Boustead Singapore - CGS-CIMB Research 2020-11-17: Firing On All Cylinders


Boustead Singapore - Firing On All Cylinders

  • Boustead Singapore’s 1HFY21 core net profit (+114% y-o-y) was above expectations, led by solid performance in energy and geospatial segments.
  • We expect strong earnings momentum to sustain into 2H21F, driven by stronger energy segment contribution and recovery from property segment.
  • Reiterate ADD on Boustead Singapore with higher SOP-based target price of S$1.20. Valuations are undemanding at ex-cash FY22F P/E of 4.0x and dividend yield of 3.9%.

Boustead Singapore's strong 1HFY21 results

  • Boustead Singapore (SGX:F9D) announced 1HFY21 (Apr to Sep 2020) core net profit of S$25.1m (+114% y-o-y), above expectations at 82% of our previous FY21F forecast. See Boustead Singapore's announcements.
  • Key surprises were stronger-than-expected growth in energy-engineering (five-fold y-o-y jump in segment PBT) and geospatial (+77% y-o-y), which offset the weaker property segment (operated by subsidiary Boustead Projects).

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 5x y-o-y in 1H21 to S$16.4m. Order book remained high at S$203m as of end-1H21, and we see strong earnings visibility till end-1HFY22F.
  • We understand that revenue recognition for these orders is slightly back loaded, but conservatively forecast segment PBT of S$16.5m in 2H21F (+266% y-o-y).

Geospatial technology: Strong tailwinds

  • New enterprise agreements and firm demand for geospatial technology in Australia and Singapore drove segment revenue/PBT growth of 41%/77% y-o-y.
  • Underpinned by government agencies’ increasing use of smart mapping technologies to combat COVID-19, we forecast segment PBT growth of 31% y-o-y to S$39m in FY21F, much stronger than the segment’s typical high-single-digit growth rate annually.

Property segment: Recovering from COVID-19 disruptions

  • While Boustead Singapore's property segment was hit hard by COVID-19 related measures in 1H21, we expect a return to profitability in 2H on the back of a resumption of construction activities, and strong leasing activities.
  • With high occupancy rates and portfolio valuation reaching c.S$1.2bn by end-FY21F, we think the time is ripe for Boustead Project (SGX:AVM) to unlock value from its leasehold properties.

Reiterate ADD with a higher target price of S$1.20

ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-11-17
SGX Stock Analyst Report ADD MAINTAIN ADD 1.20 UP 1.000