Boustead Singapore

Kim Eng on 13 Apr

Four new orders in one month. Boustead Singapore experienced a surge in order win momentum with four new contracts secured in the month of March alone. This was a happy ending to the drought that started after the last order in November last year. Excluding a designbuild- lease contract which is not accounted for in orderbook figures, the total value of the new contracts came up to $89m. As at end-March, Boustead’s outstanding orderbook stood at $388m of which $381m worth of contracts were secured in FY Mar12. This is higher than our initial forecast of $340m.

One-time gains to bolster fourth-quarter results. After three disappointing quarters due to late start-up of projects, we expect Boustead to regain some lost ground in 4QFY Mar12. While revenue recognition of the main projects may still be slow, the fourth quarter should receive a fillip from net gains of $8.6m from the recent sale of 17 strata title units on the sixth and seventh floors of Boustead House and $2.2m from the sale of an aerospace facility to Hawker Pacific.

Industrial Real-estate to lead growth. The Industrial Real-estate segment secured $243m worth of contracts in FY Mar12. We estimate the outstanding unrecognised revenue for this segment at $260m, most of which would be recognised in FY Mar13. With a surge of contracts flowing in, this segment could be the key growth engine in FY Mar13.

Bright outlook for Energy-related Engineering segment. We believe that higher capex in the oil & gas sector on the back of sustained high energy demand and oil prices would also spawn more contract opportunities for this particular business segment in FY Mar13F.

Depressed valuation unjustified, reiterate Buy with TP of $1.14. Boustead’s current ex-cash valuation at 4.9x FY Mar13F PER seems unjustified to us. After all, healthy enquiry pipelines may translate into more contract wins down the road. With a net cash position of $153m as at 3QFY Mar12 and expected dividend yield of 5.7%, we reiterate our Buy call on the stock with a SOTP-based target price of $1.14.