(Stocks Discussion) SGX: Boustead Singapore Limited (SGX: F9D)?

While Issac has indeed given a good write up on Boustead, I think I can value add in two areas in the analysis of Boustead:

Geo Spatial technology: The company is the sole distributor the software ESRI in Singapore and Australia. In Singapore, all companies depending on Geo Spatial technology uses ESRI software as their platform including the civil service. Boustead essentially has the monopoly in this area in Singapore

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Management: FF Wong is a veteran in the oil support engineering industry. He has led Boustead through numerous oil crisis including the 1980s. Till now, Boustead is on a strong financial standing despite the downturn in energy. This is testament to FF Wong's management capabilities and prudent moves. To me, he is one of the shrewedst buesinessman SIngaore has seen.

Business Profile

Established in 1828, Boustead Singapore Limited (SGX: F9D) is a progressive global Infrastructure-Related Engineering Services, Geo-Spatial Technology and Healthcare Group listed on the SGX Mainboard.

They have 3 main divisions. The Energy-Related Engineering Division provides key process technologies for the Oil & gas (“O&G”) industries, Petrochemical industry and Power industry.

Their Real Estate Solutions Division provides design-and-build and development expertise for Industrial facilities; Business park and commercial buildings; and Industrial and business parks.

The Geo-Spatial Technology Division provides professional services and exclusive distribution of Esri geospatial technology, the world’s leading geographic information system.

SWOT Analysis

Source: Boustead FY2018 AR

Strength: Boustead has made its revenue streams more diverse. They have also had several first-mover advantages which have enabled Boustead to maintain their foothold in their industry. They also have quite a healthy balance sheet but perhaps too much cash on hand.

Weakness: The firm has had decreasing revenue over the past few years, which is a sign that demand for the firm's services is decreasing. The energy sector for the firm isn't doing well due to the cyclical nature of the sector as well, which brought down overall earnings.

Source: Boustead FY2018 AR

Opportunities: There is also definitely a need for the services they provide in a growing Asian economy with a growing middle class. Their strategic operations could allow Boustead to really ride on this growth and improve earnings even further.

Threats: Trade tensions between the US and China, and perhaps now within Europe and the US could impact their earnings more significantly. The increasing protectionist stance of countries might be a long term threat especially.

Source: Boustead FY2018 AR

Financials

Source: Boustead FY2018 AR

Income Statement

Source: Boustead FY2018 AR

As a whole, revenue as a group has decreased consistently over the past few years, which is quite an unhealthy sign, that has been accompanied by a fall in net profit. As can be seen, the bulk of revenue comes from Real Estate Solutions at 49%. However, I believe their revenue streams is well-diversified such that Energy and Geo-Spatial both contribute substantial amounts as well.

Source: Boustead FY2018 AR

The most profitable segment is Real Estate Solutions, contributing the most amount of profits, followed by Geo-Spatial technology. In fact, energy had made a net loss in that year. This segment was affected by the global O&G recession which continued for the fourth consecutive year. Real Estate Solutions was impacted by the challenging industrial real estate sector while Geo-Spatial experienced steady demand across

exclusive markets in Australia and South East Asia.

Balance Sheet

The company has a very strong balance sheet, as evidenced by the high amount of short-term liquidity and very low debt levels. They also have very low liabilities, which reduces default risk. However, I do believe that the company is holding too much cash. This is evidenced by a cash ratio of 1.27 times! I believe that the more cash should be reinvested into the business, either through R&D, capital expenditures or acquisitions, since the balance sheet seems very healthy as well.

Cashflows

For FY18, the company looks like they have quite strong cash flows. They have a decent amount of cash flow from operating activities and had a positive cash flow for investing activities due to disposal or the sale of financial assets. For financing activities, it is quite heartening to see that the company has been using cash to repay debt and pay out dividends. However, they also bought back shares from shareholders, which may be another sign that the company is hoarding too much cash. Cashflow seems quite strong, with a good amount of Free Cashflow especially when compared to sales.