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The Three Numbers That Connect Boustead Singapore

Ser Jing - Boustead Singapore Engineers Higher Profit (pic)If you are looking for a company that has stood the test of time, then Boustead Singapore (SGX: F9D), which has been around since 1828, could be a prime candidate.

The engineer, which started life as a trading company, was founded around ten years after Sir Stamford Raffles landed on Singapore’s shores.

Boustead Singapore boasts one of the highest Returns on Equity on the Singapore market. At 26%, the return is more than three times higher than Singapore’s blue chips. The median RoE for the 30 companies that make up the Straits Times Index (SGX: ^STI) is around 8%.

The company’s exceptional return is the result of not one, not two but three financial levers being applied effectively. Its Net Income Margin of 15.8% means that the company delivers $15.80 of profit for every $100 of revenue generated. This is in line with the average for Singapore’s blue chips.

Boustead is also quite efficient. It generates S$0.87 for every dollar of asset employed in the business. Its efficiency compares well with small-cap engineer Dyna-Mac (SGX: NO4) but lags that of Hiap Seng Engineering (SGX: 510). The former has an Asset Turnover of 0.87, while the latter generated $1.70 for every dollar of asset last year.

The 186-year-old Boustead does employ leverage, though not excessively so. Its Leverage Ratio is an unremarkable 1.9.

By breaking down the Return on Equity for Boustead, it is easy to see how the engineer connects the dots. Its RoE of 26% is the product of a Net Income Margin of 15.8%; an above average Asset Turnover of 0.87 and a modest Leverage Ratio of 1.9.

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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 Director David Kuo doesn’t own shares in any companies mentioned.