OCBC Investment Research said Boustead Singapore : F9D +1.79%&rsquo s current share price levels may present an &ldquo attractive entry point&rdquo for investors given its undemanding valuations, above-average yield and exposure to secular megatrends.

 

The research house initiated coverage on the conglomerate with a &ldquo buy&rdquo call and a fair value estimate of S$1.05, which values its real estate segment at a 40 per cent discount to net asset value. 

 

&ldquo Considering that Boustead is trading at a forward price-to-earnings ratio of 8.1 times, which represents more than one standard deviation below its five-year historical average of 11.2 times, we think current valuations present an attractive entry point for investors to lock in a higher-than-average dividend yield,&rdquo said analyst Ada Lim on Friday (Sep 22). 

 

She noted that the stock currently offers a forward dividend yield of 5.3 per cent. This is above its five-year historical average of 4.3 per cent.

 

In Lim&rsquo s view, Boustead Singapore&rsquo s financials are poised to improve based on its project order and deferred services backlogs as at end-FY2023, along with stable contract wins in the year to date.

 

&ldquo Boustead&rsquo s healthy balance sheet and strong net cash position also lends potential for the company to deploy cash through further investments and inorganic acquisitions to unlock value for shareholders, beyond the ongoing privatisation of Boustead Projects,&rdquo added the analyst.

 

Lim is also positive about the group&rsquo s growth profile as she said it provides exposure to multiple long-term secular trends including the Asia-Pacific&rsquo s &ldquo silver tsunami&rdquo , as evident through the group&rsquo s healthcare division that was set up to provide age-related healthcare solutions.    

 

Riding on the trends of climate action and sustainability are Boustead Singapore&rsquo s energy engineering and real estate divisions, which specialise in energy-efficient and eco-sustainable projects. 

 

Given the continued growth in value of Internet of Things, the group&rsquo s geospatial division is likely to see continued demand for its technology and managed services, said Lim. 

Brokers&rsquo take: OCBC starts coverage on Boustead Singapore with &lsquo buy&rsquo call

The research house initiated coverage on the conglomerate with a &ldquo buy&rdquo call and a fair value estimate of S$1.05, which values its real estate segment at a 40 per cent discount to net asset value. 

&ldquo Considering that Boustead is trading at a forward price-to-earnings ratio of 8.1 times, which represents more than one standard deviation below its five-year historical average of 11.2 times, we think current valuations present an attractive entry point for investors to lock in a higher-than-average dividend yield,&rdquo said analyst Ada Lim on Friday (Sep 22). 

She noted that the stock currently offers a forward dividend yield of 5.3 per cent. This is above its five-year historical average of 4.3 per cent.

In Lim&rsquo s view, Boustead Singapore&rsquo s financials are poised to improve based on its project order and deferred services backlogs as at end-FY2023, along with stable contract wins in the year to date.

&ldquo Boustead&rsquo s healthy balance sheet and strong net cash position also lends potential for the company to deploy cash through further investments and inorganic acquisitions to unlock value for shareholders, beyond the  ongoing privatisation of Boustead Projects,&rdquo added the analyst.

 

A UNIT of Boustead Singapore has secured a contract related to once through steam generators (OTSGs) worth around S$31 million, the company said on Tuesday (Aug 22).

 

As part of the contract, wholly-owned subsidiary Boustead International Heaters will design, engineer and supply the generators for a floating production, storage and offloading vessel, to be deployed in Latin America.

 

This is the second contract for OTSGs secured by the unit in the past year, and rides on its efforts to bolster its product offerings and enhance capabilities in OTSGs.

 

The contract will raise the group&rsquo s engineering order backlog to S$587 million.

 

Boustead Singapore expects the contract to have a positive material impact on its profitability and earnings per share for its financial year ending Mar 31, 2024, although it will unlikely have a material impact on its net tangible asset value per share.