Ong Khang Chuen of CGS-CIMB Research has reiterated his " add" call on Boustead Singapore F9D 1.2% following its 1HFY2024 earnings that came in at " slightly" above expectations.

 

For the six months ended September, Boustead Singapore, with all-around growth from its business units, reported core PATMI of $26 million, up 90% y-o-y and up 44% over the preceding 2HFY2023.

 

The company' s energy engineering business reported revenue of $88 million, up 130% y-o-y its real estate business was up 45% y-o-y to $170 million and geospatial was up 23% y-o-y to $105 million.

 

Ong, citing the management, expects the company to maintain its strong order backlog to sustain revenue momentum in the current 2HFY2024.

 

He notes that the company is riding the favourable conditions in the global energy sector. For one, it has been awarded new engineering contracts and major order variations worth $110 million, which helped maintain its order book at $152 million as at end of 1HFY2024, versus $154 million as at end FY2023.

 

Boustead Singapore is in the midst of privatising its separately-listed unit Boustead Projects AVM 0.00% , with a revised offer of $1.18, up 24%.

 

" We see the offer as earnings accretive," says Ong, who expects the company to report earnings growth for the whole of FY2024.

 

Ong has kept his target price at $1.40, which is based on a sum-of-parts methodology.

 

Ong believes that at 7.7x FY2024 earnings now, Boustead Singapore is trading at an undemanding valuation, especially so given its significant net cash of 35 cents per share, equivalent to 42% of the company' s market cap.

Potential rerating catalysts, according to Ong, include further energy segment order wins and M& A execution. Downside risks, on the other hand, are weaker margins on cost escalation, and a weaker macro environment hurting order wins in its real estate segment.

 

BOUSTEAD Singapore : F9D +1.18% proposed an unconditional cash exit offer for its real estate unit Boustead Projects : AVM 0% at S$1.18 per share. This is 23.6 per cent higher than Boustead Projects&rsquo last-traded price of S$0.955 prior to its trading suspension.

 

It also represented a 24.2 per cent increase from the previous voluntary unconditional general offer of S$0.95 per share, which closed at 5.30 pm on Mar 27, 2023. 

 

The exit offer price is 20 times Boustead Projects&rsquo consolidated earnings per share for its last financial year.

 

It is, however, still below Boustead Projects&rsquo NAV per share of S$1.265 as at end-September 2022.

 

As in the previous offer, Ernst & Young Corporate Finance was appointed by Boustead Singapore as the independent financial adviser (IFA) for the exit offer. PrimePartners Corporate Finance remained Boustead Projects&rsquo IFA.

 

Boustead Singapore&rsquo s original offer for Boustead Projects was launched in February this year at S$0.90 per share.

 

This was later raised to a final offer price of S$0.95 apiece, which PrimePartners ruled as &ldquo not fair but reasonable&rdquo as the amount fell short of its estimated valuation range of between S$1.17 and S$1.38.

 

In March, the Securities Investors Association Singapore advised Boustead Projects shareholders to reject the offer unless the offer price was raised to a &ldquo fair and reasonable&rdquo amount.

 

A Sep 26 directive issued by the Singapore Exchange Regulation also called for the exit offer to be made at a &ldquo fair and reasonable&rdquo price.

 

On Tuesday (Nov 14), Boustead Singapore said its exit offer was made at the earliest practicable time after the expiry of its moratorium on Sep 27, 2023.

 

Boustead Singapore said it could not make a better offer earlier because the Singapore Code on Take-overs and Mergers prohibits a new offer in the six months following the close of an offer.

 

The company also said it wanted both its own and Boustead Projects&rsquo interim results and financial positions to be considered by both companies&rsquo respective independent financial advisers.

 

Boustead Projects reported a 45 per cent increase in revenue for the six months to Sep 30, 2023, to S$170.2 million.

 

Profit fell 9 per cent to S$7 million, however, due to a share of loss of associates and joint ventures of S$6.2 million. In H1 2022, Boustead Projects had booked a share of profit from associates and joint ventures.

