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Is Boustead Singapore Limited Poised To Grow Again?

Boustead Singapore Limited (SGX: F9D) was established in 1828 and is one of the oldest companies in Singapore’s stock market. The company is a conglomerate with four key divisions: Energy-Related Engineering (oil and gas and wastewater treatment); Real-Estate Solutions; Geo-Spatial technology; and Healthcare. The Real-Estate Solutions division is separately listed under Boustead Projects Ltd (SGX: AVM).

Boustead Singapore recently released its second quarter earnings update for its fiscal year ending 31 March 2019 (FY2019) and reported a 3% decline in net profit for the quarter, despite a 13% jump in revenue. Although the company’s profit performance was lacklustre, I thought it will still be interesting to review Boustead Singapore’s order book, revenue, and financials to see if there are signs of the company’s business picking up after the brutal oil and gas bust in 2014. Here are my three findings.

Finding 1: Revenue remains flat

The table below shows the company’s quarterly revenue numbers – broken down by business divisions – going back to the first quarter of FY2017:

Source: Boustead Singapore earnings updates

Both the Energy-Related Engineering and Real Estate Solutions divisions were hit by slowdowns in the oil & gas and industrial real estate sectors in 2015-2016, crimping margins and revenues. Only the Geo-Spatial Technology business managed to continue producing steady growth.

An analysis of the revenue trends for Boustead Singapore’s various business divisions over the past 10 quarters as seen above does not seem to show a marked improvement in revenues at this point. But, do note that the company’s revenue is made up principally of project-oriented contracts, therefore growth may only show up once the company’s order book shows signs of improvement.

It’s worth noting too that that the Healthcare division has begun to contribute revenue starting from the second quarter of FY2019. The division reported a slight loss before tax during the quarter, but as its business could be seasonal, investors could expect better profit performances in future quarters.

Finding 2: Order book shows improvement

The following table illustrates Boustead Singapore’s order book for its Energy-Related Engineering and Real Estate Solutions divisions going back to the first quarter of FY2017:

Source: Boustead Singapore earnings updates

The order book represents contracts which have been clinched by Boustead Singapore over time and is a reflection of the level of demand for the company’s services. As services are performed, the order book would be converted into revenue. Thus, the order book provides a glimpse into the future revenue-generating potential for both the Energy-Related Engineering and Real Estate Solutions businesses.

As can be seen in the table, the order book values in the last four quarters for both divisions are higher than in the preceding four quarters. This indicates an improvement in business prospects which should show up as higher revenue in future quarters.

Finding 3: Cash position remains strong

In the table below, you can see Boustead Singapore’s cash and debt levels for each quarter going back to FY2017’s first quarter:

Source: Boustead Singapore earnings updates

Boustead Singapore’s net cash position remains strong at S$188.4 million in the latest quarter. Although it seems that the company’s net cash position has been stagnant for the period above, do note that Boustead Singapore had spent S$19 million to acquire WhiteRock Medical (the Healthcare division) in June 2018. Boustead Singapore also used cash to fund Boustead Project’s order book growth. Taking these into account, the conclusion would be that Boustead Singapore’s cash position remains solid and demonstrates the company’s ability to continue paying its twice-yearly dividend.

Foolish Bottom Line

Looking at the above three aspects, it seems that Boustead Singapore may be able to resume its growth again, and it’s worth monitoring the company’s performance to see if growth would indeed come through.

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The Motley Fool Singapore contributor Royston Yang contributed to this article. Royston owns shares in Boustead Singapore 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 writer Chong Ser Jing owns shares in Boustead Singapore Limited. The Motley Fool Singapore has recommendations on Boustead Singapore and Boustead Projects.