CGS-CIMB Research analyst Ong Khang Chuen has kept his “add” call and target price of $1.35 for Boustead Singapore after the group announced its intention to make a voluntary unconditional general offer for the remaining 25% stake in its subsidiary, Boustead Projects.
Following the offer, Boustead Singapore will privatise Boustead Projects and have it delisted from the Singapore Exchange (SGX). Boustead Singapore’s cash offer of 90 cents per share implies a valuation of $281.9 million for Boustead Projects.
According to Ong’s estimates, the transaction will result in an earnings per share (EPS) accretion of 11.5% for Boustead Singapore’s FY2024 results, should it go through successfully. The analyst adds that he is “positive” on the transaction.
“Boustead Singapore has a strong net cash position with minimal capital expenditure (capex) needs – we think this can be tapped into by Boustead Projects which recently entered into various investments/partnerships (Bideford Road mixed-development, Vietnam industrial real-estate fund, etc.) to chart its next leg of growth,” he writes.
“We also think the current offer price favours Boustead Singapore, as it represents [a] 50% discount to our target revised net asset value (RNAV) of $1.79 for Boustead Projects,” adds Ong.
Ong’s “add” call also comes as he sees Boustead Singapore’s 1HFY2023 results being a “fundamental inflection point” for the group, with earnings recovery expected in the 2HFY2023, on the back of the group’s strong order backlog.
See also: Boustead Singapore makes 90 cent per share privatisation offer for Boustead Projects
His target price is based on a 20% discount to its sum-of-the-parts (SOTP)-based valuation.
To Ong, further order wins as well as the successful execution of Boustead Projects’ privatisation offer, are potential rerating catalysts. However, weaker markets on cost escalation could pose as downside risks.
As at 2.01pm, shares in Boustead Singapore and Boustead Projects are trading at 86 cents and 93 cents respectively.
