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Latest Earnings From Boustead Singapore Limited

Last Friday evening, Boustead Singapore Limited  (SGX: F9D) released its financial results for its fiscal third-quarter (the three months ended 31 December 2015).

Boustead Singapore provides 1) engineering services to the oil & gas sector; 2) geo-spatial technologies for commercial entities and government bodies; and 3) real estate solutions for industrial and commercial properties. The last business is housed under the listed company, Boustead Projects Ltd (SGX: AVM). Boustead Projects was spun-off from Boustead Singapore last April.

With the above as a background, let’s take a look at Boustead Singapore’s latest quarterly results.

Financial highlights

  1. Revenue for the reporting quarter tumbled 20% year-on-year to S$142.3 million on the back of broad-base revenue declines from the various business divisions.
  2. Quarterly net profit came in at S$7.5 million, a huge decline of 36% from a year ago. If the net profit were adjusted to reflect the spin-off of Boustead Projects (during the spin-off, 48.8% of Boustead Projects’ shares were distributed to shareholders of Boustead Singapore), the decline would have been lesser at 29%.
  3. Consequently, earnings per share for the reporting quarter was at 1.4 Singapore cents, down 39% from the 2.3 cents seen a year ago.
  4. As of 31 December 2015, the firm had S$231 million in cash and equivalents, with S$104 million in total debt. This is largely unchanged from a year ago when the cash balance was S$292 million but total debt was at $160 million.
  5. Boustead Singapore’s current ratio stood at 2.03 as of 31 December 2015, which looks strong to me. You can click here to learn more about the firm’s balance sheet strength.
  6. Cash flow from operations and capital expenditures for the reporting quarter came in at S$2.2 million and S$0.4 million respectively. This gave Boustead Singapore free cash flow of S$1.8 million. A year ago, the company had generated significantly higher free cash flow of S$33.7 million (S$34.2 million in cash flow from operations and S$0.5 million in capital expenditures). Increase in trade receivables for the reporting quarter had been a big reason for the lower cash flow from operations.

Business highlights

A weak business environment in the oil and gas sector had led to a 35% drop in revenue to S$31 million at Boustead Singapore’s Energy-Related Engineering Division. Crude oil prices, which plummeted from a high of around US$110 per barrel in mid-2014 to approximately US$30 now, “continued to dampen the appetite of global oil & gas corporations to undertake sizeable capital expenditures and investments.”

At Boustead Projects (the Real Estate Solutions Division), revenue tumbled 14% year-on-year to S$85.6 million, mainly due to the division’s design-and-build revenue decreasing 17% compared to a year ago. Leasing revenue increased 31% year-on-year, due to additional rental income contributed by a larger industrial leasehold portfolio. But, as you can tell, this failed to lift the overall revenue at the division.

Revenue at the Geo-Spatial Technology Division came in at S$25.7 million, down 17% year-on-year despite strong demand for geo-spatial technology services across Australia and South East Asia (the division’s main geographical markets). This was largely due to the Australian dollar’s significant depreciation against the Singapore dollar and US dollar.

Additionally, Boustead Singapore’s trade receivables increased by 35% from S$107 million at end-2014 to S$144 million at end-2015 despite falling revenue. Growth in trade receivables without commensurate increases in revenue can be a sign of potential problems ahead. That’s especially so given the challenging macro environment.

Amidst the gloom, there’s a bright spot: Boustead Singapore commented in the earnings release that “despite the significant challenges, all three operating divisions remained profitable.”

Outlook ahead

Boustead Singapore ended its reporting quarter with an order book backlog of S$343 million, effectively unchanged from a year ago.

The firm said in its earnings release that the level of profit for FY2016 (financial year ending 31 March 2016) will be considerably lower than the previous year. It also added that it is “committed to exploring acquisition opportunities, with its healthy balance sheet and capability to readily deploy its $126.9 million net cash position should an excellent opportunity arise.”

Boustead Singapore closed at S$0.75 last Friday. It is now valued at just 8 times trailing earnings.

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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 Singapore and Boustead Projects.