Boustead SG (SGX:F9D) – Share Price Undervalued, But Lack of Near Term Catalyst

  • Boustead SG (SGX:F9D) has delivered steady profitability from core businesses and maintained a healthy net cash position.
  • Order backlog grew to a healthy level of S$558m by end-Sep 22
  • Share price remains undervalued on a SOTP basis
  • Business outlook remains stable, but lack of a near term catalyst for re-rating.

1H FY2023 Results

Boustead has released their 1H FY23 results in Nov 22.

On a whole, Boustead has done well. Stripping off other extraordinary gains and losses, net profit fell 28% y-o-y. This is inline with the decrease in revenue. Looking at their segmental revenue table, energy and real estate contributed lesser compared to 1H22. This is due to the leaner order backlog of their ongoing projects.

For the six months financial period ended 30 September 2022

The Group’s net asset value per share marginally declined to 89.6 cents at the end of 1H FY2023,
compared to 89.9 cents at the end of FY2022. This is mainly due to dividend payments. The net cash position
(i.e. net of all bank borrowings) decreased to S$372.2 million at the end of 1H FY2023. But it remains strong as the net cash per share is about 77.3 cents.

Orderbook Boost

Boustead announced that they have increased their orderbook by $417million in new contracts. This brings their current order backlog to $558million. This is a huge boost as they have managed to replenish their orderbook by securing a record contract by a Fortune 500 corporation valued at $300million.

This has improved their topline visibility for the next 2 years up to FY2024. Another point to note is that Boustead’s real estate division is in the midst of clearing their pre-pandemic projects which are naturally less profitable considering the labour and material price increases since 2019/2020. The new projects secured this FY should be much better in terms of margins.

Boustead Share Price Undervalued On SOTP Basis

2 years back I wrote about Boustead and explained how the share price is undervalued on a Sum-of-the-parts basis. I guess it’s time to revisit the valuation made previously.

SOTP Valuation

It seems fair to use the sum-of-the-parts valuation technique for Boustead. This valuation method is used when a company has different segments in different industries that have different valuation characteristics.

In my previous post, I assumed a less conservative approach to value their real estate valuations by taking into account the independent valuation of their investment properties instead of their book value. For this SOTP approach, I took the market cap of Boustead Projects (SGX:AVM) and take in the 53% ownership by Boustead SG.

We can see that there is huge upside to its current share price of $0.78. Even if we remove the cash per share value from this SOTP valuation, the current share price means that we are valuing Boustead’s geospatial division at PE ratio of around 5x.

Lack of Near Term Catalyst

Using SOTP valuation shows that current share price is attractive to invest in Boustead. However, I am not seeing a near term catalyst that can cause it to move upwards (moon).

Granted that they have replenished their orderbook and their Geospatial division growth outlook is stable. I opined that their real estate division will only start to show improved results in the second half of 2023, which is 1HFY24. This is because the margin recovery from the newly secured projects will only start to be recognized during the construction phase of the project. This tends to be about 6-12 months after the commencement of the projects.

The next catalyst for Boustead could be from;

  1. Injecting industrial properties into Boustead Industrial Fund (BIF) to further unlock their value
  2. New contract wins
  3. Improved financial results in 2HFY23

Therefore, I do not see any near term catalyst that could propel the share price any further for now. Investors may have to take a medium or long term view when investing in Boustead.


Boustead SG has shown stable growth in their core business and I expect it to continue for the next 2 FY. Their orderbook wins meant that we have visibility in their outlook for FY23 and FY24.

SOTP valuation shows that there is upside to Boustead’s current share price. However, there may be a lack of near term catalyst for Boustead’s share price to propel to a higher valuation.

Investors have to take a longer term view when investing in Boustead SG.

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