BOUSTEAD SINGAPORE LIMITED (SGX:F9D)
Boustead Singapore - Steadfast Global Player With Reliable Prospects
- BOUSTEAD SINGAPORE (SGX:F9D) is a global infrastructure-related engineering and technology group. The company offers reliable prospects from its geospatial segment, which rides on sustainable industry tailwinds through the proliferation of location-based data. In addition, its energy engineering segment offers a steady foundation for recovery given its high orderbook.
- The group is dependable with its low gearing and decent yield. See Boustead Singapore Target Price. Initiate coverage with a BUY.
Company Background
- Established in 1828, Boustead Singapore is a global infrastructure-related engineering and technology group.
- Focusing on the niche engineering and development of key infrastructure to support economic growth in global markets, Boustead Singapore’s strong suite of engineering services comprises of energy engineering and real estate solutions, centred on energy infrastructure and smart eco-sustainable business park and industrial developments.
- In addition, Boustead Singapore provides technology-driven transformative solutions such as geospatial solutions that enable the implementation of smart nation initiatives, as well as niche and innovative medical solutions for the Asia Pacific region.
The real estate solutions division
- The real estate solutions division is under its 53%-owned subsidiary, BOUSTEAD PROJECTS (SGX:AVM), which is generally acknowledged as the only integrated smart eco-sustainable industrial real estate solutions provider listed on the SGX Mainboard. Design and build and development capabilities are premised on Industry 4.0 transformation standards and an integrated digital delivery approach, complemented by value-added services and green building credentials, and supported by robust quality, environmental, health and safety management systems.
- See also the initiation coverage report: Boustead Projects - Overlooked Assets Of A Building Champ.
Energy engineering division.
- This division’s key subsidiaries – BIH, Boustead Controls & Electrics and Boustead Salcon Water Solutions – provide key process technologies to the global O&G, petrochemical and energy industries.
- BIH is a leading global specialist in designing, engineering and supplying direct-fired process heater systems, waste heat recovery units and associated equipment for the global O&G, petrochemical and energy industries.
- Boustead Controls & Electrics is a well-recognised leader in designing, engineering and supplying emergency shutdown and process control systems for upstream O&G industries.
- Boustead Salcon Water Solutions is a leading global water and wastewater engineering specialist and Singapore’s largest in the energy sector.
Geospatial division.
- Boustead Singapore’s geospatial division provides professional services and exclusively distributes Esri’s ArcGIS technology – the world’s leading GIS and location analytics platform – to major markets across Australia and parts of Southeast Asia.
- The software creates digital infrastructure solutions for smart nations, smart cities and smart communities by solving the world’s largest problems through effective and sustainable planning and management of key infrastructure and resources.
Healthcare division.
- Boustead Singapore acquired White Rock Incorporation in May 18. This division provides niche innovative medical solutions that address age-related chronic diseases and mobility issues, with a focus on rehabilitative care, sleep care and sports science in the Asia Pacific region.
- The division also provides solutions to address the pain points of healthcare institutions by promoting faster recovery and higher productivity, both aimed at reducing resource shortages faced by national healthcare systems and the healthcare industry at large.
Investment Highlights
High order book for energy engineering segment.
- Boustead International Heaters (BIH) is Boustead Singapore’s downstream oil & gas (O&G) subsidiary. The unit is a leading global specialist in designing, engineering and supplying direct-fired process heater systems and waste heat recovery units, and is operational in North America, Europe, the Asia Pacific and Middle East, which accounted for about 90% of revenue and new contracts secured in FY19. BIH announced a S$100m contract win in Aug 19, which involves the design, engineering and supply of waste heat recovery units. Order wins are at S$161m ytd for FY20 and its order backlog as of 2QFY20 sat at S$209m, a five-year high.
- Boustead Singapore can also be a beneficiary of a recovery in capital expenditure by oil majors. Even with just a slight stabilisation in oil prices, exploration and production companies might be more willing to invest in new offshore projects. According to Rystad Energy AS, notwithstanding oil price volatility, spending on offshore oilfield services will rise to $208b in 2019 before surging by another 14% in 2020.
Geospatial segment provides stability, with sustainable industry tailwinds.
- Boustead Singapore provides professional IT services and exclusively distributes Esri’s ArcGIS technology – the world’s leading geographic information system (GIS) and location analytics platform – to major markets across Australia and parts of Southeast Asia. According to Arc Advisory, Esri accounts for over 45% of the worldwide GIS market and is a leader in the industry. Boustead Singapore’s geospatial segment grew at a CAGR of 2.0% from FY15-19, with healthy PBT margins averaging 20%, and contributes 25% of the group’s revenue.
- The industry also offers sustainable prospects where its technology creates digital infrastructure solutions for smart nations in their planning and management of key infrastructure and resources, a rising trend along with location-based data. Boustead Singapore’s geospatial segment covers a wide range of market sectors such as agribusiness, defence, infrastructure, etc.
- New opportunities come from its Australian operations, which run the Geocentric Datum of Australia 2020 (GDA2020) system, Australia’s new official datum. GDA2020 seeks to accurately align the country’s national coordinates with global satellite positioning systems to enable smart devices and other positioning technologies to accurately locate mapped features. On the local front, government agencies including the Land Transport Authority, PUB and Urban Redevelopment Authority (URA) are continuing to leverage on ArcGIS to underpin intelligent applications and smart workflows.
Decent dividend yield and strong balance sheet; further upside can come from real estate segment.
- Boustead Singapore typically pays out an average of 50% of core earnings as dividends. At current levels, Boustead Singapore has a decent yield of about 4.0% from 3 S cents of dividends. See Boustead Singapore Dividend History.
- As at 2QFY20, Boustead Singapore was in a net cash position of approximately S$195m. We opine that the group will also be a beneficiary of its 53%-owned Boustead Projects (SGX:AVM). Further upside is possible if Boustead Projects unlocks value from its asset base, through various forms such as a spin-off into a REIT platform.
- See also initiation coverage report: Boustead Projects - Overlooked Assets Of A Building Champ.
Valuation
- Valued at target price based on sum-of-the-parts valuation (18% upside, see Boustead Singapore Target Price).
- We value Boustead Singapore based on its four segments:
- real estate (52.7% stake in Boustead Projects (SGX:AVM)),
- geospatial (88.2% stake),
- energy engineering, and
- healthcare.
- Click on view full report button below for complete analysis on Boustead Singapore.
- See also Boustead Singapore Share Price; Boustead Singapore Target Price; Boustead Singapore Analyst Reports; Boustead Singapore Dividend History; Boustead Singapore Announcements; Boustead Singapore Latest News.
Lucas Teng
UOB Kay Hian Research
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Llelleythan Tan
UOB Kay Hian
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https://research.uobkayhian.com/
2020-01-16
SGX Stock
Analyst Report
0.92
SAME
0.92
