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CGS-CIMB reiterates Boustead Singapore at 'add' and $1.40

Ong expects the company to maintain its strong order backlog to sustain revenue momentum in the current 2HFY2024

Ong Khang Chuen of CGS-CIMB Research has reiterated his "add" call on Boustead Singapore F9d following its 1HFY2024 earnings that came in at "slightly" above expectations.

For the six months ended September, Boustead Singapore, with all-around growth from its business units, reported core PATMI of $26 million, up 90% y-o-y and up 44% over the preceding 2HFY2023.

The company's energy engineering business reported revenue of $88 million, up 130% y-o-y; its real estate business was up 45% y-o-y to $170 million and geospatial was up 23% y-o-y to $105 million.

Ong, citing the management, expects the company to maintain its strong order backlog to sustain revenue momentum in the current 2HFY2024.

He notes that the company is riding the favourable conditions in the global energy sector. For one, it has been awarded new engineering contracts and major order variations worth $110 million, which helped maintain its order book at $152 million as at end of 1HFY2024, versus $154 million as at end FY2023.

Boustead Singapore is in the midst of privatising its separately-listed unit Boustead Projects Avm, with a revised offer of $1.18, up 24%.

"We see the offer as earnings accretive," says Ong, who expects the company to report earnings growth for the whole of FY2024.

Ong has kept his target price at $1.40, which is based on a sum-of-parts methodology.

Ong believes that at 7.7x FY2024 earnings now, Boustead Singapore is trading at an undemanding valuation, especially so given its significant net cash of 35 cents per share, equivalent to 42% of the company's market cap.

Potential rerating catalysts, according to Ong, include further energy segment order wins and M&A execution. Downside risks, on the other hand, are weaker margins on cost escalation, and a weaker macro environment hurting order wins in its real estate segment.

Boustead Singapore closed Dec 5 at 84 cents, unchanged for the day, but up 4.37% year to date.

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