You know you are investing in the right company if they have excellent management. A company with excellent management is able to weather the storm. This has to be Boustead, my favorite company in my stock portfolio.
What do I like about Boustead that stands out?
1. Asset Light Model
A shareholder in Boustead is not a beneficial owner of hard assets such as equipment, machinery and fabrication or manufacturing facilities. Instead, you are a beneficial owner of a renowned brand name that has thrived for 188 years on the basis of our strong values and reputation for credibility, integrity, quality, reliability and trust; – Wong Fong Fui, Chairman & Group Chief Executive Officer
2. Cash Flow Driven Business Model
Free cash flow of $110.0 million remains strong for Boustead. The cash flow driven business model (asset light) allows Boustead to weather the current headwinds. A final dividend of 2 cents was declared. This has proven they have no issues sustaining their dividends in bad times.
Our cash flow-driven business model places us in a strong position to weather the storm. Our balance sheet is steady with a net cash position of S$165.6 million. – Wong Fong Fui, Chairman & Group Chief Executive Officer
3. Ongoing Acquisitions
If you follow the news, Boustead has tried to acquire three businesses in FY2016.
First, they tried to acquire a gas field with proven reserves in Indonesia. However they were outbid by their rival. Boustead felt there was a lack of margin of safety should they overpay for the bid.
Second attempt was in the energy related sector for a business providing engineering services for gas related infrastructure. Boustead did not pursue after detailed investigations.
Third failed attempt was in the real estate sector. Information was not forthcoming and thus Boustead did not pursue further.
Although all attempts failed, Boustead can be seen as being careful, diligent and patient in their acquisitions.
Acquiring a business is easy. Acquiring a great business is most difficult. – Wong Fong Fui, Chairman & Group Chief Executive Officer
Wong Yu Loon, elder son of Wong Fong Fui was appointed Deputy Group Chief Executive Officer. Spending 13 years in Boustead, I believe he has picked up the ropes in the job from Mr Wong Fong Fui.