Look forward to a better FY23F
? FY22 results below expectations, with core net profit declining 28% yoy on
weaker performance across. DPU remains healthy at 4 Scts (4.2% div. yield).
? We see FY23 to be a year of recovery. Geospatial segment, Boustead’s key
profit contributor, should resume growth with structural tailwinds intact.
? Improving sentiment for global energy sector should also aid orderbook
recovery for engineering segment. Maintain Add with lower TP of S$1.30.
Weaker FY3/22 as macro challenges impacted order backlog
Boustead Singapore (BS) reported a FY3/22 core net profit of S$32.3m (-28% yoy),
below expectations at 89% of our forecast. The weaker performance in FY22 was mainly
due to a drop in revenue across key segments, as the pandemic and volatile macro
environment resulted in weaker order backlog. Despite weaker profitability, BS declared a
final DPU of 2.5 Scts. Full-year DPU of 4 Scts represents a healthy 4.2% dividend yield.
Geospatial segment to resume growth in FY23F
Geospatial segment’s PBT declined 9% yoy in FY22 due to a tough comparative base
last year (vastly increased adoption of smart mapping technologies to support critical
activities in combatting Covid-19, coupled with front loaded revenue recognition of
enterprise agreements). Covid had accelerated adoption of geospatial technologies —
segment revenue CAGR of 11% for FY20-22 had outpaced the historical average growth
rates of the segment (FY16-20 segment revenue CAGR was 7.4%). With structural
tailwinds intact (smart-city trend, push for ESG initiatives), we expect the segment to
resume a high single-digit growth rate from FY23F onwards.
Improving outlook for engineering segment
While its energy engineering segment orderbook remained at relatively low levels, at only
S$39m as of end-FY22, management has noted that more enquiries have been flowing
through recently, with improved sentiments on higher oil prices. We believe FY23F will be
a more promising year for Boustead’s engineering segment, with potentially more final
investment decisions by the global energy sector aiding orderbook replenishment.
Reiterate Add, with a lower TP of S$1.30
Reiterate Add. We lowered our FY23-24F EPS due to weaker order wins in FY22. Our
TP is lowered to S$1.30 accordingly, still based on a 20% discount to its SOP-based
valuation. Valuation remains attractive — stripping out its stake in Boustead Projects
(S$150m based on market value) and net cash of S$185m, investors are essentially
paying c.4x CY23F P/E for the geospatial segment (which is a high-margin, cash
generating business that offers structural growth), while getting the energy and
healthcare segments for free. Potential re-rating catalysts include successful M&A
execution by Boustead Projects to accelerate international expansion and order wins in
its energy segment; downside risks include weaker property segment margins given
escalating cost pressures and slower than expected orderbook replenishment.