SINGAPORE (March 27): CIMB is initiating coverage of Boustead Projects with $1.04 target price, for its attractive valuation, net cash position and possible REIT launch.
In a note last Friday, CIMB says Boustead Projects’ recent project wins at Mediapolis and Continental phase III will bring the total asset base to $750 million by FY19.
This marks a significant step of Boustead Projects towards its goal of an eventual REIT listing.
“Factoring in roughly two years of gestation, we believe Boustead Projects could be ready for a REIT listing by FY20-21,” says CIMB.
And this could be expedited if Boustead Projects pools its portfolio with private property owners.
“We estimate a potential REIT launch could re-rate Boustead Projects to $1.30-1.39 based on 20-25% discount to FY18F RNAV,” says CIMB.
Boustead Projects is a market leader in the industrial Design & Build field, with a proven track record in the delivery of high-specifications built-to-suit industrial facilities.
MNC clients include Rolls Royce, Airbus, Applied Materials and GSK across various industries including aerospace, pharmaceutical, high-tech manufacturing and logistics.
As at end 3Q17, its order book stands at $170 million.
Currently, Boustead Projects’ leasehold portfolio comprises 18 industrial facilities in Singapore with total GFA of 238,000 sq m. Seventeen out of the 18 facilities being built-to-suit buildings with 15 occupied by single tenants. Over 80% GFA caters to MNCs from high value industries with long WALE of seven years.
“We expect the portfolio to bring in steady operating cash flow of $20-23 million p.a. in FY17-19F,” says CIMB.
Meanwhile, Boustead Projects trades at a 0.47x FY18F RNAV, vs Singapore industrial REITs of 1.02x RNAV and developers at 0.68x RNAV.
As at 3Q17, Boustead Projects is in a net cash position of $8.6 million.
“We expect BP to recognise one-off gains of $13.7 million in 4QFY17F for the disposal of its TripleOne Somerset stake and compensation from an early lease termination.” says CIMB.
“We forecast the one-off gains to boost Boustead Projects’ FY17F net profit to $37.8 million vs FY16’s $22.9 million. Any special dividend should be a positive surprise. Stiffer competition is a key risk,” adds the research house.
Shares of Boustead Projects are up 1 cent at 82 cents.