Wolf Money(Boustead Singapore update)

 

(Edward Boustead, The founder of Boustead & Co in 1828 which the current company took its name from)


This is my update report on Boustead Projects, now under Boustead Singapore. First and foremost, Just to set the tone for my discussion, Boustead Singapore is a decent company. I have invested in Boustead Singapore or Boustead Projects periodically during my career as a broker or as a retailer investor after I left the industry 9 years ago. First the background, my latest involvement in Boustead Singapore came from selling Boustead Projects shares for Boustead Singapore shares amid the takeover offer for Boustead Projects so as to continue my investment journey with Boustead Projects via Boustead Singapore. Confusing? Please read my previous blog.

I am back this month to discuss an important document which was released to the shareholders of Boustead Projects in conjunction with the takeover offer. If the offeror spent million to have the offer document written, I am pretty sure there are plenty of important informations. Disclaimers, I don’t know every single detail of it but I try to understand them as much.

The offer document contains an updated valuation report on all the properties in Boustead Projects which were not disclose due to their conservative accounting policy(properties held at cost plus depreciation). It gave me an idea how undervalued Boustead Projects is, in this case Boustead Singapore after the takeover. I wouldn’t go into detail of other businesses of BSL. Brief summary, I like the geospatial business and not the heater/oil&gas and healthcare business. Positive on Geospatial for its wide application for smart cities. Less sanguine on heater/oil gas business due to lumpy earning and ESG concern even thou their order book had more than double since last year. The healthcare business failed to gain profit traction 6 years under Boustead Singapore ownership. Boustead Projects is likely to be the growth driver for BSL earning. In term of earning of the enlarged group, Michael of Asiancenturystocks.com did an updated report on Boustead Singapore which can be download for free. The link to the report. https://www.asiancenturystocks.com/p/deep-dive-2023-3-boustead-singapore

The valuation gap of NAV and RNAV in Boustead Projects can be found in the valuation report which was enclosed by the IFA in the offer document. Independent Financial Advisor had conduct a detail valuation report which found RNAV of Boustead Projects was worth $1.84 almost double the final offer price of 95c. In general, I have no issue with the valuation report except for two major properties which I think should have been given higher valuation, one been the 30 Bideford which was valued at 550m as the building was vacant when the valuation was done. It is perfectly fine to value it as vacant until the news of Incoming tenant Como Group operating a lifestyle destination out of Bideford got published in the news. Como Group, part of Christina Ong empire (Wife of Ong Beng Seng), will be operating The Como Metropolitan Hotel Singapore out of Bideford. A Michelin Star restaurant, a multi labels Club 21 boutique and a wellness centre will be operating concurrently within the building from the 2nd half of 2023.  Como Group effectively will be taking up most of 30 Bideford leasable area. I am not a property valuer but base on my understanding if the building is producing cash flow going forward, valuation of the property will be higher. Similar to selling a residential property with tenancy agreement or without. I presume the property at Bideford road will be valued much higher when they welcome Como Group to the building. I had detect activities around the building with workers doing fitting out for the incoming tenant(s). The property was valued close to 700m just 2 years ago. I foreshadowed the building would be able to contribute to significant earning growth to Boustead Singapore once gestation period is over. I estimated the eps contribution from the building alone to BSL could be up to 2c per share.


(IFA report shown the big gap between NAV and RNAV)

(Bideford property bought new at fire sale price)

(Extract from IFA report)

(Full load of skip tank on different day)


(More activities at Bideford, full skip tank load of construction debris removed)


(Como Metropolitan Hotel Singapore and other associated businesses of Como Group will be opening in 2H2023) 


(Source: Como Group website : A picture speaks a thousand words)


The second for the valuation done on the 4% stake in Beijing Tongzhou development using residual method base on “vacant land” basis. Why is the valuation done on vacant land basis with majority of the development has already completed? Does that mean no value were apportion to the buildings in the nearly completed development? I don’t know, maybe some property expert can explain to me privately. Thank you. The property was valued at RMB 6.2B around SGD 1.2B. Total gross development value stand at around RMB 14.9B around SGD 2.91B. The valuation is less than half of GDV which is stated for completion in 3Q 2023, only 3-5 months away. Then again I am not a property valuer to judge whether the valuation is fair. I am expecting property prices to move up after they welcome their first tenant. Overall even thou the RNAV $1.84 is almost double of offer price, it is still on the conservative side but I can live with the IFA valuation. Kindly 2c worth, just some mental sum workout. DYODD


(Residual method base on vacant land)


(Beijing Tongzhou phase 1 to be completed in 5 months time)


(Cost of development is at around RMB 3.6B excluding VAT)


Another important information which I found out was the TOP date for Alice@mediapolis another big hitter project ripe for divestment. The JTC rule stated, any property which had passed the probation period of 5 years after the csc date can be sold. The report stated the TOP is on 29 Oct 2018, CSC cert is usually issued slightly after TOP. In theory the property at Mediapolis can be sold to Boustead industrial Fund any time after end of Oct 2023. The full property value is 218.5m(Boustead owned 50% around 109m). The NAV and RNAV gap is close to 30m. 


