CGS-CIMB Research analyst Ong Khang Chuen has maintained his “add” recommendation on Boustead Projects with a higher target price of $1.40 from $1.33 despite the company’s FY2021 results coming in below expectations.

See: Boustead Projects reports 972% surge in 2H21 earnings of $133.9 mil due to the Boustead Industrial Fund

For the FY2021 ended March, Boustead Projects reported a net profit of $131.7 million, which stood below Ong’s expectations at 95% of his FY2021 forecast.

Excluding a disposal gain of $134.8 million following the completion of its sale of 14 properties to the Boustead Industrial Fund (BIF), Boustead Projects recorded a net loss of $3.2 million due to the impact of Covid-19 on its engineering and construction (E&C) segment, which was formerly known as the company’s design-and-build segment.

The company’s total dividend of 15.4 cents for the FY2021, including the special dividend of 14.5 cents, represents a yield of 13.9%, says Ong.

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That said, the impact of Covid-19 still poses a drag onto Boustead Projects’ core business, which Ong expects to continue on the back of unprecedented cost increases. As such, he has forecasted a lower margin on Boustead Projects’ existing projects and has lowered his earnings per share (EPS) estimates for FY2022 to FY2023 by 36% to 55%.

Nevertheless, Ong views that the company’s current order book of $351 million should “support healthy operating levels” for FY2022, and that its strong net cash position of $296 million will help chart the company’s next leg of growth.

“Together with its network of strategic platforms and partnerships, we believe Boustead Projects will be able to accelerate its international expansion plans as its next leg of growth. A target market could be Vietnam, where Boustead Projects recently signed agreements to acquire a 49% stake of 16 ready-built factories in Bac Ninh Province. We expect more mergers and acquisitions to come,” he writes in a May 26 report.

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“Despite the share price rally y-t-d, Boustead Projects remains attractively valued, with net cash of 95 cents/share as of end-FY21 (86% of market cap), while owning a portfolio of industrial properties worth $700 million (mostly on joint venture arrangements where Boustead Projects holds 50% stakes) that can be potentially injected into BIF or other property trusts to further unlock value in future years,” he says.

Ong’s higher target price is now based on a 25% discount (previously 30%) to his revised net asset value (RNAV) estimate of $1.86 per share for the FY2022.

“Re-rating catalysts include stronger order wins or further asset injection into BIF; downside risks include further construction delays.”

As at 10.45am, shares in Boustead Projects are trading 2 cents higher or 1.7% up at a 52-week high of $1.21.