Boustead 3rd quarter 2012 result

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.

1. Net profit down 58% from the same time last year.
1. 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.
2. However, the poor result was partly mitigated by a 14% increase in revenue from Geo-Spatial.
3. In FY2011 there is a 67 mil sale of industrial leasehold property. This was absent in FY2012
4. Waster Water projects are under way and contribute increase profits as do the Geo Spatial Technology.
2. Balance sheet in a pink of health.
1. Net cash position fell from $184 mil cash to $151 mil cash.
2. Net cash being 30% of assets.
3. 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.
4. 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.
5. 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%
6. 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.
1. Wong Fong Fui have proven to be a turn around maverick who have never been shy to venture into the unknown.
2. 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.
3. 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.

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Kyith

Kyith is the Owner and Sole Writer behind Investment Moats. Readers tune in to Investment Moats to learn and build stronger, firmer wealth foundations, how to have a Passive investment strategy, know more about investing in REITs and the nuts and bolts of Active Investing.

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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Insurance Start-up Havend. All opinions on Investment Moats are his own and does not represent the views of Providend.

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