Stock Name: BSTEAD
Company Name: BOUSTEAD HOLDINGS BHD
Boustead Holdings Bhd
(Oct 13, RM5.33)
Recommend buy at RM5.15 with revised target price of RM7 (from RM7.50): Boustead's share price has fallen 20% from its high and it is trading at only eight times FY12 price-earnings ratio and 1.1 times net tangible assets while offering 9% yield (70% payout paid quarterly). At +1 standard deviation (SD), it has dropped from peak of +2SD, it is cheaper than prior to the acquisition of MHS Aviation Sdn Bhd and Pharmaniaga Bhd. We remain confident FY11 will post net profit of RM540 million, anchored by plantations with nine months production locked in at RM3,350 per tonne average (against RM2,796 spot) and nine months consolidation of Pharmaniaga's earnings. Return on equity key performance index for 1HFY11 of 6.9% is also on track to meet our FY11F of 12.6% and 12% internal target. The key risk is timing.
The purchase of 60 acres (24ha) of property in Jalan Cochrane, Kuala Lumpur, is in the final stages of Cabinet approval. The transfer will be directly to Boustead and not Lembaga Tabung Angkatan Tentera (LTAT) to avoid paying stamp duty twice. To ease the burden on its balance sheet, part of the estimated land cost (RM1.3 billion @ RM500 psf) may be financed by rebuilding government quarters on the vacated land and securing anchor tenants for the land. The site is earmarked for more commercial content with Ikea a likely key tenant. We estimate this project could add RM1.03 per share or 12% to our sum-of-parts value. The MRT station and Ikea will improve pricing power ' we assume RM900 psf average selling price, which is similar to less-prime Sunway Velocity.
We understand the letter of award for the next batch of six offshore patrol vessels worth circa RM8 billion (our forecast RM7 billion) will be out end-2011. In our view, this contract is not only important for BN Shipyard Sdn Bhd (60%-owned by Boustead), but also to Lumut's economy with 3,000 workers and 600 local vendors. Given the impending general election, it may be in the government's interest to expedite the rollout. ' HwangDBS Vickers Research, Oct 13
This article appeared in The Edge Financial Daily, Ocotber 14, 2011.
Company Name: BOUSTEAD HOLDINGS BHD
| Research House: HWANGDBS | Price Call: BUY | Target Price: 7.00 |
Boustead Holdings Bhd
(Oct 13, RM5.33)
Recommend buy at RM5.15 with revised target price of RM7 (from RM7.50): Boustead's share price has fallen 20% from its high and it is trading at only eight times FY12 price-earnings ratio and 1.1 times net tangible assets while offering 9% yield (70% payout paid quarterly). At +1 standard deviation (SD), it has dropped from peak of +2SD, it is cheaper than prior to the acquisition of MHS Aviation Sdn Bhd and Pharmaniaga Bhd. We remain confident FY11 will post net profit of RM540 million, anchored by plantations with nine months production locked in at RM3,350 per tonne average (against RM2,796 spot) and nine months consolidation of Pharmaniaga's earnings. Return on equity key performance index for 1HFY11 of 6.9% is also on track to meet our FY11F of 12.6% and 12% internal target. The key risk is timing.
The purchase of 60 acres (24ha) of property in Jalan Cochrane, Kuala Lumpur, is in the final stages of Cabinet approval. The transfer will be directly to Boustead and not Lembaga Tabung Angkatan Tentera (LTAT) to avoid paying stamp duty twice. To ease the burden on its balance sheet, part of the estimated land cost (RM1.3 billion @ RM500 psf) may be financed by rebuilding government quarters on the vacated land and securing anchor tenants for the land. The site is earmarked for more commercial content with Ikea a likely key tenant. We estimate this project could add RM1.03 per share or 12% to our sum-of-parts value. The MRT station and Ikea will improve pricing power ' we assume RM900 psf average selling price, which is similar to less-prime Sunway Velocity.
We understand the letter of award for the next batch of six offshore patrol vessels worth circa RM8 billion (our forecast RM7 billion) will be out end-2011. In our view, this contract is not only important for BN Shipyard Sdn Bhd (60%-owned by Boustead), but also to Lumut's economy with 3,000 workers and 600 local vendors. Given the impending general election, it may be in the government's interest to expedite the rollout. ' HwangDBS Vickers Research, Oct 13
This article appeared in The Edge Financial Daily, Ocotber 14, 2011.
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