Boustead Singapore -
LAST CLOSE: S$1.44
FAIR VALUE: S$1.91
Breaking new grounds in Iskandar Malaysia
Boustead enters into JV for developments in Iskandar Malaysia. Boustead announced that BP Lands, a wholly-owned subsidiary of Boustead Projects (wholly‐owned subsidiary of Boustead), has entered into a Shareholders Agreement with Tat Hong International Pte Ltd, AME Land Sdn Bhd and L&M Ground Engineering Sdn Bhd to jointly undertake mixed property development in Iskandar Malaysia through the JV company Tat Hong Industrial Properties Sdn Bhd.
The JV company intends to develop six parcels of vacant industrial land in Nusajaya, Iskandar Malaysia’s Flagship Zone B.
BP Lands to own 35% shareholding in JV company
For the purposes of making the payments for the land acquisition and other costs in relation to the operation of the JV Company, the JV Partners will advance shareholders’ loans according to the shareholding proportions of the JV Partners in the JV Company (see Fig 2). The initial cash consideration of RM3.5 million (~ S$1.37 million) for BP Land’s subscription of new shares in the paid‐up capital of the JV Company will be funded internally.
A positive development
We reiterate our positive view on Boustead Projects’ early move to diversify its presence beyond Singapore. By partnering Tat Hong International, AME as well as L&M, that collectively boasts strong construction and engineering expertise, Boustead can enjoy synergistic benefits in terms of cost savings and shared expertise. Moreover, we note that its JV partners are well‐versed with the local operating conditions in Malaysia, which should mitigate execution risks for Boustead.
We understand that the joint venture is still at its preliminary stage
As such, details on the expected timeframe and planned capital expenditures relating to the development of the six parcels of industrial land in Iskandar Malaysia have not yet been finalized. Nonetheless, we note that Boustead has an existing cash balance of S$242mil, and this would provide it with sufficient financial flexibility to support its expansion plans. Maintain BUY on FV S$1.91.
Publish date: 28/10/13