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Boustead Singapore Limited’s Latest Earnings: A Mixed Bag

Boustead Singapore Limited (SGX: F9D) reported in its third quarter earnings report yesterday. The reporting period was for 1 October 2014 to 31 December 2014.

Boustead is a technology group focused on geo-spatial solutions and infrastructure-related engineering. Within this general classification, there are four major divisions. These are Real Estate Solutions; Energy-Related Engineering; Geo-spatial Technology; and Water & Wastewater Engineering.

You can learn more about the company here, and catch up with the last year’s report here.

Financial highlights

Here’s a rundown on the financial figures:

  1. For the third quarter, overall revenue for Boustead leap 37% on a year on year comparison, coming in at $177 million.
  2. Profit for the period though, fell by a hefty 36% to $11.8 million. According to management, the majority of the fall in profit was due to a large but “unusually low margin” real estate project.
  3. Earnings per share (EPS) also fell 36% from 3.6 cents in the third quarter last year to 2.3 cents in the past quarter. The technology group made 8.8 cents in EPS for the first nine months of the financial year, roughly unchanged from last year.
  4. For the third quarter, cash-flow from operations was a healthy $34.1 million with capital expenditure clocking in at $485,000. The low capex gave Boustead a positive free cash flow of more than $33 million. For the first nine months of the financial year, Boustead had positive free cash flow exceeding $56 million.
  5. As of 31 December 2014, the company had $291 million in cash and equivalents and borrowings of $159.1 million in borrowings.

In all, Boustead suffered from a particular setback from a large real estate project, as well as general malaise from the oil and gas industry. Chief Executive Officer (CEO) Wong Fong Fui had highlighted the competitive real estate environment before – where customers have come to demand “rock bottom” price.

The twin challenges chose to rear its ugly head in this quarter, perhaps to remind investors of the potential downsides.

Operational Highlights

The real estate solutions business saw its quarterly revenue soar by 95% year on year to $99.3 million. Despite almost doubling in revenue, profit before tax for this segment fell a whopping 61% compared to last year’s quarter – and only made up $4.9 million.

Next up, the Geo-Spatial Technology segment had steady growth in the tune of 14% growth compared to last year. The segment contributed $30.8 million in revenue for the quarter. Profit before tax for this segment grew at a 3% rate compared to the last year, and ended with $7.1 million for the third quarter.

On the flipside, energy related engineering (which now includes water and waste water engineering) experienced a 8% fall in quarterly revenue to $47.8 million. Surprisingly, profit before tax for this segment increased by 61% to $7.4 million for this quarter.

The group secured approximately $312 million in new contracts in the first nine months of this financial year which began on 1 April 2014 (FY 2015).

CEO Wong add the following commentary on the future outlook :

We expect to deliver a reasonable profit for FY 2015. Nonetheless, the current business climate remains extremely challenging for corporations operating in the industrial real estate and global oil & gas markets. We have in our favour a healthy balance sheet and net cash position of about S$133 million which will enable us to ride out this cycle and hopefully, capture some interesting opportunities along the way.

Foolish readers may also want to keep in mind that Boustead proposed a demerger of the Real Estate Solutions business to a new entity named Boustead Projects.

Beyond that, Boustead is also awaiting the verdict of its legal and financial exposure in Libya on the Al Marj project where the judge is expected to deliver his ruling in the first half of 2015. According to an announcement made on 28 February 2011, the group had a financial exposure of between $15.5 million to $39.6 million.

Foolish summary

At its closing price yesterday of $1.81, Boustead traded at around 13 times trailing earnings with a trailing twelve months dividend yield of 3.8%.

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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.