Boustead Singapore Ltd - CGS-CIMB Research 2019-11-14: Poised For Stronger Quarters Ahead


Boustead Singapore Ltd - Poised For Stronger Quarters Ahead

  • Boustead Singapore's 1HFY9/20 core net profit rose 1.4% y-o-y to S$13.5m. We deem this in-line with our expectations at 37% of our FY20F as we anticipate a stronger 2H.
  • Record orderbook (S$789m) to drive earnings recovery in energy-related and real-estate segment. Geospatial segment continues to see firm demand.
  • Maintain ADD rating and Target Price of S$1.00.
  • Boustead Singapore is trading at 9.3x FY21F P/E, while being backed by S$0.40/share net cash and 3.9% yield.

2Q20 results within expectations, as we expect a stronger 2H20F

  • BOUSTEAD SINGAPORE (SGX:F9D)'s 2Q20 revenue grew 44% y-o-y to S$163m, due to stronger growth from the energy-related engineering (+40% y-o-y) and real estate segments (+71% y-o-y). However, impacted by
    1. lower margins for real estate, and
    2. weakness in wastewater treatment business, 2Q core net profit came in at S$6.9m (+2.9% q-o-q; flattish y-o-y).
  • Boustead Singapore’s 1H19 core net profit rose 1.4% y-o-y to S$13.5m, making up 37% of our full-year forecast.
  • See Boustead Singapore Announcements.

Energy-related segment to make a major comeback in 2H20

  • Energy-related segment PBT recovered to S$0.7m in 2Q20 (2Q19: -S$0.3m), with the stronger performance of Boustead Singapore’s downstream oil & gas business being partially offset by one-off provisions in the wastewater treatment business.
  • We expect a much stronger 2H, with contributions from a major S$100m contract starting in 3Q – this could bring the energy segment PBT to S$6.3m for FY20F.
  • Order book backlog stood at S$209m as of end-Sep, a 5-year high. Management remains positive on further order wins, as they noted that more oil and gas companies are reaching final investment decisions.

Buffing up sales team to drive geospatial segment growth

  • The geospatial segment PBT decline of 9.2% y-o-y to S$6.5m in 2Q20 was mainly due to FX headwinds. Stripping off currency impacts, management said segment revenue showed a healthy growth in the mid-single digits.
  • Boustead Singapore is expanding its sales team to drive sales growth, riding on smart-city trend which triggers the need for more advanced geospatial technology. We expect segment PBT to return to positive growth in 2H.

Industrial real estate weaker off a high-base

  • 2Q20 real-estate PBT fell 35% y-o-y off a high-base to S$6.5m due lower margin projects and a lower quantum of cost savings from previously-completed projects. We expect leasing income to grow in the coming quarters, with ongoing ALICE@Mediapolis asset stabilisation and 85 Tuas South property starting to contribute.
  • In Oct, BOUSTEAD PROJECTS (SGX:AVM) announced the acquisition of an industrial property and incorporated a property fund management subsidiary; we continue to see a REIT listing in 2020 as a possibility. See Boustead Project Share Price; Boustead Project Announcements.

Maintain ADD and Target Price of S$1.00

ONG Khang Chuen CGS-CIMB Research | Caleb PANG Huan Zhong CGS-CIMB Research | 2019-11-14
SGX Stock Analyst Report ADD MAINTAIN ADD 1.000 SAME 1.000