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Boustead Singapore’s Latest Earnings: New Healthcare Division Is A Letdown

Boustead Singapore Limited (SGX: F9D) (“Boustead”) released its second-quarter and half-year fiscal year 2019 (1H FY 2019) earnings yesterday.

The reporting period for the quarter was from July 1 to September 30, 2018. Boustead was established in 1828 and has grown to come a conglomerate today with four key divisions – Energy-related Engineering, Real-Estate Solutions, Geo-Spatial technology and Healthcare.

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Here are eight key takeaways from Boustead’s latest earnings:

1. Revenue rose 13% year-on-year to S$118.4 million, up from the revenue of S$104.9 million recorded a year ago. The bulk of the increase came from the company’s real estate solutions division under its subsidiary Boustead Projects Limited (SGX: AVM) which saw an increase of 21% in revenue from S$50.1 million to S$60.6 million. Boustead Projects’ earnings, released last week, was covered in a previous article. Boustead also saw maiden revenue contribution of S$3.7 million from its new Healthcare division.

2. Boustead’s gross margin fell from 39% in the second quarter of last year to 36% in the current quarter. As a result, the company’s gross profit rose by just 4% from S$40.8 million to S$42.5 million.

3. Net profit after tax declined by 3% from S$7.1 million a year ago to S$6.9 million in the latest quarter due to share of losses from associates and joint venture companies as well as a higher tax expense.

4. Boustead’s balance sheet remains rock-solid, with its cash balance increasing to S$268.4 million at the end of the reporting quarter, up from S$265.4 million six months ago. Over the same period, borrowings increased from S$71 million to S$80 million. At the end of the reporting quarter, Boustead had a net cash position of S$188.4 million, leaving the company in good stead to make future acquisitions.

5. Meanwhile, Boustead generated S$7.9 million in operating cash flow for the quarter. With capital expenditure at S$6.6 million, the company’s free cash flow generated was S$1.3 million. Majority of the capex was spent on a new headquarters for its Geo-Spatial division in Australia.

6. Moving into Boustead’s business segments, energy-related engineering saw a slight 3% increase in revenue to S$23.4 million, as enquiries for work improved year-on-year. This division made up around 20% of total revenue. The Geo-Spatial division’s revenue saw a slight 4% dip and accounted for 25.8% of Boustead’s total revenue. The company’s healthcare division contributed 3.1% to total revenue.

7. Looking at the company’s profits (before tax) by division, energy-related engineering reported a loss before tax of S$300,000 but would have been profitable if not for exchange losses of S$500,000. Real-estate solutions division saw a contraction in margins from 23.6% in 2Q FY 2018 to 16.5% in the current quarter, as cost pressures continued to mount for this division.

8. The group declared an interim dividend of S$0.01 per share, similar to its dividend declared last year. The trailing full-year dividend for Boustead is S$0.03. At the company’s closing price of S$0.78 yesterday, shares offered a dividend yield of 3.8%.

Foolish Takeaway

Boustead reported a downbeat set of earnings and its newly-acquired healthcare division WhiteRock Medical (which it paid S$19 million for back in June 2018) turned out to be a letdown, registering a loss before tax of S$100,000 based on the segment’s revenue of S$3.7 million for the quarter.

The positives would include a strong balance sheet and healthy free cash flow generation, enabling the group to continue to pay out twice-yearly dividends.

Boustead recommends that investors should view its performance on an annual basis as its revenue is derived from project-oriented businesses which may fluctuate significantly from quarter-to-quarter. Hence, it may be better to re-assess the group’s results again once it has reported its full-year earnings for the fiscal year 2019.

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The Motley Fool Singapore contributor Royston Yang contributed to this article. Royston owns shares in Boustead Singapore Limited and Boustead Projects Limited.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore recommended shares of Boustead Singapore Limited and Boustead Projects Limited. The Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned.