Boustead Singapore

[Musicwhiz]

Dear all, I have posted Part 1 of Boustead's recent EGM highlights on my blog. Please feel free to visit and leave comments, thanks!

A snippet as follows:-

"Regarding Boustead Projects, another shareholder noted that for the last three months, most of the contracts secured were those of design and build, with contract amounts being small to medium (in the S$15 to S$20 million range). The pertinent question is whether Boustead was still continuing talks and discussions to grow their leasehold asset portfolio, which was perceived to be much more important as it would build up a recurrent stable of income for the Group as opposed to short-term “lumpy” contract deals. Also, as FF Wong pointed out, the order book which stands at S$320 million today only includes design and build deals, and does not include the design, build and lease (DB&L) projects. "

(Vested)

[Musicwhiz]

Dear all, I have posted Part 2 of Boustead's recent EGM highlights on my blog. Please feel free to visit and leave comments, thanks!

A snippet as follows:-

"When asked about the value of the industrial leasehold properties within Boustead’s stable, FF Wong gave a candid assessment, stating a market value of about S$160 million. After netting off the associated loans relating to these properties, one would still end up with about S$120 million worth of cash. Add this to the current S$200 million net cash and you would end up with a net cash balance of close to S$320 million, which is close to almost 80% of the current market capitalization of $410 million (above) purely in cash."

[Contrarian]

Thanks, Musicwhiz.

I have owned Boustead since 09. Have added lately...

Do you know the leasehold properties... how much yield are they generating? To my knowledge, industrial properties generate yields of 8-9%.

[buddy]

Two questions:

Do u think this 160 mn is a realistic number for industrial properties? I look at FY11 annual report there are 2 items which correlate to this :

- schedule 13 says properties held for sale is 55.7 mn: all these properties are in existence. Given schedule 30 says rental income is 8 mn using 10% yield ( as 8 mn is gross rental income) - the value of this property is 80 mn.
- schedule 17 : says investment properties book value is 13.5 mn & market value is 26 mn. Given the investment income from them is 1 mn $ so it is a realistic number.

This means combined value for industrial property should be 105 mn $. What I am missing?

Cash on Balance sheet : 200 mn - most of epc companies own it should excess cash be mere 100-120 mn as i assume they will need rest for business using approx. 20% of revenue.

---

i mean most of epc companies have lots of cash on balance sheet as they need for running the business. assuming they need 20% of revenues as cash for running the business excess cash should be approx. 120 mn

[Musicwhiz]

Two questions:

Do u think this 160 mn is a realistic number for industrial properties? I look at FY11 annual report there are 2 items which correlate to this :

- schedule 13 says properties held for sale is 55.7 mn: all these properties are in existence. Given schedule 30 says rental income is 8 mn using 10% yield ( as 8 mn is gross rental income) - the value of this property is 80 mn.
- schedule 17 : says investment properties book value is 13.5 mn & market value is 26 mn. Given the investment income from them is 1 mn $ so it is a realistic number.

This means combined value for industrial property should be 105 mn $. What I am missing?

Cash on Balance sheet : 200 mn - most of epc companies own it should excess cash be mere 100-120 mn as i assume they will need rest for business using approx. 20% of revenue.

---

i mean most of epc companies have lots of cash on balance sheet as they need for running the business. assuming they need 20% of revenues as cash for running the business excess cash should be approx. 120 mn

Boustead capitalized leasehold property graudally in the books, therefore what was captured may not reflect the book value of the fully completed DB&L property portfolio. FF Wong was merely mentioning that from his assessment, the market value of the completed portfolio should be about $160 million. I take this to be a ballpark figure which was not supported by any valuations made by any real estate valuation company like Knight Frank or Colliers.

Investment/rental income is not easy to compute as the yield on each leasehold property is different as they are located in different industrial parks.

Boustead is not a pure EPC company as it has four different divisions. The loans taken up are mainly for building and financing their property portfolio, and the rest of the cash is excess of working capital requirements and therefore can be paid ou as dividends.

[wee]

MW,

thanks for your detailed notes. Am I right to conclude that the company would need to incur additional construction costs to complete the portfolio of leasehold properties, and if so are we double counting (i.e. cash would be consumed to complete the projects).

Regards
wee

Two questions:

Do u think this 160 mn is a realistic number for industrial properties? I look at FY11 annual report there are 2 items which correlate to this :

- schedule 13 says properties held for sale is 55.7 mn: all these properties are in existence. Given schedule 30 says rental income is 8 mn using 10% yield ( as 8 mn is gross rental income) - the value of this property is 80 mn.
- schedule 17 : says investment properties book value is 13.5 mn & market value is 26 mn. Given the investment income from them is 1 mn $ so it is a realistic number.

This means combined value for industrial property should be 105 mn $. What I am missing?

Cash on Balance sheet : 200 mn - most of epc companies own it should excess cash be mere 100-120 mn as i assume they will need rest for business using approx. 20% of revenue.

---

i mean most of epc companies have lots of cash on balance sheet as they need for running the business. assuming they need 20% of revenues as cash for running the business excess cash should be approx. 120 mn

Boustead capitalized leasehold property graudally in the books, therefore what was captured may not reflect the book value of the fully completed DB&L property portfolio. FF Wong was merely mentioning that from his assessment, the market value of the completed portfolio should be about $160 million. I take this to be a ballpark figure which was not supported by any valuations made by any real estate valuation company like Knight Frank or Colliers.

Investment/rental income is not easy to compute as the yield on each leasehold property is different as they are located in different industrial parks.

Boustead is not a pure EPC company as it has four different divisions. The loans taken up are mainly for building and financing their property portfolio, and the rest of the cash is excess of working capital requirements and therefore can be paid ou as dividends.

[Musicwhiz]

MW,

thanks for your detailed notes. Am I right to conclude that the company would need to incur additional construction costs to complete the portfolio of leasehold properties, and if so are we double counting (i.e. cash would be consumed to complete the projects).

Regards
wee

Hi wee,

From my understanding, probably more loans (long and short-term) would be taken up to finance the costs of construction based on a progress payment basis (i.e. loans are progressively drawn down as and when Boustead is required to pay the contractors). But the amounts for the loans is not expected to be very much more than current (my personal opinion) as cash outflow would slow down as more and more of their properties near completion. Therefore, the completed properties can then be leased out and contribute operating cash flow to finance those still currently under construction.

At the same time, the other 2 major divisions (Energy-Related Engineering and Geo-Spatial) are also good cash generators, judging from FF Wong's conservative stance on the use of capital. Therefore, cash should continue to build up in the kitty, barring major unforseen circumstances.

Regards.

[freedom]

if I read annual report 2011 correctly, only properties held for sale are financed by long term amortized loan. investment properties are financed by the group itself.

I believe most of its newly DBL properties probably would end up being investment properties.

the yield on its properties, using its 8 million rental income divided by around 60 - 70 million book value. it is not bad an investment to me.

[Behappyalways]

divested. good company to keep for the long term but not so good this year with order book 320m vs 580m last year. good luck everyone!

FYI

http://info.sgx.com/webcorannc.nsf/Annou...endocument

[Bibi]

I wouldn't be bothered by a director selling just 63 lots of a 83 cents share. It's a mere 52+k. Remember to these rich people half a million is considered a peanut.