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

BOUSTEAD SINGAPORE LIMITED (SGX:F9D)

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 (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).

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).

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.

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 as we expect Boustead Singapore's strong earnings momentum to sustain into 2H21F.
We raise our Boustead Singapore's FY21-23F EPS forecast by 7.1%-71.6% to reflect stronger profit assumptions from geospatial and energy segments. Our target price is raised to S$1.20, 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 10.5x FY22F P/E. The stock is backed by S$232m of net cash (S$0.48/share, or 61% of market cap) and stable dividend yield of 3.9%.
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’s potential REIT spin-off. See also report: Boustead Projects - CGS-CIMB Research 2020-11-17: One Step Closer To Value Unlocking.
Downside risks include weaker order wins for energy and property segments.

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