Boustead Singapore Limited (SGX: F9D) was established in 1828 and is one of the oldest companies in Singapore. The group has four key divisions — energy-related engineering, real estate solutions, geo-spatial technology, and healthcare. If investors are wondering how a company could possibly survive more than 100 years, it’s because the company was managed conservatively and has a strong core business that has evolved over the years.
When it comes to sniffing out great companies, investors need to look for certain attributes which make companies resilient and less risky. These attributes enable the company to sail through stormy weather and emerge not just unscathed, but also stronger in the process. Let’s look at three of these attributes for Boustead which I think investors will love.
Strong balance sheet
Boustead has always maintained a robust and strong balance sheet, which is always in a net cash position. Management is prudent with running the business and does not let debt rise to levels which may cause stress to the group. As of 31 December 2018, Boustead had a net cash position of S$115.4 million, which translates into a net cash per share of S$0.234.
Based on Boustead’s share price of S$0.80 (as of 3 May 2019), the proportion of net cash makes up 29% of the share price.
Free cash flow generation
Another aspect which investors should love about great companies is consistent free cash flow generation. Free cash flow is great for a company as it makes them more resilient during bad times and also increases the chances that the company will pay a dividend to shareholders. For Boustead, I have summarised it in a table below:
The table shows that Boustead had generated copious amounts of free cash flows in the last five fiscal years (the company has a 31 March year-end). In addition, the company also continued to generate strong free cash flow in the first nine months of FY 2019.
Geo-spatial technology division
The third aspect which investors will love about Boustead is their geo-spatial technology division. This division provides professional services and exclusively distributes the Esri geo-spatial technology, which is the world’s leading geographic information system. This technology is used by corporations and governments to perform location mapping, such as detailed mapping for tunnels and sewer systems, to name a few. Boustead’s clients for this division are from Australia and Southeast Asia.
What makes this division attractive is that there’s a consistent demand for such services, even during economic downturns. This makes the division anti-cyclical and acts as a stable base for the group as compared to its two other divisions (energy-related engineering and real estate solutions), which are cyclical by nature.
The Foolish bottom line
Boustead boasts three aspects which make it a stable and strong company. Investors should treasure these attributes as it enables the group to not just be more resilient in the face of adversity, but also allows it to continue to pay dividends through bad times.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang owns shares in Boustead Singapore Limited. The Motley Fool Singapore has recommended shares of Boustead Singapore Limited.