Boustead Building Up Net Cash Position to Ride through the Storm

A year ago, I mentioned in my post that Boustead has a net cash position of S$165.6 million. At the end of 1Q FY2018, Boustead has a net cash position of S$212.2 million. This was an increase of 28.1%. Thus, I consider Boustead is still in a healthy net cash position. Net cash position is very important to companies in a cylindrical industry such as oil and gas. Only with sufficient net cash position, it will be able to ride through the storm.

Although Boustead’s 1Q FY2018 financial results do not look so promising, I noted that in its latest press release, it has mentioned that Boustead’s revenue is largely derived from project-oriented businesses and as such, quarterly results would not accurately reflect the full-year’s performance.

1Q FY2018 1Q FY2017 Change
Revenue S$90.3m S$113.7m (21%)
Net Profit S$4.6m S$6.1m (25%)
Earnings Per Share 0.6 cents 1.3 cents (54%)
Net Asset Value Per Share 62.5 cents 59 cents 6%

Below are some notable points from the financial results announcement

  • The Energy-Related Engineering Division was experiencing its first quarterly loss since the global oil & gas recession began three years ago.
  • Geo-Spatial Technology Division was 3% lower year-on-year at S$25.7 million. The geographic information system (GIS) mapping software used by the division is called Esri. Interested readers can do more research on it.
  • Real Estate Solutions Division (under Boustead Projects) registered revenue that was 25% lower year-on-year at S$45.7 million, with lower revenue contributions from both the design-and-build and leasing businesses.

My opinion

Currently, Boustead makes up only 3% of my stock portfolio. There should be limited upside based on the current share price of $0.91. I have noticed the company is also performing share buy back. This should provide some form of downside support for the share price.

Dividend is depressed due to the current gloomy oil and gas industry. It may take a year or many year more for the oil and gas industry to recover. But I have know this company do pay its shareholder well when it is performing well. I will hold on to Boustead at the moment unless there is something better to buy then I may consider divesting Boustead for the opportunity cost.

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