Boustead Projects - CGS-CIMB Research 2021-05-26: Charting The Next Leg Of Growth


Boustead Projects - Charting The Next Leg Of Growth

  • With the completion of its asset sale to Boustead Industrial Fund (BIF), Boustead Project reported a net profit of S$131.7m for FY21. Special dividend brings Boustead Project's FY21 total dividend to S$0.154.
  • Core business remains impacted by COVID-19, but with successful capital recycling, Boustead Project now has a strong war chest to chart its next leg of growth.
  • Boustead Project is attractively valued, with net cash of S$0.95 per share (86% of market cap), while holding stakes in properties worth S$700m. Reiterate ADD, S$1.40 target price.

Boustead Project's FY21 results largely supported by disposal gains

  • Boustead Project (SGX:AVM) reported a FY21 (Apr 2020 to Mar 2021) net profit of S$131.7m, below expectations at 95% of our FY21F forecast. Excluding a disposal gain of S$134.8m, post-completion of its sale of 14 properties to Boustead Industrial Fund (BIF) in Mar 21, Boustead Project recorded a FY21F core net loss of S$3.2m, as its design-and-build segment was heavily impacted by the COVID-19 pandemic.
  • In consideration of the successful value unlocking and capital recycling, Boustead Project proposed a special dividend of S$0.145 per share. Total FY21 dividend of S$0.154 represents a yield of 13.9%.

COVID-19 still a drag on core business

  • While activities in the construction industry have generally returned to ~75%-80% of pre-COVID-19 levels in 1QCY21, we expect Boustead Project to remain impacted by the unprecedented cost increases relating to the pandemic, and forecast a lower margin on existing projects. Our FY22-23F earnings per share forecast for Boustead Project is hence lowered by 36%-55%.
  • Nevertheless, we are pleased to note that Boustead Project managed to secure contract wins of S$178m in FY21 (FY20: S$93m) despite the COVID-19 disruptions, and its current orderbook of S$351m should support healthy operating levels for FY22F.

Strong balance sheet to chart the next leg of growth

  • With the capital recycling, Boustead Project has a strong net cash position of S$296m as of end-FY21F. Together with its network of strategic platforms and partnerships, we believe Boustead Project will be able to accelerate its international expansion plans as its next leg of growth. A target market could be Vietnam, where Boustead Project recently signed agreements to acquire a 49% stake of 16 ready-built factories in Bac Ninh Province.
  • We expect more M&As to come.

Reiterate ADD on Boustead Project with a higher target price of S$1.40

ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-05-26
SGX Stock Analyst Report ADD MAINTAIN ADD 1.40 UP 1.330