Recommendation: BUY
Previous Close: S$1.39
Fair Value: S$1.935 (raised from S$1.80)

Company Overview
Boustead operates market leading infrastructure related businesses: Geospatial Technology (28% PBT), Industrial Property Design & Build + Property Portfolio (58%), Water & Wastewater Engineering (1%), and Energy (13%) Related Engineering. Boustead also generates strong excess cash.

Whats in the news?
•    Energy Orderbook has surged by about S$90m since March YE as Boustead’s direct fired heater and waste heat recovery systems get more orders globally.
•    Orders are outside the Middle East where margins are significantly better, reflecting the benefits of being a global operation.
•    Management guides positively for Energy orders as they see demand firm up. The Shale story in the USA is potentially something to watch for as refining capex picks up there, Boustead being 1 of 4 global players at the heart of the refining process.
•    Surge in Energy orders offsets weakness in Real Estate solutions, plus modest recovery in Water orders gives total orderbook backlog of S$379m (versus S$397m for last FY start).

How do we view this?
•    FYMar13 saw a 46% surge in reported PATMI (S$81.4m vs S$55.6m y-y) due to early project completion, non-core investment gains, writeback of overprovision of taxes, all on the back of outperformance in core-earnings. The result blew past our PATMI expectations of S$67.5m. Dividend payout declared for the full FY turned out to be S$0.07, exactly as forecasted.
•    The key takeaway is to realize that at the core earnings level, segmental earnings from the 4 business groups far exceeded our estimate of S$91.1m to clock in at S$106.1m, which is 52% above previous year’s S$69.7m. Core-profitability is thus at a new level.
•   On the back of this, we estimate that core-profitability for FYMar14f would be S$93.5m (versus our previous estimate of S$88.6m), driven by energy and water orders making up for some lost ground from the real estate segment. In addition, recurring non-orderbook earnings from the industrial portfolio and geospatial segment continue to grow.

Investment Actions
Maintain BUY with a raised TP of S$1.935 from S$1.80 as core-profitability has increased. At current price the stock is trading at 10.1x FYMar14 EPS or 5.1% FYMar14 DPS.

Source: PhillipCapital Research - 30 May 2013