“Given Boustead Singapore’s strong net cash position, we believe the payout will be passed on to its shareholders. Assuming 50% of net cash proceeds from Boustead Project’s asset disposal are paid out as special dividends, we estimate special DPS of 7 cents (c.8% yield) for Boustead Singapore,” he writes in a March 17 research note.
In addition, Ong expects Boustead Singapore’s strong earnings momentum to continue into 2HFY2021, with the company to record core net profit of $24.2 million for the period, bringing full-year core net profit to $49.4 million, up 35% y-o-y.
The strong earnings are expected to come on the back of y-o-y PBT growth of 31% for the geospatial technologies segment to $38 million on the back of increased usage of smart-mapping technologies by government agencies for vaccine roll-outs and contact tracing. In addition, Ong forecasts PBTfrom the energy-related engineering segment to grow four-fold y-o-y to $32.9 million on its strong order book of $203 million as of 1HFY20201, while its property should all see a return to profitability as construction activities resume in Singapore.
The higher target price of $1.40 reflects the value-unlocking exercise, though Ong notes that FY2021 - FY2023 earnings per share (EPS forecast have been reduced by 0.4% - 0.6% due to lower rental income from investment properties post-disposal, we reduce our FY21-23F core EPS forecasts by 0.4%-6.0%.
“The stock is backed by $175 million of ex-Boustead Projects net cash (35 cents/share, or 39% of market cap) and stable dividend yield of 3.3%,” he adds.
Shares in Boustead Singapore closed 2.5 cents or 2.76% higher at 93 cents, while shares in Boustead Projects closed 3 cents or 3.09% higher at $1.00 on March 18.
