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Boustead’s Green Foray

SolarPanelMany forms of energy that we have are from non-renewable energy sources, such as coal. This means that the supply is gone once it has been consumed and cannot be replaced.

Finding alternative energy sources will decrease our dependency on fossil fuels and other non-renewable energy sources. Alternative energy sources are also better for the environment. Examples of renewable energy includes solar, wind, hydro, geothermal and biofuel.

Let’s look at a business listed in the Singapore Exchange that is involved in the renewable energy sector.

Boustead Singapore Limited (SGX: F9D) is a worldwide infrastructure-related engineering services and geo-spatial technology group.

Boustead Maxitherm Energy, an engineering division of Boustead, is the company involved in renewable energy. It is able to convert solid waste into energy by utilising cost-effective processes. Regionally, the company has supplied mini-power plants and solid waste energy recovery plants to its industrial and municipal clients.

On 15 March 2013, Boustead announced that it entered into a joint venture with Kinnarii Power Assets Pte Ltd to develop utility-scale solar photovoltaic projects in Japan. The rationale for the investment is that it provides excellent opportunity for Boustead to expand its expertise in renewable energy projects.

Boustead’s revenue from 2004 to 2013 increased at a compound rate of 9.5%. Its net profits increased at 22.3% over the same period.

The gross profit margin and net profit margin were at 34.6% and 15.9% respectively for FY 2013. Its Return on Equity (ROE) was at 27%. Boustead carried a total debt of $34 million. It has $224 million in cash and cash equivalents.

The company generates copious amounts of free cash flow. The average free cash flow per year over the past nine years $46 million. This has allowed Boustead to be a consistent dividend payer.

The latest payout for 2013 was 5 cents per share gross dividends and 2 cents per share special dividends for a total of 7 cents dividends per share. This translates to a dividend yield of 5.1%. Stripping away the special dividends, the dividend yield stands at 3.7%.

Boustead is up 14% when compared to the Straits Times Index (SGX: ^STI) over the past five years, from 2008 to 2013.

Foolish Bottomline

World Wildlife Fund predicts that by 2050, we could get all the energy we need from renewable sources. This will help to eradicate most of the problems of climate change and dwindling fossil fuel resources.

Boustead may be able to ride on this growth story by making more inroads in the solar and biofuel sector. Furthermore, there are still bountiful opportunities in the wind, hydro and geothermal sectors. With an astute management and huge cash hoard, Boustead may be able to grab some opportunities by the bull’s horns when it arrives.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P owns shares in Boustead.