SINGAPORE (Jan 16): UOB Kay Hian is initiating coverage on infrastructure-related engineering and technology group Boustead Singapore with a “buy” recommendation and a target price of 92 cents.

The target price represents a potential upside of almost 18% to its last closing price of 78 cents on Jan 15.

“The company offers reliable prospects from its geospatial segment, which rides on sustainable industry tailwinds through the proliferation of location-based data,” says lead analyst Lucas Teng in a Jan 16 report.

Boustead Singapore is the exclusive distributor for Esri’s world-leading ArcGIS technology to major markets across Australia and parts of Southeast Asia.

Recognised as the industry leader, Esri accounts for more than 45% of the worldwide geographic information system market.

“We opine that the industry offers sustainable prospects as its technology creates digital infrastructure solutions for smart nations in their planning and management of key infrastructure and resources, a rising trend along with location-based data,” Teng says.

From FY2015 to FY2019, the group’s geospatial segment saw revenue growth at a CAGR of 2%. The segment now contributes to around a quarter of the group’s total revenue.

“For the geospatial segment, we are expecting a modest single-digit growth rate in the light of favourable industry trends,” Teng says. “Overall, we are projecting a core net profit CAGR of 5.2% for FY19-22F.”

Meanwhile, the analyst also sees bright spots for Boustead Singapore in its real estate and energy engineering segments.

“We estimate revenue CAGR of 8.2% for FY19-22 with the gradual recognition of order book contracts from both the real estate and energy engineering segments,” he says.

Teng notes that Boustead Singapore’s real estate segment saw revenue grow 68% in 1HFY20. And he reckons the “robust growth” is set to continue as the group’s large-scale projects -- including the $242 million JTC Multi-Store Recycling Facility and the Razer Southeast Asia Headquarters -- are progressively completed.

At the same time, Teng highlights that its energy engineering segment has raked in order wins of $161 million year-to-date in FY2020. As of 2QFY2020, its order backlog stood at a five-year high of $209 million.

“Its energy engineering segment offers a steady foundation for recovery given its high orderbook,” Teng says.

As at 4.30pm, shares in Boustead Singapore are trading 1.5 cents higher, or up 1.9%, at 79.5 cents.

According to UOB Kay Hian valuations, the stock is trading at estimated price-to-earnings of 14.1 times and dividend yield of 3.8% for FY2020F.