If you’re looking for a company that has defied the odds and posted strong earnings, look no further than Boustead Singapore Limited (SGX: F9D), or BSL.
The engineering conglomerate reported its highest-ever net profit of S$113.1 million despite the strict safe management measures and limited availability of workers.
This sterling result came about despite the group reporting a 6% year on year dip in its revenue to S$685.7 million, largely due to a 29% year on year plunge in revenue recognised from its real estate contracts due to the four-month closure of Singapore construction site last year..
In addition, BSL also managed to secure S$230 million worth of new contracts to end the fiscal year 2021 (FY2021) with a backlog of S$447 million.
Here are five highlights from the engineering giant’s latest earnings report.
Unlocking value from its properties
The key reason for the robust financial performance was the unlocking of value from BSL’s real estate division under its 53%-owned subsidiary, Boustead Projects Limited (SGX: AVM), or BPL.
BPL had, back in January this year, announced the setting up of a private investment fund called Boustead Industrial Fund (BIF).
The real estate division then divested its interest in 14 properties — full disposal of 11 properties and partial disposal of the remaining three properties, into BIF.
In the process, BPL recognised an exceptional gain of S$134.8 million and brought in cash worth S$240.8 million.
Because of this gain, BSL’s real estate division reported a profit before tax of S$140.6 million, up more than five-fold from the prior fiscal year’s S$27.5 million.
However, if this gain was excluded, the division would have reported a net loss of S$3.2 million.
CEO of BPL Thomas Chu attributed this to four months of the closure of Singapore project sites, higher pandemic-related compliance costs and lower productivity due to social distancing requirements.
A robust balance sheet
BSL maintained a strong balance sheet flush with cash and a low level of borrowings.
The cash raised from the divestment of properties into BIF was used to repay the bulk of bank loans, reducing total debt to around S$7 million as of 31 March 2021.
Cash surged to S$479.8 million from S$281.7 million a year ago, providing a sufficient buffer for BSL to tide through downturns in the construction sector.
The group also held S$38 million of investment securities for FY2021, of which around 20% is highly liquid.
Strong demand for geospatial technology
Another bright spot for BSL is its geospatial technology division.
This division provides professional services and distributes Esri ArcGIS technology, a leading geographic information system, smart mapping and location analytics platform.
Revenue rose by 24% year on year to S$170.4 million, underpinned by new enterprise agreements and strong demand for smart mapping capabilities.
Profit before tax for the division surged 37% year on year to S$40.7 million.
The geospatial division is offering free tools, apps, data and resources to regional governments as part of their COVID-19 response.
Although such complimentary use will not contribute to BSL’s bottom line for now, around 325 organisations from countries such as Australia, Indonesia and Singapore are tapping on the technology.
This usage has already generated enquiries that could potentially lead to S$6 million worth of future business.
Opportunities to recycle capital
With the setting up of BIF, BPL’s business now integrates the entire industrial value chain.
This move increases the capabilities of the division and also creates a new platform for the injection of a pipeline of future development projects.
BIF opens up opportunities for future leasehold properties to be divested by BSL, thus unlocking further value and recycling capital for more development projects.
BSL also benefits from earning a management fee from managing BIF, of which it owns a 25% stake.
BSL CEO Wong Fong Fui did caution, though, that value will be unlocked at a “slower pace” that will be spread out over more years than expected due to the adverse impact of the pandemic.
A special dividend
In light of the strong showing, BSL has declared a final dividend of S$0.03 as well as a special dividend of S$0.04, for a total of S$0.07.
If the interim dividend of S$0.01 is included, the total annual dividend amounts to S$0.08, a record for the group.
This level of dividends is more than double that declared in the prior fiscal year of S$0.03.
The reasons for the significantly higher dividend include the unlocking of value by BIF and also the special dividend of S$0.145 declared by BPL.
Get Smart: Well-positioned for a recovery
BSL has positioned itself well for the eventual recovery.
It has fortified its balance sheet with a large stash of cash and built up a decent order backlog that can be slowly converted to revenue.
Investors can also look forward to steady dividends moving forward as the group continues to generate healthy free cash flow.
We found a stock with 83% YOY growth and a 70% payout ratio. If weโre right, you can expect this stock to remain strong for the rest of 2021. All the details you need about this stock is inside our FREE report, 8 Singapore Stocks for Your Retirement Portfolio. Click here to download the report today.
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Disclaimer: Royston Yang owns shares of Boustead Singapore and Boustead Projects.
