CGS-CIMB Research analyst Ong Khang Chuen has kept “add” on Boustead Singapore with an unchanged target price of $1.40 following the group’s record performance for the FY2021 ended March.

The target price, says Ong in a May 28 report, is still based on a 20% discount to its sum-of-the-parts (SOTP)-based valuation.

That said, the group’s net profit of $113.1 million stood slightly below Ong’s expectations at 96% of his full-year earnings estimates.

See: Boustead Singapore reports record FY21 earnings of $113.1 mil; record annual dividend of 8 cents per share

The lower-than-expected figure was due to the underperformance of Boustead Singapore’s subsidiary, Boustead Projects, while the group’s other business segments stood in line with expectations.

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Without the one-off disposal gain, Boustead’s core net profit for the FY2021 stood at $44.6 million.

Profit before tax for Boustead’s geospatial segment grew 37% y-o-y to $40.7 million in the FY2021, “much stronger” than its typical high-single-digit annual growth rate.

To Ong, he expects the group’s geospatial division to continue performing well due to government agencies’ increasing use of smart mapping technologies to combat the Covid-19 pandemic.

The group’s outlook on its energy segment is, however, dependent on its order replenishment in the FY2022.

The energy segment currently has an order backlog of $96 million which is moderately healthy, but “significantly lower” than that of FY2020’s $279 million.

“Hence the outlook beyond 2HFY2022 is largely dependent on order replenishment in FY2022,” writes Ong.

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While Ong deems Boustead Singapore’s valuation as “attractive”, he has reduced his earnings per share (EPS) estimates for the FY2022 to FY2023 by 0.4% to 1.4% to account for lower earnings assumption for Boustead Projects due to the Covid-19 disruptions on Boustead Projects’ engineering and construction (E&C) segment formerly known as the design-and-build segment.

“Stripping out its stake in Boustead Projects ($182 million based on market value) and net cash of S$177 million, investors are essentially paying six times price-to-earnings (P/E) for the geospatial segment, which is a high-margin, cash generating business that offers structural growth riding on the smart-city trend,” he writes.

“Potential re-rating catalysts include successful mergers and acquisitions (M&A) execution by Boustead Projects to accelerate international expansion and order wins in its energy segment; downside risks include weaker property segment margins.”

Shares in Boustead Singapore closed 5 cents higher or 4.3% up at $1.22 on May 31, or 1.25 times P/B, according to CGS-CIMB’s estimates.