• Results  continue  to  be  solid.  For  the  9  months  FY3/14,  Revenue  increased 1.3%  while  Core  Operating  Profit  (EBIT  adjusted  for  numerous  exceptional items in both years) is up 4.7% to S$51.7m from S$49.4m.
• Geospatial  continues  its  recovery  post  Aussie  elections  as  revenue  &  profit pick up sequentially (S$27m v. S$24m q-q, S$6.1m v. S$4.9m q-q).
• Energy  and  Real  Estate  usually  see  the  last  quarter  of  the  financial  year contain  the  best  results  as  cost  efficiencies  and  last  minute  project enhancements are  made.  We expect the last  quarter of the FY to  meet  our full-year estimates.
• Industrial  Property  Portfolio  Value  to  increase  from  27%  (FY3/14)  to  35% (FY3/15) to 47% (FY3/16) of today’s market cap. Throw in ~S$200m net cash position  and  core-earnings  from  energy,  water,  D&B  and  geospatial  seem grossly under-valued at 7.8x (FY3/14f), 5.6x (FY3/15f) and 3.7x p/e (FY3/16f).
• Maintain “BUY”, with unchanged TP of S$2.05

Investment Action

We  maintain a  "BUY" rating with  unchanged  TP of S$2.05, with the view that as the Industrial Property Portfolio size increases from 94k sqm this FY to 122k sqm next  FY  and  159k  sqm  the  FY  after  that,  the  undervaluation  of  Boustead progressively steepens  at this price. The odds of  a  catalytic event  (REIT)  to unlock this  valuation  is  high  as  well,  as  Boustead  has  ~S$200  net  cash,  as  well  as  a S$500m multi-currency debt issuance facility,  to draw upon for any opportunities to  add  to  the  portfolio.  Other  catalytic  event  could  be  an  announcement  to develop its 35% stake in 120k sqm of industrial land in Nusajaya, Iskandar.

Source: Phillip Securities Research - 18 Feb 2014