 

This year&rsquo s losses were largely attributed to higher interest and operating expenses incurred for the opening of a mixed development at Bideford Road called Como Orchard, which the company said will &ldquo take time to reach a stabilised state&rdquo .

 

Boustead Singapore added that its independent directors &ldquo spent considerable time and effort during the moratorium period to weigh all possible delisting and privatisation options to achieve a positive outcome for all stakeholders&rdquo .

 

&ldquo They have a fiduciary duty to protect the interests of Boustead Singapore&rsquo s minority shareholders and had to ensure that any subsequent offer would be attractive to Boustead Projects&rsquo public minority shareholders, and yet not be prejudicial to the interests of Boustead Singapore and its minority shareholders.&rdquo

 

Boustead Singapore will hold an extraordinary general meeting before the end of 2023 to seek approval from its independent minority shareholders in acquiring Boustead Projects shares belonging to Boustead Singapore&rsquo s chairman and group chief executive, Wong Fong Fui, and his children. 

 

Wong and his children &ndash who collectively hold a 19.99 per cent stake as at the close of the previous offer &ndash have abstained from decision-making on both the previous offer and Boustead Singapore&rsquo s current exit offer due to material conflicts of interest.

 

Shareholdings of Boustead Singapore in Boustead Projects stood at 75.5 per cent as at the close of the previous offer.

 

The remaining 4.51 per cent equity in Boustead Projects was held by public shareholders who did not accept the previous offer.

 

As Boustead Projects did not meet the Singapore Exchange&rsquo s free float requirement of at least 10 per cent, the counter was suspended from trading effective 9 am on Mar 28, 2023.

 

BOUSTEAD Singapore : F9D +1.8% on Tuesday (Nov 14) reported 19 per cent higher net profit at S$26.9 million for the first half of FY2024 ended Sep 30, compared with S$22.6 million the previous year.

 

This came on the back of 49 per cent higher revenue at S$367.9 million, driven by significantly higher contributions from its energy engineering, real estate and geospatial divisions.

 

The group also attributed the net profit rise to 62 per cent higher interest income at S$8.6 million and an increased shareholding in Boustead Projects, after the voluntary unconditional cash offer closed in March.

 

Revenue and interest income growth was, however, offset by higher overhead expenses, income tax expenses and share of loss of associates and joint ventures, said the infrastructure-related engineering and technology group.

 

The results translated to earnings per share of S$0.056, up 19 per cent from S$0.047 in the previous H1 period.

 

The board declared an interim dividend of S$0.015 per share, unchanged from the year-ago period.

 

Its energy engineering division&rsquo s revenue was 130 per cent higher year on year at S$88.1 million. This was mainly due to the division&rsquo s stronger revenue recognition from a higher order backlog carried forward at the end of FY2023, compared with FY2022.

 

&ldquo The continuation of favourable conditions in the global energy sector also had a positive effect on the division&rsquo s activities,&rdquo said Boustead Singapore.

 

The real estate division, Boustead Projects, registered 45 per cent higher revenue on year at S$170.2 million. The geospatial division&rsquo s revenue was 23 per cent higher at S$104.7 million, with growth recorded across all key markets and an uplift from a landmark contract in Australia.

 

Boustead Singapore said its healthcare division, which has been undergoing restructuring, registered 8 per cent lower revenue at S$4.7 million.

 

While the group&rsquo s gross profit increased 42 per cent on year, overall gross margin declined slightly to 29 per cent, compared with 30 per cent in H1 FY2023.

 

The group&rsquo s net asset value per share increased to S$0.976 at the end of H1 FY2024, from S$0.949 at the end of FY2023. Its net cash position increased to S$379.4 million, representing S$0.795 net cash per share position.

 

Wong Fong Fui, chairman and group chief executive of Boustead Singapore, said: &ldquo Moving forward, we will continue to boost our business development efforts and prudently manage our costs amid the volatile global environment, taking a risk-managed approach in the pursuit of opportunities.&rdquo

 

He noted that given a strong net cash position, Boustead is ready to capture opportunities to ensure long-term value creation for shareholders.