Strong demand to drive growth

CGS-CIMB has kept its “add” call and target price of $1 on Boustead Singapore following FY2020 earnings that came in line with expectations. Its geospatial technology and energy–related engineering segments did well but somewhat offset by its property division, through 53% owned Boustead Projects.

The research house also has an “add” call on Boustead Projects but with a lower target price of 88 cents.

Unlike Boustead Projects, Boustead Singapore has managed to keep its FY2020 dividend per share at 3 cents.

The reason for the company’s strong performance in its geospatial technology segment was primarily due to a steadfast demand across Australia and Southeast Asia, which resulted in revenue and pretax profit growth of 12% and 9% y–o–y, respectively, in FY2020.

In a July 14 report, analysts Ong Khang Chuen and Caleb Pang writes: “Underpinned by government agencies’ increasing use of smart mapping technologies to combat the recent major crises, including Australia’s massive bushfires and global spread of Covid–19 (contact tracing, planning of emergency routes etc), we continue to expect a 7.5% pretax profit growth for the segment to $31.9 million in FY2021.”

As for the company’s energy–related engineering segment, pre tax profit for FY2020 surged six times y–o–y, despite the downturn in global crude oil prices. This is as Boustead executed on its strong order backlog.

“We see strong earnings visibility till end 1H2022, as the orderbook remained high at $279 million as of end FY2020 (end FY2019: $103 million), mainly made up of downstream oil and gas businesses (waste heat recovery units for LNG projects). We forecast an energy–related engineering segment to record a pretax profit growth of 61% y–o–y to $12.7 million in FY2021,” says Ong and Pang.

On the other hand, weaker project margins caused the company’s property segment to see a 23% y–o–y fall in pre tax profit. Although this segment’s orderbook remains healthy, the analysts have forecasted pre tax profit to further fall by 56% y–o–y in FY2021 due to a staggered return to normalcy for construction activities post circuit breaker.

“With lower profit assumptions from the property segment, we lower our FY2021–2022 EPS by 22%–24%,” says the analysts. —