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Boustead Projects Ltd’s Latest Earnings: What Investors Should Know

Boustead Projects Ltd (SGX: AVM) is an industrial real estate solutions provider in Singapore, with core engineering expertise in the design-and-build and development of industrial facilities for both multinational corporations and local companies.

On Friday, Boustead Projects announced its financial results for the full year ended 31 March 2018 (FY2018). Here are the key highlights from the earnings announcement that investors should know about:

1. Revenue slipped from S$228.3 million in FY2017 to S$201.3 million in FY2018, a fall of 12% year-on-year. The decline was on the back of lower revenue contributions from both the design-and-build and leasing businesses.

2. Design-and-build revenue came down 13% to S$169.9 million due to a lower total value of contracts secured in FY2017 for revenue conversion in FY2018. Also, a major project with significant contract value which was completed in FY2017 contributed to higher design-and-build revenue for that year. The above was partially offset by higher revenue converted from contracts secured in FY2018. Meanwhile, leasing revenue for FY2018 was 5% lower year-on-year at S$31.5 million. This was mainly due to the lease expiry of 85 Tuas South Avenue 1 in January 2018 and lack of contribution from 36 Tuas Road due to AusGroup Ltd’s (SGX: 5GJ) early lease termination in FY2017, partially offset by contributions from new leases and development management fees from the Boustead Development Partnership.

3. Gross profit, however, increased by 11% to S$65.2 million. As a result, gross margin for the latest year improved to 32% from 26% in FY2017. The higher margin was mainly due to productivity improvements, unlocking of project cost savings and conversion of projects with higher margins.

4. Net profit tumbled 19% to S$29.2 million mainly due to the lack of S$14.7 million in one-off compensation for AusGroup’s early lease termination and the TripleOne Somerset sale recorded in FY2017. Excluding these one-time gains, full-year net profit would have been around 15% higher year-on-year.

5. Boustead Projects’ balance sheet strengthened during the year. At the end of March 2018, Boustead Projects had S$111.4 million in cash and cash equivalents, and total borrowings of S$70.5 million. This gives a net cash position of S$40.9 million. In comparison, as at 31 March 2017, the firm had S$25.0 million in net cash.

6. Net asset value per share at the end of FY2018 stood at S$0.79, up from S$0.717 a year ago.

7. In FY2018, the group’s cash flow from operations came in at S$25.2 million, down from S$44.0 million seen in the previous year. With capital expenditure coming in at S$291,000, free cash flow for the latest period was S$24.9 million, as compared to FY2017’s S$43.6 million.

8. Boustead Projects secured a healthy level of contracts in FY2018 to the tune of S$233 million, a vast improvement from the figure of S$140 million amassed in FY2017.

9. The board has proposed a first and final dividend of 1.5 cents. In the previous year, it paid out 1.5 cents in first and final dividend and 1.0 cent in special dividend.

10. Looking ahead, Thomas Chu, managing director of Boustead Projects, said:

“Although we have seen an improvement in the construction activities in the industrial real estate sector in Singapore, competition is expected to remain intense and margins challenging. Nonetheless, we are cautiously optimistic that our market leadership and financially-sound position, combined with our strong business development efforts, will allow us to capitalise on opportunities in our growing design-and-build and real estate development enquiry pipelines both in Singapore and overseas. We will also continue to invest in smart and eco-sustainable building capabilities, drive cost and productivity improvements, and intensify our efforts in securing strategic partnerships and M&A targets that could support our market expansion and extend our capabilities.”

Boustead Project shares ended Friday at S$0.81. This gives a price-to-book ratio of 1.03 and a dividend yield 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 contributor Sudhan P owns shares in Boustead Projects Ltd.

Editor's note: The article has been updated to include the dividend information.