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Boustead Projects Ltd’s Latest Earnings: What Investors Need to Know

Boustead Projects Ltd (SGX: AVM) is an industrial real estate solutions provider in Singapore and is 51%-owned by Boustead Singapore Limited (SGX: F9D). Boustead Projects was listed on the local stock exchange in April 2015 by a way of introduction. Currently, the firm operates two business segments – Design-and-Build, and Leasing.

On Tuesday, the firm announced its first-quarter earnings of 2018 (1Q 2018). The financial period was from 1 April 2017 to 30 June 2017.

Here’s a quick rundown on the financial figures from the latest quarter:

1. Revenue tumbled 25% year-on-year to S$45.7 million. The decline was due to lower revenue contributions from both the design-and-build and leasing businesses.

2. However, gross profit grew from S$13.5 million in 1Q 2017 to S$14.5 million in 1Q 2018, an uptick of 7% year-on-year. This gave a gross profit margin of 32% in the latest quarter, up from 22% in 1Q 2017. The improvement in the margin was largely due to productivity improvements and unlocking of cost savings from projects.

3. Net profit for 1Q 2018 was 5% lesser year-on-year at $5.8 million. The decrease was mainly due to higher selling and distribution expenses, administrative expenses, and share of loss of an associated company and joint ventures. Net profit margin for 1Q 2018 was 12.7% while that in 1Q 2017 was 10%.

4. Consequently, earnings per share for the quarter was at 1.80 Singapore cents, down from 1.90 cents seen in the previous year’s corresponding quarter.

5. As at 30 June 2017, Boustead Projects had S$48.6 million in net cash, a vast improvement from S$25 million in net cash that it had on 31 March 2017.

6. Net asset value per share went up to 73.6 cents, as at 30 June 2017, from 71.7 cents, as at 31 March 2017.

7. Cash flow from operations was at S$2.4 million, and S$110,000 was spent on capital expenditure. Therefore, the firm brought in around S$2.3 million in free cash flow for the latest quarter, a massive decline from S$8.3 million raked in a year ago.

As seen above, both revenue and net profit declined for the quarter. But, the bright spots were that margins improved significantly and that the net cash position was stronger.

Design-and-build revenue was lower as more projects with greater work progress were completed in 1Q 2017 and a lower total value of contracts was secured during FY2017 for revenue conversion in 1Q 2018.

Meanwhile, leasing revenue declined mainly due to a lack of contribution from AusGroup Ltd‘s (SGX: 5GJ) early lease termination of 36 Tuas Road in 4Q 2017.

On the expenses side, selling and distribution expenses, and administrative expenses rose due to “investment in new capabilities in line with the BP Group’s regional growth strategies and increased professional fees related to joint venture investments”.

The share of loss of an associated company and joint ventures was higher mainly due to “elimination of construction and project management profits attributable to projects which the BP Group has entered into with an associated company and joint ventures”.

The firm’s current order book backlog (unrecognised project revenue remaining at the end of 1Q 2018 plus total value of new orders secured since then) is at around S$137 million.

Mr Thomas Chu, Managing Director of Boustead Projects, commented on the year ahead:

“We expect FY2018 to be another challenging year. Nonetheless, with our healthy balance sheet and strong net cash position, we are in a strong position to pursue our strategies on strengthening our smart building and eco-sustainable capabilities, driving cost and productivity improvements, focusing on higher value industries, and building additional strategic partnerships and platforms regionally.”

Shares of Boustead Projects ended Tuesday at S$0.905. This translates to a trailing price-to-book ratio of 1.23 and a dividend yield of 1.7%.

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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 Projects Ltd and Boustead Singapore Limited.