BOUSTEAD PROJECTS LIMITED (SGX:AVM)
Boustead Projects - Stepping Up Presence In Vietnam
- Boustead Project (SGX:AVM) inked an option agreement with KTG to acquire a 49% stake in a Vietnam industrial real estate fund (jointly set up) with seed assets worth US$141m.
- The deal signifies a step towards Boustead Project’s next leg of growth (international expansion) and plans to further grow its income-yielding leasehold portfolio.
- We keep our ADD call with a target price of S$1.40 for Boustead Project, based on 25% discount to RNAV.
Option agreement to acquire a 49% stake in Vietnam property fund
- Boustead Project announced this morning (2 Jun 2021) that it signed an option agreement with Khai Toan Joint Stock Company (KTG), a leading conglomerate in electrical appliances, building materials and industrial real estate in Vietnam.
- In essence, the agreement paves the way for Boustead Project to acquire a 49% interest in a Vietnam logistics and industrial real estate development fund (KBJSC), to be established jointly by both parties. Boustead Project will pay a fully-refundable option deposit of US$12.5m to KTG, and in return Boustead Project/KTG will be provided a call/put option for Boustead Project to purchase the above-mentioned stake. The option has a validity period of 18 months.
- The fund will have 13 initial seed assets – 10 will be injected by KTG; the rest by Boustead Project. The assets are located in mature industrial zones in Greater Hanoi and Greater Ho Chi Minh regions, with average occupancy above 95%. Gross asset value is ~US$141m, covering about 840k sq m of land area and about 550k sq m of gross leasable area.
- Post inception, the development fund intends to acquire other potential industrial real estate assets under an identified pipeline of targets, which would have the potential to double the land area and gross leasable area in the portfolio. We believe the fund will also work on greenfield development to further expand assets under management.
Signifies the next leg of growth
- The deal signifies a major step towards Boustead Project's next leg of growth post its capital recycling exercise earlier this year. We view this announcement positively, as it provides more clarity on how Boustead Project plans to utilise its significant cash holdings.
- We believe this partnership is synergistic – KTG offers strong development capabilities and local contacts; Boustead Project meanwhile can complement with its expertise in design-and-build, asset management and MNC contacts. The real estate fund can also generate good recurring income for the firm.
Reiterate ADD and ex-dividend Target price of S$1.40
- We leave our earnings estimates intact while awaiting more updates on this partnership. Boustead Project is attractively valued, with net cash of S$0.95/share at end-FY3/21 (80% of market cap), while owning a portfolio of industrial properties worth ~S$700m (mostly via JVs where Boustead Project holds ~50% stakes) that can be potentially injected into Boustead Industrial Fund to further unlock value.
- See
- Re-rating catalysts: more updates on Vietnam partnership or further asset injection into Boustead Industrial Fund.
- Downside risks: further construction delays.
ONG Khang Chuen CFA
CGS-CIMB Research
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https://www.cgs-cimb.com
2021-06-02
SGX Stock
Analyst Report
1.400
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1.400
