Boustead Singapore - CGS-CIMB Research 2021-03-17: Set For Another Good Year

BOUSTEAD SINGAPORE LIMITED (SGX:F9D)

Boustead Singapore - Set For Another Good Year

Completion of Boustead Project’s (52.8%-owned subsidiary) value unlocking exercise could translate into special dividend being declared by Boustead Singapore, in our view.
Strong earnings momentum to continue in 2HFY21. Excluding disposal gains, we forecast FY21F core net profit of S$49.4m (+35% y-o-y).
Reiterate ADD on Boustead Singapore with higher target price of S$1.40.

With the completion of Boustead Project (SGX:AVM)’s (Boustead Singapore (SGX:F9D)’s 52.8%-owned subsidiary) injection of 14 industrial properties into Boustead Industrial Fund (BIF) on 4 Mar, significant value of Boustead Project’s leasehold portfolio has been unlocked, in our view. Refer to our first take note: Boustead Projects - CGS-CIMB Research 2021-01-04: A Major Step To Unlocking Value.
We see high possibility of special dividends being declared by Boustead Project in the upcoming FY21 (Apr 2020 to Mar 2021) results announcement. Given Boustead Singapore’s strong net cash position, we believe the payout will be passed on to its shareholders.
Assuming 50% of net cash proceeds from Boustead Project’s asset disposal are paid out as special dividends, we estimate special dividend of S$0.07 per share (~8% yield) for Boustead Singapore.

Excluding the disposal gains, we forecast Boustead Singapore to record core net profit of S$24.2m in 2HFY21 (Oct 2020 to Mar 2021), bringing full-year core net profit to S$49.4m (+35% y-o-y).
- Underpinned by government agencies’ increasing use of smart mapping technologies to combat COVID-19 (vaccination roll-out, contact tracing, etc.), we forecast geospatial technologies segment PBT to grow 31% y-o-y to S$38m in FY21F.
- We forecast energy-related engineering segment to see PBT grow four-fold y-o-y to S$32.9m in FY21F, leveraging its strong order book of S$203m (as of end-1H21).
- Meanwhile, property segment should also return to profitability on the back of resumption of construction activities in Singapore, and strong leasing activities.

Reiterate ADD on Boustead Singapore. With the fruition of the value-unlocking exercise, our SOP-based target price for Boustead Singapore is raised to S$1.40 accordingly. Nevertheless, given the lower rental income from investment properties post disposal, we reduce our FY21-23F core earnings per share forecasts by 0.4%-6.0%.
Boustead Singapore is backed by S$175m of ex-Boustead Project net cash (S$0.35 per share, or 39% of market cap) and stable dividend yield of 3.3%.
See Boustead Share Price; Boustead Target Price; Boustead Analyst Reports; Boustead Dividend History; Boustead Announcements; Boustead Latest News.
Potential re-rating catalysts include strong 2HFY21 results and special dividend announcement.
Downside risks include weaker order wins for energy and property segments.

ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-03-17

SGX Stock Analyst Report ADD MAINTAIN ADD 1.40 UP 1.200