Boustead Singapore

Kim Eng on 14 Feb 2012


Another slow quarter. Boustead experienced another slow quarter, reporting 3QFY Mar12 revenue of $95.3m (-25% YoY, +5% QoQ) and net profit of $5.5m (-58% YoY, -39% QoQ). The results were below our expectations, with 9MFY Mar12 net profit of $23.2m making up only 55% of our full-year forecast. We cut our FYMar12F-13F net profit forecasts by 6-19%, and consequently reduce our SOTP-based target price to $1.18 (from $1.32). The stock remains a Buy on valuation grounds.


Dragged down by late project start-ups. The underperformance was attributed to the late start-up of projects in the Engineering Services segment, which saw revenues decline by 34% YoY in the third quarter. The bright spot was its Geo-Spatial Technology segment which saw a 14% YoY increase in revenue. Boustead expects 4QFY Mar12 results to be significantly better due to flow-over revenue recognition, making up for the preceding slow quarters.


Orderbook still healthy but cautious outlook ahead. Boustead’s current outstanding orderbook stands at $300m, excluding committed sales of $93m in property assets. Although the company said that enquiry pipelines remain healthy, we are exercising caution as it did not report any significant contract wins in the last quarter, and the orderbook is now a little lower than the $335m level it was at one quarter ago.


Finally utilising part of its cash hoard. Boustead finally announced a proposed acquisition last month, to invest about $23.3m for an 8.6% stake in OM Holdings Limited, a manganese producer in Australia. It has been holding on to a huge amount of cash, and this move is a first step in making more efficient use of its capital. Net cash as at 3QFY Mar12 stood at $152.6m ($0.302 per share).


Maintain Buy on valuation grounds. Boustead’s valuations are still at depressed levels, with the current share price implying an ex-cash FY Mar13F PER of only 4.8x, coupled with an expected yield of 5.8%. Maintain Buy with a lowered SOTP-based target price of $1.18, after cutting FY Mar12F-13F net profit forecasts by 6-19%.