Engineering services outfit Boustead Singapore (SGX: F9D), at a market value of around S$834m, is a small-cap gem in our local share market. Why do I say so? That’s because as of yesterday’s close at S$1.62 per share, Boustead’s shares have gained 810% since the start of 2003, according to S&P Capital IQ, and that’s just capital gains alone. If we tack on reinvested dividends, long-term investors in Boustead are looking at four digit returns of 1,267%. Considering that the broader market in Singapore, as represented by the Straits Times Index (SGX: ^STI), only managed to gain 129%…
Engineering services outfit Boustead Singapore (SGX: F9D), at a market value of around S$834m, is a small-cap gem in our local share market.
Why do I say so? That’s because as of yesterday’s close at S$1.62 per share, Boustead’s shares have gained 810% since the start of 2003, according to S&P Capital IQ, and that’s just capital gains alone.
If we tack on reinvested dividends, long-term investors in Boustead are looking at four digit returns of 1,267%. Considering that the broader market in Singapore, as represented by the Straits Times Index (SGX: ^STI), only managed to gain 129% from 1,336 points to 3,059 points in the same period, and we can see why Boustead’s a gem in terms of past market returns.
Given the massive market-outperformance the company has had so far, it might be worthwhile for investors to learn more about it. And fortunately for us investors, Boustead recently prepared an informative presentation for its Retail Investor Day to inform the public about all that it does.
Here are some important facts I’ve picked up about Boustead’s operations.
1) Boustead’s businesses
It’s easy to describe Boustead as an ‘infrastructure-related engineering services and geo-spatial technology provider’. But… what exactly do these terms mean?
The company has provided a lot more colour on this. Turns out, they have four divisions: Industrial real estate solutions; Energy-related engineering; Geo-Spatial technology; and Water & wastewater engineering. Here’s how much each segment accounted for in Boustead’s annual revenue for its last completed financial year:
% of revenue for financial year 2013
Industrial real estate solutions
Water & wastewater engineering
Source: Boustead Singapore Retail Investor Day presentation
2) Industrial real estate solutions division
For the first division, Boustead’s really all about using their engineering expertise to construct and develop industrial parks and facilities. It currently operates under two models: design-and-build, as well as design-build-and-lease.
Some of the industrial facilities that are under Boustead’s portfolio include the Airport Logistics Park of Singapore, Boustead Industrial Park, Changi International LogisPark, and Seletar Aerospace Park. With a multinational clientele list that includes huge companies like IBM and P&G, the division has a track record of executing more than 125 projects worth more than S$2.2b in total in Singapore, Vietnam, Malaysia and China.
3) Energy-related engineering division
In the Energy-related engineering division, we see Boustead providing engineering services mainly to both the upstream (the exploration and production of crude oil) and downstream oil & gas industry (the refining and processing of crude oil into various products, such as petrol, petrochemicals, and asphalt).
The upstream oil & gas sector makes up 15-20% of the division’s revenue and it is where Boustead is a “regional specialist” for electronic systems such as well head control systems; hydraulic power units; emergency shutdown systems; and fire & gas detection systems, among others.
With the downstream oil & gas sector, which makes up 75-80% of the division’s revenue, Boustead is a “global specialist” for direct-fired process heater systems and waste heat recovery units. The company provides its engineering services for the downstream oil & gas industry through its subsidiary Boustead International Heaters and it has installed more than 2000 process heater systems around the world.
All told, the Energy-related engineering division has executed more than 270 projects worth more than S$1.2b in at least 50 different countries. It has served many different oil & gas players of various sizes and that includes the giants like ExxonMobil and Chevron.
4) Water & wastewater engineering division
Coming to the Water & wastewater engineering division, it is where Boustead is a “leading global specialist” in water and wastewater engineering and is Singapore’s “largest ion exchange specialist” in the energy sector.
The division has worked with companies from many different sectors and that includes oil & gas; power generation; electronics manufacturing; food & beverage; and tourism, among others.
Some of the local projects Boustead has worked on include the Senoko Power Seawater Desalination Plant, Singapore’s first seawater desalination plant, and the Tembusu Multi-Utilities Complex Plants.
5) Geo-spatial Technology division
Finally, we have the Geo-spatial technology division. Here, Boustead provides geographic information systems (GIS) and location intelligence solutions from privately-owned American company ESRI through its majority-owned subsidiaries Esri Australia (88% ownership) and Esri South Asia (88% ownership).
The subsidiaries, in which ESRI has the rest of the ownership, has exclusive distribution of the GIS and location intelligence solutions technology in Australia, Singapore, Malaysia, Indonesia, Bangladesh, Brunei, and Timor-Leste.
According to Boustead, there’s an established client base of more than 13,000 organisations, from the public and private sectors, for the geo-spatial technology, which has 40% of global market share.
It’s hard to describe accurately what the technology is, but think of it as a system where users can input various kinds of data into a digital map, which can then be layered on to each other in myriad combinations to form new kinds of three-dimensional maps for better information processing and planning.
Boustead’s Esri subsidiaries are involved with software sales, professional services, training, and after-sales maintenance services. Some of those activities help provide recurring revenue – currently at 45% of overall sales – for the division.
The division has grown steadily over the years, clocking 11 years of consecutive top-line growth.
Foolish Bottom Line
Useful information about understanding a company’s various businesses can sometimes be hard to find. But there are also times when the company in question lends investors a helping hand with presentations and factsheets. Make use of those resources to know your companies a little better.
Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool's free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.
The Motley Fool's purpose is to help the world invest, better. Like us on Facebook to keep up-to-date with our latest news and articles.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.