Evaluating an Engineering and Technology Group using 4 Financial Metrics

• FY2020 revenue surged by 54% year-on-year

• Strong growth in free cash flow

• Stable dividend payout across the years

• Net cash position for the past 3 financial years

Established in 1828, Boustead Singapore Limited (“Boustead”) is a progressive global infrastructure-related Engineering and Technology Group listed on the SGX Mainboard. Focusing on the niche engineering and development of key infrastructure to support sustainable shared socio-economic growth in global markets, Boustead’s strong suite of engineering services under its Energy Engineering Division and Real Estate Division centres on energy infrastructure and smart eco-sustainable business park and industrial developments.

Boustead’s Geospatial Division provides professional services and exclusively distributes Esri ArcGIS technology – the world’s leading geographic information system, smart mapping and location analytics platform – to major markets in the Asia Pacific including Australia, Singapore, Malaysia and Indonesia.

Evaluating Boustead Singapore Limited using 4 Financial Metrics

Revenue & Net Profit

For FY2020, Boustead’s revenue was 54% higher year-on-year at S$726.6 million. The growth was due to the increase in revenue across all business division. As the largest revenue contributor to the Group, the Real Estate Solutions Division saw its revenue increase by revenue by 82% year-on-year to a new division record of $426.2 million. This was due to the execution of the order backlog of design-and-build projects.

Despite the sharp rise in revenue, net profit after tax for the Group came in at S$44.5 million, which is a decline of 10.3% year-on-year. This can be a contribution from fair value losses on investment securities, higher administrative, finance and income tax expenses, and impairment losses.

For Boustead’s trailing 12-month performance, its revenue saw a slight dip of 0.33% to S$724.1 million. The dip was contributed from the revenue dip in its real estate and healthcare division while being offset by its Energy Engineering and Geospatial division.

With a lower share of losses of associates and finance cost, Boustead’s profit after tax grew by 10.1% and came in at S$48.9 million.

Free Cash Flow

Boustead has registered positive free cash flow since FY2018, even though the figure has witnessed some form of huge fluctuation. For FY2018, free cash flow came in at S$39.0 million and has declined to only S$10.4 million in FY2019 due to a higher capital expenditure and a negative change in working capital.

However, in FY2020, the increase in cash generated from operations and a positive change in working capital has allowed Boustead’s free cash flow to grow by more than 1000% to S$139.7 million.

Dividend

Despite the improvement in the Group’s profitability, Boustead’s total dividend per share of 3 Singapore cents has kept at a similar level for the past 3 financial years. This has resulted in the Group’s dividend payout ratio to dip from a high of 61.4% to 47.6% in FY2020.

This might indicate that the management is keen on balancing between conserving resources for business development and rewarding shareholders. Based on the current share price of S$0.77, the indicative yield amounts to 3.89%.

Leverage Ratio

Boustead has been in a net cash position since FY2018. It shows that the Group’s current cash level can be used to pay off the total debts/borrowings incurred by the Group. Despite the strong financial positioning, Boustead's interest coverage ratio has been on a decline since FY2018 due to an increase in interest expenses.

Furthermore, the increase in interest expenses can be reflected in the Group’s rising total debt to equity ratio. This indicates that the Group has been increasing its debt load across the financial years and investors should keep a lookout for the Group’s debt level to ensure that it is sustainable in the long run.

Conclusion and Prospects

Boustead has registered a positive set of financial result for FY2020, given the sharp increase in revenue and the growth in revenue across all business division. On top of that, the improvement in free cash flow and the stable dividend payout also highlights the strength of the Group. However, investors should take note of the Group’s declining interest coverage ratio and rising total debt to equity ratio.

Mr. Wong Fong Fui, Chairman and Group Chief Executive Officer of Boustead said, “Nonetheless, the pandemic and global situation continue to be of immense concern, in almost every respect. Furthermore, demand deficit and ongoing travel restrictions have made it extremely challenging to conduct meaningful business development activities. As we expect steady results for FY2021, our attention will now be turned towards securing business opportunities to underpin FY2022 and medium-term performance.”

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