VALUATION

 Boustead Singapore (Boustead) is trading at forward PE of 14.1x and P/B of 2.6x. ......................(WST: My opinion is....... not cheap now......over 1 yr raise up by more than 60%)

Based on Bloomberg, the consensus 12-month target price is S$1.99.

INVESTMENT HIGHLIGHTS

 Focuses on sustainable businesses in niche infrastructure that forms the

backbone of economies. The group?s four main divisions are: a) industrial real

estate solutions (50% of group revenue), b) energy-related engineering (25%), c)

geo-spatial technology (20%), and d) water and wastewater engineering (5%).

While these markets are not considered large, the attraction lies in the high barriers

to entry due to the highly-specialised nature of each segment. Boustead holds

strong market positions and/or competitive advantages in each division.

 Building an industrial leasehold portfolio for future unlocking. Under the real

estate division, Boustead?s services include industrial design-build-and-lease

solutions. In the last five years, management has refocused its strategy into

accumulating more leasehold properties to grow its recurring income stream and to

eventually unlock the portfolio?s value through a REIT. Management estimates

rental income and profit before tax of S$20m and S$10m in FY14 respectively. It

currently holds 14 properties (10 completed, 4 under construction) with a total GFA

of over 160,000sqm. It aims to build this to over 300,000sqm to gain sufficient size

for a REIT listing.

 Energy pre-tax margin has bottomed expect a recovery going forward on the

back of the upturn in North America?s oil & gas (O& G) industry. Boustead?s energy

division has secured S$140m of new contracts ytd in FY14 (FY13: S$111m) and

currently has an orderbook backlog of S$171m to be recognised over 18 months.

Some 75-80% of this division?s business comes from supplying two types of heater

systems to downstream O& G and petrochemical players ? process heater systems

and waste heat recovery units (WHRU). WHRU has shown good growth potential

given its energy-efficiency capabilities and adaptability to other industrial sectors,

such as power. The division?s pre-tax margin is about 10%.

 Dominance in geo-spatial technology with widely-adopted Esri geographic

information system (GIS) among governments and government agencies. Boustead

is the exclusive distributor of GIS in Australia and South Asia (Singapore, Malaysia,

Indonesia, Brunei, Bangladesh and Timor-Leste). It holds an aggregate 80% share

of the markets it covers and management forecasts a sustainable high single-digit

revenue growth, driven by new contracts and system upgrades. In Singapore, the

URA recently signed a 2-year MOU with Esri that will allow the government agency

to apply 3D technology to its urban planning process.

 Risks include a lack of new contract wins and available industrial properties, lowerthan-

expected margins, execution and political risk.

KEY FINANCIALS

Year to 31 Mar (S$m) FY11 FY12 FY13 1HFY13 1HFY14

Net Turnover 560.6 408.7 513.2 225.6 242.0

EBITDA 77.7 76.9 103.9 36.7 39.5

EBIT 74.2 72.8 98.6 34.4 35.7

Net Profit 52.2 55.6 81.4 27.5 26.7

EPS (cts) 10.3 11.0 16.1 5.4 5.3

PE (x) 9.7 7.9 9.1 - -

P/B (x) 2.2 1.7 2.5 - -

Dividend Yield (%) 4.0 5.8 3.4 - -

Net Margin (%) 9.3 13.6 15.9 12.2 11.0

Net Debt to Equity (%) n.a. n.a. n.a. n.a. n.a.

Interest cover (x) 121.0 86.1 84.3 51.9 109.8

ROE (%) 23.6 23.0 29.3 - -

Source: Boustead, Bloomberg, UOB Kay Hian