On 10 December 2018, Boustead Projects Ltd (SGX: AVM) clinched a S$241.9 million contract with JTC Corporation that saw its order book hit a record high of S$460 million. Since then, the company has managed to clinch three more contracts to further boost its order book.
As a quick recap, Boustead Projects specializes in providing design and build solutions and project management expertise for industrial properties. The company’s clients include multi-national corporations in the healthcare, biotechnology, and logistics industries.
The contract wins
The three contracts awarded since the JTC Corporation project announcement are:
1. A development project awarded to Boustead Development Partnership (a co-investment vehicle of Boustead Projects and a Middle Eastern sovereign wealth fund) for an aerospace facility in Singapore’s Seletar Aerospace Park. The property, which will be leased long-term to a company specializing in the transport industry, will be Boustead Project’s ninth project at Seletar Aerospace Park and 18th aerospace-related development.
2. A contract for a business park development in the One-North precinct of Singapore which will be primarily used as the new Southeast Asia Headquarters for the Hong Kong-listed Razer Inc (SEHK: 1337), a leading global lifestyle brand for gamers. The building will have approximately 19,300 square metres of gross floor area (GFA) and completion is expected in the second quarter of 2020. The projects for Razer’s new headquarters and the latest aerospace facility in Seletar Aerospace Park – which were both announced on 21 December 2018 – boosted Boustead Project’s order book to S$548 million and increased the company’s regional leasehold portfolio to 337,000 square metres in GFA.
3. On 18 January 2019, Boustead Projects announced that it was awarded a contract worth around S$200 million to build the global headquarters for Surbana Jurong Group, an integrated development, in the 600-hectare Jurong Innovation District in Singapore. This property will have a GFA of 68,915 square metres and is expected to be completed by 2021.
Yet another record-high order book
The latest contract with Surbana Jurong Group has boosted Boustead Projects’ burgeoning order book to yet another new record high of S$747 million. In a short span of just over a month, Boustead Projects’ order book has more than tripled from S$218 million (just before the JTC Corporation contract) to S$747 million currently.
As each project has its own timeline for completion which covers more than one financial year, it will be difficult to estimate each project’s revenue and margin impact on Boustead Projects as the numbers will be based on the percentage of completion recognition method. But, the company has guided for a “positive material impact” on its profitability and earnings per share for FY2020 (financial year ended 31 March 2020) and FY2021.
Expansion of regional leasehold portfolio
It is also noteworthy that Boustead Projects is slowly but steadily growing its leasehold portfolio. As per the company’s annual report for FY2018, its portfolio’s GFA was 275,000 square metres. With the completion of the Seletar aerospace facility and also Razer’s headquarters, the GFA of Boustead Projects’ GFA will rise by 22.5% to 337,000 square metres. Investors can therefore expect higher leasing income to flow through in FY2020 and FY2021 as these properties are progressively completed.
The Foolish Bottom Line
The successive and significant contract wins in the last 30-plus days demonstrate Boustead Projects’ clout and its strong ability to secure contracts despite tough competition. Business development efforts are ongoing in countries such as Malaysia, Vietnam, and China which may further boost the company’s growth as we head into FY2020. At Boustead Project’s share price of S$0.88 last Friday, the company is trading at a trailing price-to-earnings (PE) ratio of 9.7, and has a trailing dividend yield of 1.7%.
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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.