Company Name: BOUSTEAD HOLDINGS BHD
|Research House: HWANGDBS||Price Call: BUY||Target Price: 6.60|
KUALA LUMPUR: HWANGDBS Vickers Research Sdn Bhd has recommended a "buy" for Boustead Holdings Bhd due to its strong growth prospects, driven by all its core divisions.
The research firm said it had raised its ex-bonus target price to RM6.60 after including contribution from a new hotel, rolling over valuation base to financial year 2012 forecast and its new target price for Affin Holdings based on 1.1 times financial year 2012 forecast book value.
"This values Boustead at 12 times the financial year 2012 forecast price earnings and two times price over net tangible assets," it said in its research note today.
Boustead closed trading today at RM5.42, down one sen from RM5.43 yesterday.
According to HWANGDBS, the company had been stoking investor interest over the past two years with a more solid earnings delivery, formal 70 per cent dividend payout policy and a slew of acquisitions in Pharmaniaga Bhd and MHS Aviation.
"Its market capitalisation has visibly increased by almost double to RM5.6 billion, and it has beaten internal key performance indicators for return on equity and dividend per share," the research firm said.
However, HWANGDBS Vickers said Boustead was still undervalued.
"It is trading at 10 times financial year 2012 price earnings and 1.2 times price per net tangible assets currently, despite offering 19 per cent earnings per share compound average growth rate and an attractive 7.6 per cent yield," it added.
It also said Boustead's core divisions businesses were currently on solid ground.
Boustead naval shipyard contract of RM9 billion for six patrol vessels will keep its heavy industries unit busy until 2021.
The RM9 billion contract will provide long-term earnings visibility to BHIC and is set to reap substantial profits from this single largest contract awarded in Malaysia, given its leading roles in weaponry, combat system, vessel design, naval electronics.
"BHIC may also be given a maintenance contract for this batch of vessels, as for the first generation vessels. Strong patronage by the Royal Malaysian Navy will continue to ensure its order book is replenished regularly," the research firm said.
Boustead will also benefit from the rising crude palm oil (CPO) prices as it has about 74,000 hectares of matured estates. Every RM100 per metric tonne increase in the CPO price would raise financial 2012 forecast net profit by three per cent.
The research firm said Boustead's disposal of its 95 per cent stake in the Indonesian plantation business to PT Agro Investma Gemilang for US$38 million, was a good move, as the 8,000 hectares of planted area has been dragging down the group's blended fresh fruit bunches yield. - Bernama