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Two Important Announcements at Boustead Singapore

Last week, Boustead Singapore Limited (SGX:F9D) revealed a pair of contracts which it secured.The first one was a deal worth in excess of $20 million to design and build the Airbus Asia Training Centre. The award was from Airbus Asia Training Centre Pte. Ltd, a wholly-owned subsidiary of Airbus. A second deal consisted of three different contracts with a potential value of $137 million. The trio of contracts came from the food, logistics, and renewal energy areas.

Why is this critical for Boustead?

Firstly, the two deals increased the order book backlog for Boustead to $452 million. This increase is significant when compared to the $209 million in revenue that the Real Estate Solutions business segment (for Boustead) brought in for the financial year ended 31 March 2014 (FY 2014).

Secondly, the Real Estate Solutions business segment is also the largest revenue contributor for Boustead. It made up 41% of revenue for FY2014. On top of that, the business segment also made up 43% of its profit before tax in FY2014.

In a recent earnings briefing, Chief Executive Officer Wong Fong Fui shared that the Real Estate Solutions segment was becoming more crowded with competitors who were laying claim on design and build capabilities. In a response to this, the two deals demonstrated the company’s strategy to move to niche areas such as aerospace and renewable energy where there are less competitors.

This is probably the most important point as it could signal the way forward for Boustead in the coming years.

Foolish Take away

In a fitting end to the past week, Boustead launched the official sale of iBP @ Nusajaya, a 35% joint venture development at Iskandar, Malaysia. The company has been looking for Real Estate Solution projects overseas as well, and the developments in Iskandar represents one of its first tentative steps.

We can also look forward to the contribution from its partnership with the Abu Dhabi Investment council which has a potential investment pipeline worth over $600 million in Singapore.

Boustead closed at $1.76 on 14 October 2014. The shares has a price-to-earnings ratio of 12.9, and a dividend yield of 4%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.