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.

Want our latest Singapore corporate news stories for FREE

Follow our Telegram, Facebook for the latest updates round the clock

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.


For more stories about where the money flows, click here for our Capital section


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.