Boustead Singapore - FY23 A Year Of Two Halves
- Boustead Singapore (SGX:F9D)’s 1HFY23 core net profit of S$13.6m (-28% y-o-y) was in line with expectations at 39% of our FY22F (we expect a stronger 2H). 1HFY23 reported net profit, which includes currency exchange gains from FX hedging, grew 6% y-o-y to S$22.6m.
- Boustead Singapore declared an interim dividend of S$0.015. See Boustead's Dividend History.
- Aside from the major contract win (~S$300m) in the real estate segment, Boustead Singapore’s energy engineering segment also saw strong order momentum recovery in 1HFY23, having secured more than double the value of contracts won in FY22. Benefiting from the demand surge for global energy security, we expect further order wins in 2HFY23F.
- Order backlog grew to a healthy level of S$558m by end-Sep (end-Mar: S$274m), we expect this to underpin earnings recovery starting 2HFY23F. FY24F should be even stronger as that is when much of the revenue recognition for these contracts will occur.
- Geospatial segment’s PBT fell 3% y-o-y in 1HFY23 mainly due to FX headwinds – it bills customers in local currencies while key costs are paid in US$. Boustead Singapore said its revenue continued to grow (in constant currency terms) in Southeast Asia in 1HFY23 and sees firm demand for geospatial technology and smart mapping capabilities across the region riding on structural tailwinds.
- Aside from growing sales of Esri’s software products (under distribution agreement), Boustead Singapore is also actively increasing the share of revenue from Esri-aligned services (independent enhanced offerings), leveraging on the in-depth implementation expertise of its regional teams. We expect PBT to remain stable in 2H.
- We believe 1HFY23 is a fundamental inflection point and expect earnings recovery for Boustead Singapore starting 2HFY23F riding on its strong order backlog. We raise our FY23-25F EPS by 0.8-6.7% on stronger order win assumptions, which lifts our target price to S$1.35, still based on a 20% discount to its SOP-based valuation.
- Boustead Singapore's valuation remains attractive — stripping out its stake in Boustead Project (SGX:AVM) (S$130m based on market value) and net cash of S$170m, investors are essentially paying 2.5x CY23F P/E for the geospatial segment (high-margin, cash generating business that offers structural growth), while getting the energy and healthcare segments for free.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2022-11-25 2022-11-25
Previous report by CGS-CIMB:
2022-06-08 Boustead Singapore - Look Forward To A Better FY23.