This is a thought exercise to determine the value of Boustead Singapore. The company is a conglomerate with operations in the 4 areas of: (i) Real Estate/Construction, (ii) Engineering in water treatment and offshore gas, (iii) Distribution in Geospatial Technology Solutions and (iv) Healthcare. Over time, the company has experienced profit growth due to the trend of increasing technology use and a booming Singapore Property Market.
I will try to determine the value of each business segment and then adding them.
Boustead singapore owns through its 53% stake in the listed subsidiary of Boustead Projects (BP). BP has captured investors attention recently because it injected some assets into an industrial fund which potentially means a future REIT. BP has a large number of properties such as Razer HQ, ALICE@mediapolis it owns and can be injected into the fund. All these properties amount to a billion dollar valuation and can be injected into the newly formed industrial fund to monetize. For its construction arm, despite a COVID year, the construction segment was still profitable; hence one can expect BP to be consistently profitable.
The company is now sitting on a net cash of 86% of its current market cap and with a billion dollar portfolio of properties to inject into the fund and strong construction order book due to Singapore's property demand, I personally expect BP to be worth $1.60 per share. This is because the RNAV of its remaining assets which it can sell to its fund is in the $2 range.
Hence BP is worth $542 million, and proportioning to Boustead Singapore's 53% stake, that is $288 million.
Boustead provides engineering services to refineries as well as has water treatment plants worldwide. The company has been experiencing high revenue and profit growth over the years with the latest FY seeing an increase of 37% revenue growth ($198 mil vs $144.5mil) and its profits before income tax has tripled. Engineering segment profits is now $28 million, as compared to FY20's of $7.9 million
While this segment has lumpy revenue due to it being a book order based, the revenue and profit growth is still commendable. Based on a price earning ratio of 10 times at current profits of $28mil. Its market value is $280 million.
The geospatial segment has been seeing constant growth and Boustead is the sole distributor of ESRI software in this region. There has been a mass uptake in the ESRI software Boustead is selling. Revenue has been growing year on year. For FY 21, revenue was $170 million with net profits before income tax of $40 million. This means since FY16, the CAGR for revenue and profits are 11% and 14%.
It is also the key profit contributor to Boustead Singapore in FY20 (contributed 45%) and this segment has been growing rapidly due to the move towards the increasing use of technology in this region. It has set another record revenue and profits for FY21.Annual Report for FY 20's Geospatial Results
Its clients in the region are governments and MNCs; hence it is stable. With its continuing high digit growth in profits due to operating leverage, one can reasonably ascribe a 15 times price earning to account for this segment's continuous high profit growth. At 15x PE of $40 million PBIT, this segment is worth $600 million.
The healthcare is a new segment which is still making losses. It is difficult to value it now. For simplicity, I will consider its assets as zero valueAnnual Report for FY 20's Healthcare Results
Sum of Part Valuation
Adding (288+280+600) million, I expect the company to be worth $1.16 billion. Its current market cap is $568 million at a share price of $1.17.
Based on the SOTP valuation, Boustead is worth $2.39 per share. It represents an upside of 100%.
<Author is invested in Boustead Singapore>