 10% of its shares, and not 5%.

[jovialger]

Can I just clarify, share-buybacks does not automatically reduce the no. of shares outstanding, unless the shares are cancelled?

Hence, share buyback does not result in a "lowered number of issued shares", isn't it? So there should not be any change in EPS as a result?

[Musicwhiz]

Can I just clarify, share-buybacks does not automatically reduce the no. of shares outstanding, unless the shares are cancelled?

Hence, share buyback does not result in a "lowered number of issued shares", isn't it? So there should not be any change in EPS as a result?

I'd be happy to clarify that.

Share buybacks reduce the amount of issued shares available to be traded in the stock market as treasury shares are held by the Company, but you are right it does not reduce total issued share cap unless these shares are cancelled.

But EPS will still be enhanced if earnings remain the same as the denominator uses issued share cap less treasury shares for computation. The same goes for dividends - treasury shares are not entitled to dividends.

[Behappyalways]

Thanks for correcting me on the 10% share mandate buyback.

Using the information you have given, let's do a simplistic calculation.....Let's say a company called Hathaway has 100 shares and it is trading at 88 cents. Assets include 39.75cents cash/per share and 7.25cents other assets/per share and no debts and liabilities. Meaning NTA of 47 cents per share.

The company shareholder funds is $47 of which $39.75 is in cash and $7.25 is in other assets based on 100 shares.

Now the company does a share buyback at 88 cents per share and let's assume it does a 10% share buyback at 88 cents. A 10% share buyback would meant the company would buy 10 shares(out of 100) at 88 cents costing the company at $8.80.

The company would now have $30.95 in cash(after spending $8.80 on share buyback) and other assets of $7.25. Shareholder funds is now $38.20($47-$8.80).

With the 90 shares remaining(after sharebuyback of 10 shares), the remaining shareholder will have 34.39 cents in cash and 8.05 cents in other assets per share....NTA of 42.44 cents per share compared to 47 cents before the share buyback.

Nevertheless, I am using a very simplistic calculation of company doing a share buyback because a company might have certain intangibles assets in the company which is not assessed in this calculation and also ROE of the company will increase with share buyback as shareholder's equity is being reduced.