Boustead Singapore – chart poised for a bullish breakout! (23 Jun 23)

Dear all

With reference to my write-up on Comfort Delgro dated 9 Jun 2023 (click HERE) where I pointed out that I am comfortable to accumulate Comfort Delgro for a trading play, Comfort Delgro closed at $1.03 on 9 Jun, the lowest close last since on 18 Mar 2004. Since my writeup, Comfort Delgro has fortunately appreciated nine out of ten trading days to close almost 15% higher at $1.18 today. This compares favourably with STI which moved up 0.2% over the same period.

Another stock, Boustead Singapore has recently caught my attention due to its chart development. It closed $0.825 today.

First of all, let’s understand what Boustead Singapore does.

 

Description of Boustead Singapore

With reference to its FY23 press release, Boustead Singapore is a progressive global Infrastructure-Related Engineering and Technology Group listed on the SGX Mainboard. It is established in 1828 and as Singapore’s oldest continuous business organisation, they focus on the niche engineering and development of key infrastructure to support sustainable shared socio-economic growth. Their strong suite of engineering services under their Energy Engineering Division and Real Estate Division centres on energy infrastructure and smart, eco-sustainable and future-ready real estate developments.

In addition, they provide technology-driven transformative solutions to improve the quality of life for all walks of life. Their Geospatial Division provides professional services and exclusively distributes Esri ArcGIS technology – the world’s leading geographic information system, smart mapping and location analytics enterprise platform – to major markets in the Asia Pacific. The enterprise platform creates digital infrastructure solutions and digital twins that enable smart nations, smart cities and smart communities to solve the world’s most complex problems. Their Healthcare Division provides innovative medical solutions that address age-related chronic diseases and mobility issues, with a focus on rehabilitative care and sports science in the Asia Pacific.

With a vast global network stretching across Asia, Australia, Europe, Africa and the Americas, they have undertaken projects in 93 countries and territories globally to date.

 

What is so interesting on Boustead Singapore then?

Main basis: chart seems poised for a bullish breakout

Based on Chart 1 below, Boustead Singapore seems to be testing a long-term downtrend line and its 200D EMA around $0.840. Volume has picked up from 8 – 15 Jun. The recent small price consolidation around $0.830 is accompanied with lower than average volume which seems positive.

Indicators such as ADX is rising to trade around 54.0 amid positively placed DI (indicative of a trend). Other indicators such as RSI and MACD are generally rising. If the overall market sentiment remains bullish, odds are likely of an upside break above $0.840. A sustained break above $0.840 points to an eventual technical measured target price of around $0.885. A sustained break below $0.795 with volume expansion is negative for the chart. It closed at $0.825 today where most transactions are done at $0.830.

Near term supports: $0.830 / 0.820 / 0.810

Near term resistances: $0.840 / 0.850 / 0.875 – 0.885

Chart 1: Chart seems poised for a bullish breakout above $0.840

Boustead Singapore chart as of 23 Jun 23

Source: InvestingNote 23 Jun 23

 

Other interesting factors to note

a) CGS CIMB recently raised its target price to $1.40 post its FY23 results

CGS-CIMB has recently raised Boustead Singapore’s target price to $1.40 after it reported FY23 results. Coupled with an estimated dividend yield of around 4.8%, total potential return may amount to 73% if CGS-CIMB is right.

Fig 1: Analyst target price $1.40, total potential return approximately 73%!

Figure 1_Boustead Singapore analyst target price 20 Jun 23

Source: Bloomberg as of 20 Jun 23

b) FY24F core earnings may jump >50% year on year

Based on CGS CIMB report dated 7 Jun, CGS CIMB estimates that Boustead Singapore’s FY24F core earnings may jump more than 50% on a year on year (“y/y”) basis to hit around $47.7m. Do refer to their report HERE for more information.

c) Ex-dividend $0.025 / share on 3 Aug

Boustead Singapore has announced that it is going to distribute $0.025 / share as dividends for its 2HFY23. It is going to ex-dividend $0.025 / share on 3 Aug. Based on its 2HFY23 dividend alone, this translates to around 3.0% dividend yield. For the entire FY23, Boustead Singapore has distributed a total of $0.04 / share as dividends.

CGS CIMB estimates that Boustead Singapore can dish out a total dividend per share amounting to $0.04 in FY24F, similar to that of the entire FY23. At $0.830, this works out to a FY24F dividend yield of around 4.8%. Given that Boustead Singapore’s FY24F core earnings may be 50% higher on a y/y basis, there may be scope for higher dividends.

d) Net cash amounting to $0.67 / share

Based on Boustead Singapore’s FY23 results, management highlighted that they are sitting on a net cash per share amounting to $0.671 / share, comprising of 81% of its market capitalisation. Such strong balance sheet should be able to support its dividends and any acquisitions. Furthermore, generally speaking, in a high interest rate environment, having net cash is better than being in debt.

e) Valuations seem attractive

Based on Bloomberg, Boustead Singapore trades at approximately 8.4x FY24F P/E and 0.83x P/BV. Average 5-year P/E and P/BV are 10.0x and 1.1x respectively. Boustead Singapore’s NAV / share stands at $0.950.

 

Risks

As usual, there are risks involved. Due to time constraints, I am only pointing out some of the possible risks.

a) Business risks

Usual business risks such as cost escalations on projects; inability to win contracts due to weaker macro environment, forex volatility are some of the risks which Boustead Singapore has to contend with.

b) Lack of analyst coverage

Boustead Singapore has various diverse business segments and it is not easy to understand. To be very clear, at this moment, my basis is mostly on chart. I do not really have a thorough understanding of their various business segments. This may be why it is not widely covered by analysts even though it is a company with a business history spanning more than 190 years!

c) Illiquidity

Notwithstanding the general pick up in volume, Boustead Singapore is still generally thinly traded. Average 30 day volume traded is only 320K shares per day. As it is thinly traded, chart interpretation may not be fully accurate.

 

Conclusion

It is noteworthy that there are risks involved such as the aforementioned risks (e.g. illiquidity risk, various macro and business risks etc.). Nevertheless, Boustead Singapore is backed by $0.671 per share of net cash, coupled with an estimated 4.8% dividend yield and likely sharply improving results in FY24F, plus a supportive chart, it may arguably be worth a closer look.

For a more complete picture, it is advisable to refer to Boustead Singapore’s analyst reports (Click HERE); SGX website (Click HERE) and Boustead Singapore’s corporate website (Click HERE).

Readers have to assess their own % invested, risk profile, investment horizon and make your own informed decisions. Everybody is different hence you need to understand and assess yourself. The above is for general information only. For specific advice catering to your specific situation, do consult your financial advisor or banker for more information

 

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P.S: I am vested in Boustead Singapore.

 

Disclaimer

Please refer to the disclaimer HERE

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