BOUSTEAD SINGAPORE LIMITED (SGX:F9D)
Boustead Singapore - Solid Results Amid Challenging Landscape
- Boustead Singapore's FY3/20 in-line; core NP (+34% y-o-y) at 100% of our forecast. Strong growth in geospatial and energy segments offsets property segment weakness.
- We expect both geospatial and energy segments to maintain growth in FY21F on the back of steadfast demand and strong order backlog.
- Reiterate ADD and SOP-based Target Price of S$1.00.
- Boustead Singapore's valuation is undemanding at 10.2x FY22F P/E, backed by net cash position and dividend yield of 4.2%.
Boustead Singapore's 2HFY3/20 results in line with expectations
- Boustead Singapore (SGX:F9D)'s 2H20 core net profit of S$22.7m (+63% hoh, +48% y-o-y) was in line with expectations. Growth was led by strong performance in both geospatial technology and energy-related engineering segments, offset by weaker property division (through 53%-owned Boustead Project (SGX:AVM), ADD, Target Price: S$0.88, see report: Boustead Projects - CGS-CIMB Research 2020-07-14: Significant Value To Be Unlocked.).
- Boustead Singapore maintained its full-year DPU of 3 Scts. See Boustead Dividend History.
Geospatial technology: strong demand driving business growth
- Steadfast demand for geospatial technology across Australia and Southeast Asia drove segment revenue/pretax profit to grow 12%/9% y-o-y, respectively, in FY20.
- Underpinned by government agencies’ increasing use of smart mapping technologies to combat the recent major crises, including Australia’s massive bushfires and global spread of Covid-19 (contact tracing, planning of emergency routes, etc.), we continue to expect a 7.5% pretax profit growth for the segment to S$31.9m in FY21F.
Energy-related engineering: strong earnings visibility till 1HFY22F
- Despite the downturn in global crude oil prices, pretax profit of the energy-related engineering segment surged 6x y-o-y in FY20, as Boustead executed on its strong order backlog. We see strong earnings visibility till end-1HFY22F, as Boustead Singapore's orderbook remained high at S$279m as of end-FY20 (end-FY19: S$103m), mainly made up of downstream oil & gas businesses (waste heat recovery units for LNG projects).
- We forecast energy-related engineering segment to record a pretax profit growth of 61% y-o-y to S$12.7m in FY21F.
Property segment: near-term headwinds
- Boustead Singapore's property segment PBT fell 23% y-o-y in FY20 due to weaker project margins. While orderbook remains healthy, we forecast segment PBT to decline 56% y-o-y in FY21 due to a staggered return to normalcy for construction activities post circuit breaker.
- With lower profit assumptions from property segment, we lower our FY21-22F EPS by 22-24%.
Reiterate ADD and Target Price of S$1.00
- Nevertheless, given stronger earnings contributions from the geospatial and energy segments, we keep our Boustead Singapore's target price of S$1.00, still based on a 20% discount to our SOP valuation at S$1.25/share.
- Maintain ADD as we think Boustead Singapore's valuation is undemanding at 10.2x FY21F P/E. The stock is backed by S$163m of net cash (S$0.33/share) and stable dividend yield of 4.2%.
- See Boustead Share Price; Boustead Target Price; Boustead Analyst Reports; Boustead Dividend History; Boustead Announcements; Boustead Latest News.
- Re-rating catalysts include further updates on Boustead Project (SGX:AVM)’s potential REIT spin-off; downside risks include weaker margins. See also report: Boustead Projects - CGS-CIMB Research 2020-07-14: Significant Value To Be Unlocked.
ONG Khang Chuen CFA
CGS-CIMB Research
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Caleb PANG Huan Zhong
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-07-14
SGX Stock
Analyst Report
1.000
SAME
1.000
