Boustead Projects - CGS-CIMB Research 2020-04-13: Aiming To Unlock Hidden Value

BOUSTEAD PROJECTS LIMITED (SGX:AVM) | SGinvestors.io BOUSTEAD PROJECTS LIMITED (SGX:AVM)

Boustead Projects - Aiming To Unlock Hidden Value

  • Construction works in Singapore are halted for a month under the circuit breaker measure announced by the government.
  • Macro uncertainties have hurt Boustead Project (SGX:AVM)’s order wins for D&B segment YTD, but Boustead Project’s two ongoing public sector projects may anchor segment earnings.
  • Potential REIT launch remains the key catalyst for Boustead Project.
  • We reiterate ADD with a lower Target Price of S$0.93, based on a 50% discount to FY20F RNAV.



One month stop work order on construction sites

  • Construction works in Singapore are halted for a month (7 Apr to 4 May), in line with the circuit breaker measure announced by Singapore government to mitigate the spread of Covid-19. With the stop work order, we can expect minimal progress billings for Boustead Project in Apr.
  • There is still room for Boustead Project to catch up in the later part of the year as the situation improves, but we see short-term negative earnings impact from the circuit breaker, given construction companies’ large fixed cost base.


Two public sector projects to anchor D&B segment till FY21F

  • Management noted that the macroeconomic uncertainties have resulted in corporates turning more cautious, thereby hurting Boustead Project’s order wins in the design and build (D&B) segment YTD.
  • Nevertheless, we believe the two ongoing public sector projects (S$242m JTC multi-storey recycling facility and S$200m Surbana Jurong Campus) could continue to anchor Boustead Project’s D&B segment earnings through FY21F, given their larger scale and longer project duration.
  • At end-Sep 2019, Boustead Project’s order book remains healthy at S$620m, still more than double its past five years’ average of S$295m.


Possible REIT launch remains the key catalyst

  • We estimate existing projects under development would bring Boustead Project’s leasehold portfolio asset base to S$1bn this year, putting it on track for an eventual REIT listing.
  • With the help of higher occupancy rate after the completion of the ALICE (ALICE@Mediapolis) asset stabilisation, we continue to see REIT listing in 2020/2021 as a possibility. We think this could unlock significant value, as the investment properties are accounted for at cost less depreciation.
  • A special dividend is also a possibility after a successful REIT listing, in our view.


Reiterate ADD with a lower Target Price of S$0.93






ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-04-13
SGX Stock Analyst Report ADD MAINTAIN ADD 0.930 DOWN 1.24



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