Boustead is a company that is in my watchlist. Its in a net cash position, pays a safe 5-6% yield, diversified into 4 segments, energy related, water and waste water, industrial property and geo-spatial.
If you like PEC, Hyflux, AREIT and Google Map roll into one, you will like Boustead.
They just announced their 3rd quarter results so I thought I will break down some of the finer points.
- Net profit down 58% from the same time last year.
- This is attributed to the reduction in revenue from the Engineering Services Segment, due to the late start-up of projects in hand and an unexpected disruption in the supply chain caused by the catastrophic flooding at a subcontractor’s fabrication site in Thailand.
- However, the poor result was partly mitigated by a 14% increase in revenue from Geo-Spatial.
- In FY2011 there is a 67 mil sale of industrial leasehold property. This was absent in FY2012
- Waster Water projects are under way and contribute increase profits as do the Geo Spatial Technology.
- Balance sheet in a pink of health.
- Net cash position fell from $184 mil cash to $151 mil cash.
- Net cash being 30% of assets.
- Free Cash Flow looks negative to me largely due to increases in investment properties. This is due to a $19 mil investment in an industrial leasehold property which will eventually contribute back to the bottom line.
- Earnings per share is down from 10.5 cents to 4.6 cents for the 9 months. Should the last quarter be as lukewarm, we should estimate a 5.7 cents full year earnings per share.
- This would drastically reduce the dividend per share payout from 6-7 cents to 5 cents. At share price of $0.86 this will come up to a yield of 5.8%
- Boustead entered into the natural resources and mining sector with their share subscription into ASX listed OM Holdings which is the 3rd largest manganese producer in Australia and a top 10 manganese producer in the world.
- Wong Fong Fui have proven to be a turn around maverick who have never been shy to venture into the unknown.
- While not all his ventures turn out well, we speculate that he does see potential in the demand and supply of this particular material to warrant such an investment.
- As investors we can either trust his acumen but it would be safe to find out if there is some underlying logic to this purchase.