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Boustead Projects Ltd More Than Doubles Its Order Book With Latest Contract Win

Boustead Projects Ltd (SGX: AVM) announced yesterday that it had secured its very first open tender public sector contract. The contract, with a value of around S$241.9 million, was awarded to Boustead Projects by JTC Corporation for a Multi-Storey Recycling Facility (MSRF) project located at Kranji Loop.

Construction of the MSRF will begin in December 2018 and is estimated for completion on January 2021. The new facility is expected to achieve the Green Mark Platinum rating, which is the highest eco-sustainability rating under the Building and Construction Authority’s (BCA’s) Green Mark program.

Order book at a record high

Boustead Projects specialises in providing design and build services for industrial facilities for multi-national corporations.

Yesterday’s announcement not only marks the company’s first win of a government tender project, but it is also financially significant: The latest contract more than doubled Boustead Projects’ order book to S$460 million from S$212 million as of 30 September 2018. The order book of S$460 million is also the highest-ever achieved by Boustead Projects.

A quick comparison

Looking at Boustead Projects’ FY2018 (financial year ended 31 March 2018) results, it reported S$170 million in revenue for its Design-and-Build segment for the year, and S$19.5 million in segment result before interest. These numbers work out to a segment margin of 11.5%.

If I assume that the MSRF contract is recognized fully from January 2019 onward, it would boost Boustead Projects’ revenue for FY2019 by S$116 million. If I use a more conservative segment margin of 10% (as this is a large contract which may involve higher costs), the company’s segment result before interest would increase by S$11.6 million.

It’s worth noting that in FY2018, Boustead Projects’ profit attributable to shareholders was S$29.2 million. S$11.6 million represents almost 40% of the company’s net profit for the prior year and is therefore significant.

The Foolish Bottom Line

The win of the huge MSRF contract is an important development for Boustead Projects as it boosted the company’s order book to a new record high. Moreover, the contract would benefit the company’s financials (in terms of revenue and profit) for both FY2019 and FY2020. Elsewhere, Boustead Projects is also embarking on other business development initiatives to grow its leasehold property portfolio and expand into other neighbouring Asian countries.

With the catalysts mentioned above, the future looks promising for the company. At Boustead Projects’ share price of S$0.80 currently, the company has a trailing price-to-earnings ratio of 8.8, and a trailing dividend yield of 1.9%.

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

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has a recommendation for Boustead Projects. The Motley Fool Singapore writer Chong Ser Jing owns shares in Boustead Projects.