(Source : www.afm.com.sg)



(The property is reaching end of 5 years probation date toward end of this year)


One of the recent purchase of a food processing property at Tai Seng done by Boustead Industrial Fund was excluded from the valuation report due the timing for the conclusion of this deal. That property had a lot of redevelopment potential. As reported by MingTianDi, the property had a long 44 years lease left, a rarity, given the short 30 years leases for new industrial buildings in Singapore. The building is under built by 29% before it reached the maximum allowable under their GFA and there is potential for plot ratio to increase further after the Paya Lebar Air Base relocation in 2030. The purchase come with a 10 years sale and leaseback deal with the vendor taking up 60% of the leasable area which promises stable rental income for Boustead Industrial Fund. Further more the supply of food processing industrial buildings in Singapore are limited. It is another excellent example of Boustead Projects management deal making ability. The purchase had increase asset under management by Boustead Industrial Fund management to 750m, another march towards the golden 1b aum for a minimum reit listing.


(Source MingTianDi.com Tai Seng building to be acquired)



(Source mingtiandi.com High redevelopment potential plus the stability of a 10 years rental income, the deal is as close as having your cake and eat it)


Finally Boustead Singapore managed to increase its shareholding in Boustead Projects by slightly more than 20% from the takeover offer. As the offer of 95c is below Boustead Projects NAV of $1.265, BSL can booked an one time negative goodwill gain of around 25m(5.3c) eps per BSL share in the upcoming profit and loss statement unless they somehow decide to book it as a balance sheet item. I had provide link to my previous research on Boustead Projects. Happy investing. God Bless! Selamat Hari Raya Puasa to those celebrating Eid.




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Disclaimers 

All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for education only. Buyer beware,do you own due diligence.

Comments

  1. Dear Lone Wolf - thank you for writing about Boustead Projects. For personal reasons, I have not been paying close enough attention to what has been happening with Boustead Projects and Boustead Singapore. I own both stocks, but I own a lot more Projects than Boustead Singapore. To be perfectly blunt, I do not 100% understand the potential consequences for individual investors in Projects shares - at the moment the shares are suspended so I cannot sell my position. Correct? However, if the Voluntary Unconditional Offer proceeds/succeeds, does that mean that Boustead Singapore will purchase all of my Boustead Projects shares and, if so, will this happen automatically on my brokerage account or will I need to take some action to make sure I at least get reimbursed for my position and don't end up with zero Projects shares and zero cash for them either !! Apologies for what may be considered potentially stupid questions, but having read through the announcements on the Projects Investor Relations website, I could not easily figure out what action to take, if any, to make sure I do not lose my share and do not lose their cash value either (based on halted trading price at 0.955 SGD/share). I would be most grateful if you were able to provide a brief explanation of what action (or actions if we have more than one option?) an individual investor in Boustead Projects shares should be considering. Thank you in advance for your reply, Michael

    ReplyDelete
    Replies
    1. Lone Wolf here

      Warning !This is not an advice.

      1.) BSL need to remedy the short fall in free float which stand at less than 10% by 1.) issuing shares to bring the float above 10% or

      2.) If they want to delist the company, they need to give an exit offer which qualifies fair and reasonable determine by the IFA. If they met the delisting rule, they can do a compulsory delisting which all shareholders will receive the final offer price. If it is a voluntary offer, the shareholders need to indicate by submitting the offer document.

      3.) There is a third way which i wouldn’t comment openly.

      3.) They have until 26 June to come out with a solution for BPL. It is very difficult to say with certainty what they going to do. You can wait for the date.

      Disclaimers

      All investments is highly speculative in nature and involves substantial risk of loss. We encourage our reader to invest very carefully. We also encourage reader to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way whatsoever warrant or guarantee the success of any action you take in reliance on our statements. All information provided are for education only. Buyer beware,do you own due diligence.

      Delete

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