Boustead Singapore Limited (SGX: F9D), or Boustead for short, is a leading engineering conglomerate with four main divisions – energy-related engineering (oil and gas plus water and wastewater engineering systems), real estate solutions, geo-spatial technology and healthcare technology. Boustead’s real estate solutions division is 53%-owned and separately-listed as Boustead Projects Ltd (SGX: AVM), which I’ve covered before.
Boustead recently released its full-year 2019 (FY 2019) earnings. The reporting period was from 1 April 2018 to 31 March 2019. Here are eight highlights from the earnings report.
1. FY 2019 revenue was up 22% year-on-year from S$385.1 million to S$470.6 million. However, cost of sales increased by a higher 33% year-on-year, meaning gross profit only inched up by 5% year-on-year to S$154.4 million. Gross profit margin shrank from 38% the year before to 33%.
2. Net profit attributable to shareholders (after adjusting for one-off items) was marginally lower at S$29.8 million, down 2% year-on-year from S$30.4 million.
3. The group declared a final dividend of 2 Singapore cents per share, with a choice of either scrip or cash. Added to the 1 Singapore cent interim dividend, the full-year dividend totals 3 Singapore cents. At Boustead’s closing price of S$0.79, this translates to a trailing dividend yield of 3.8%.
4. Balance sheet remains rock-solid with S$246.9 million of cash and S$147.4 million of gross debt, for a net cash balance of S$99.5 million (net cash per share of around S$0.20). Boustead also held S$60.4 million of investment securities, half of which are highly liquid.
5. Cash flow generation remained strong with the group reporting operating cash inflows of S$20.8 million. Excluding the acquisition of WhiteRock Medical, additions to investment properties and loans to joint ventures, total capital expenditure would have amounted to around S$12.9 million. Around S$8 million of free cash flow was generated for FY 2019, which was significantly less than the S$39 million generated the year before, principally due to working capital committed to a major project for Boustead Projects under a deferred payment arrangement.
6. Moving into Boustead’s business divisions, real estate solutions remained the biggest revenue contributor, accounting for nearly 50% of total revenue. The division also saw a significant 38% year-on-year jump in revenue due to larger contract values being recognised. Healthcare Technology division made its maiden 9-month contribution with S$11.4 million of revenue, making up 2.4% of the total.
7. For divisional profit before tax (PBT), real estate solutions remained the largest contributor at S$35.7 million, but this was boosted by S$5.9 million gain on the sale of 25 Changi North Rise. Stripping this out, PBT for this division would have been S$29.8 million. Energy-related engineering performed poorly with a PBT of just S$1.1 million despite clocking in revenue of S$102.5 million, while the outlook is not great for this division either. Geo-spatial technology division remained the steady performer as PBT rose by 4% year-on-year to S$27.2 million.
8. Mr Wong Fong Fui, chairman and group CEO of Boustead, was cautious on the outlook but remained confident of growth in the business. This is what he said:-
“Although we have witnessed a gradual improvement in the business outlook across our operating sectors, the current global business environment remains shrouded in huge uncertainty posed by strong geo-economic and geo-political headwinds including the trade war and multiple threats to globalisation and the global economy. As we continue to pursue our technological transformation – so far yielding good results – and armed with our healthy balance sheet, net cash position, wide range of available financing options and our record full-year announcement order book backlog level of S$763 million, we continue to be in an excellent position to weather the highly challenging global business environment.
We are also actively working on capital deployment for various proposed strategic growth programmes under our Real Estate Solutions, Geo-Spatial Technology and Healthcare Technology Divisions, all of which will help us contribute to achieving most – if not all – of the United Nations’ 17 Sustainable Development Goals and underpin long-term performance. Development of technology-based products and services are currently in the pipeline and this is expected to strengthen the business prospects of the Healthcare Technology Division.”
Boustead reported a mixed performance for FY 2019. On one hand, its real estate solutions division performed well and captured a record level of contracts, expanding its order book to a new all-time high of S$660 million. On the other hand though, energy-related engineering continued to perform poorly as headwinds from the 2014 oil price collapse continue to cripple the division. On a positive note, Boustead’s balance sheet remains healthy and free cash flow continued to be generated despite the challenges the group faced.
With a record order book of S$763 million, as well as plans to implement strategic growth programmes under the real estate solutions, geo-spatial technology, and healthcare technology divisions, investors have reason to feel optimistic on the group’s performance in the coming years.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Royston Yang owns shares in Boustead Singapore Limited and Boustead Projects Limited. The Motley Fool Singapore has recommended shares of Boustead Singapore Limited and Boustead Projects Limited.