CGS-CIMB Research analyst Ong Khang Chuen has retained his ‘add’ rating for Boustead Singapore with a higher target price of $1.40 from $1.20 previously on the completion of its 52.8%-owned subsidiary Boustead Project’s value-unlocking exercise.

The exercise saw the injection of 14 industrial properties into Boustead Industrial Fund (BIF), which Ong says unlocks significant value from Boustead Project’s leasehold portfolio. He anticipates special dividends per share (DPS) being declared by Boustead Projects in the upcoming FY2021 ending March results announcement. 

“Given Boustead Singapore’s strong net cash position, we believe the payout will be passed on to its shareholders. Assuming 50% of net cash proceeds from Boustead Project’s asset disposal are paid out as special dividends, we estimate special DPS of 7 cents (c.8% yield) for Boustead Singapore,” he writes in a March 17 research note.

In addition, Ong expects Boustead Singapore’s strong earnings momentum to continue into 2HFY2021, with the company to record core net profit of $24.2 million for the period, bringing full-year core net profit to $49.4 million, up 35% y-o-y. 

The strong earnings are expected to come on the back of y-o-y PBT growth of 31% for the geospatial technologies segment to $38 million on the back of increased usage of smart-mapping technologies by government agencies for vaccine roll-outs and contact tracing. In addition, Ong forecasts PBTfrom the energy-related engineering segment to grow four-fold y-o-y to $32.9 million on its strong order book of $203 million as of 1HFY20201, while its property should all see a return to profitability as construction activities resume in Singapore.

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The higher target price of $1.40 reflects the value-unlocking exercise, though Ong notes that FY2021 - FY2023 earnings per share (EPS forecast have been reduced by 0.4% - 0.6% due to lower rental income from investment properties post-disposal, we reduce our FY21-23F core EPS forecasts by 0.4%-6.0%. 

“The stock is backed by $175 million of ex-Boustead Projects net cash (35 cents/share, or 39% of market cap) and stable dividend yield of 3.3%,” he adds.

Shares in Boustead Singapore closed 2.5 cents or 2.76% higher at 93 cents, while shares in Boustead Projects closed 3 cents or 3.09% higher at $1.00 on March 18.