Wednesday, October 23, 2013

Boustead Singapore - Crystallizing the embedded value within (AM)

Boustead Singapore -
LAST CLOSE: S$1.385
FAIR VALUE: S$1.91
Crystallizing the embedded value within

We initiate coverage on Boustead with a BUY recommendation and a target price of S$1.91. Boustead is a progressive global Infrastructure‐Related Engineering Services and Geo‐Spatial Technology Group listed on the Singapore Exchange. Boustead’s Engineering services include Energy‐Related Engineering, Water & Wastewater Engineering and Real Estate Solutions.


Book value not reflective of true underlying market value
Boustead’s industrial leasehold properties are currently carried on its books at cost, which stands at approx. S$105.6mil. This is substantially lower than our revalued net asset value of S$238.2mil. A REIT listing could potentially catalyze the realization of the hidden value and trigger its share price outperformance.

Building the recurring income stream
Boustead’s Geospa tial division has traditionally been a cash cow, consistently generating stable recurring income between 2010‐2013. We highlight that Boustead’s emphasis on expanding its design‐build‐lease portiolio would further strengthen its recurring income stream. We forecast recurring revenue from these 2 segments to encompass 59% of Group’s profit before tax in FY14.

Capturing the high growth potential in O&G
How often do you see a company that has businesses in today’s high growth sectors like Subsea, LNG and Floating Production Storage and Offloading? With a mixture of products that serve these attractive markets, we believe Boustead’s engineering division prospects are extremely bright. Puting it all together. Relying on growth of its four distinct divisions, Boustead’s fortunes are not solely reliant on the cycle of just one division, and this will continue to leave it well‐positioned to ride out economic uncertainties or downturns.

Initiate BUY with FV S$1.91
We derive a FV of S$1.91 from our sum‐of‐the‐parts (SOTP) valuation, after incorporating a 20% conglomerate discount. Our SOTP valuation of S$2.39 includes a DCF‐derived valuation of S$1.05 per share for the Geo‐Spatial technology segment, which reflects the recurring cash‐generative ability and stable growth nature of the segment.


Source/Extract/Excerpts/来源/转贴/摘录: AmFraser-Research,
Publish date: 22/10/13

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