Author Topic: AVM.SI - Boustead Projects  (Read 3139 times)

Gregmal

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AVM.SI - Boustead Projects
« on: December 11, 2018, 05:43:27 PM »
Anyone else own this? The announcement yesterday IMO is somewhat of a game changer and the start of what I expect to be a catalyst rich, 3 year stretch for Boustead.

https://www.fool.sg/2018/12/11/boustead-projects-ltd-more-than-doubles-its-order-book-with-latest-contract-win/

2018 was ho hum, but the shares trade at a 40%+ discount to NAV, maybe more. They are evaluating a potential REIT conversion for 2020, and are now getting traction in the right places as the RE market in Singapore has IMO evened out. Very high insider ownership, and from my understanding, they seem to exhibit an approach that places the interests of shareholders first. It's worth mentioning that this was more or less a spin off that got thrown out with the bath water. I don't own many non-US RE plays, but this one is unique.

As usual, I am a bit lazy when it comes to littering my writeups with superfluous detail and financial metrics; I assume one reading this is privvy the same information I have, but there is enough out there that one interested can find it.
« Last Edit: December 11, 2018, 10:58:58 PM by Parsad »


_JJ_

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Re: AVM.SI - Boustead Projects
« Reply #1 on: December 12, 2018, 09:10:04 AM »
I own this one too (4% position). Their asset light design & build segment seems to be a really good business and leasing provides a steady income stream. I agree that a REIT spin off/conversion will be one of the possible catalysts. They have said it will happen once they reach critical mass, I think 2020 is a good bet.

I found this interview quite helpful:
https://valueinvestasia.com/interview-with-keith-chu-from-boustead-singapore/

Most of the interview is about Boustead Singapore (holds 50%+ of the Boustead Projects shares), but it also sheds some light on their decision to start the leasing segment and their selection of leasing clients:

Quote
Stanley Lim: Oh, okay! Interesting! Maybe we can close that off with some discussion on Boustead Project. Boustead Project of course now from your annual report, you talked about the three main type of business model on Boustead project. You know your view and design, your leasing, and of course some strategic partnership or investment, of course now is still design and build that is the main bulk of your revenue stream, but you will see, you know, you guys are moving more and more to what itís just owning the property outright and having a leasing model for your future projects. Is it something that you are seriously on building up your leasing portfolio?

Keith Chu: Well I guess, of course, design and build has always been our bread and butter. I donít think weíll ever get away from that in terms of, at least here in Singapore. But if we had a choice, we still love to do more in terms of development and leasing. Of course, quite a fair bit of this is really up to our client, right, but is there global mandate on whether they own their own facilities, or lease facilities. So, that opportunity is there for development and leasing, we would rather take that option because it comes with the recurring income for the long term, so that will be our aim.

Now overseas markets, really three overseas markets at this point in time, which is Malaysia, Vietnam, and potentially Indonesia, Iíve skipped China is because China is very difficult market to basically do any of these things, but the other three overseas market. We find that trying to do just pure design and build services is much more difficult, clearly because the clients themselves one proposition where you have the land, you are able to design and build for them, and the location has to be right.

Weíve come across the situation where we can do the design and build for them quite easily, but fairly we donít have the land, so weíve been looking very actively across these three markets for a land bank that would be suitable, one which is in a good location and one which really meets the target industries that we are out after. Quite a bit of it causes right now focused on logistics type of hubs, networks, so a land in that space and we have been looking for land partners as well. So, these land partners typically of course have land but they donít have the designer and build expertise, also donít have clients [inaudible 36:53].

Stanley Lim: Okay! Thatís interesting of how you guys have a unique position on making everything work. But I think Edmond brought out a nice point saying that you know, because you guys are focused so much on the design and build of a building, when the company wants to lease it from you guys you know, does it include a risk for you because itís all designed for their purpose and you know, if theyíre businesses isnít take off and they have to move out. Is that a risk for you to have a white elephant or youíre quite easily you can convert that to another purpose or properties?

Keith Chu: Thatís a fair question. I think when it comes to what we do, we have to basically go through a very in depth due diligence process, also our clients. And Iíll give you an example, during the global financial crisis, just before that, we truly turned away half of all the opportunities that we were seeing because; we felt that after doing the due diligence on the clients, that balance sheet was not strong enough and clearly there, even their profitability at that time also wasnít showing that they could be very good paymasters, so that part of it is something that we always look at.

Secondly, when it comes to the clients who come under this kind of proposition leasing proper proposition, we always asked for corporate guarantee from the parent company, right? So thatís supposed to cover really the duration in 10 years or more until so, they pull out halfway, right, this corporate guarantee we have something to seize upon.

The third thing that we do is; I think this goes against conventional thinking. We donít do any facilities usually for monopolies. Youíre thinking monopoly, a good business right? By rights, they should be there for long time, but the reality is what happens if they pull out of Singapore, there is no competitor who could take over the space very easily. At least with a competitor, they could likely take over the space with minimal disruption as well as minimum works that we have to do to the existing facility.

And the very last thing that we typically do is in terms of the structural design, which to put in some flexibility that of course you can put in total flexibilities because certain things of the structure cannot be changed, but some flexibility than you could adapt building to a new use to a new industry if it need be.

Stanley Lim: Okay! Thatís very reassuring to know. I think letís have the last question. I think Mr. Leeís asking the last question because of your leasing business, would you consider once you have a sizeable portfolio, you know, even to do Boustead REIT or maybe some of your properties that youíre open to leasing it now or maybe midterm off your lease, you decided to spin it off, and sell it to another REIT, maybe talk about what the management view on this kind of issue?

Keith Chu: I guess you know we were one of the first movers right when it came to design, build, and lease. So we had actually quite a number of properties early on and then we were selling one to two a year, we build out maple tree logistics trust, so they put this up the lease, and few other competitors of course in the REIT market, and so clearly the end benefit was going to these guys eventually. So, around the financial crisis period, we said, okay, letís stop, benefiting these other parties why donít we do things ourselves and lock things ourselves.

The reason, I mean, at least in the past decade, holding onto all these properties and trying to build up a sizeable portfolio, tension really to put it into ideally, either you have a lease early for a property trust, probably trust is not listed that can basically in such an instance, you know, we are strong sponsor to this reach of trust. We also take a controlling stake in it so that we control the direction of it, we will be part of the manager then not the properties, but of course in any case you get the tax incentives, right you get the vision, structure, whereas in the other cases that weíve looked at, you donít get that. So, itís a fine balance at the moment. We havenít yet reached that critical mass to do it. Then we have been pretty aggressive in picking up new deals over the past few years.

So, weíre talking about portfolio size really almost doubling in terms of the value, once we include all our joint venture partners and [inaudible 42:39] data. So weíve been able to do that part of it, but the final move, whether they do it, the REIT or our property trust that part of it we havenít yet decided that. The other thing I could probably say is that we probably wouldnít sell out totally to another revamp or editor of things like that. So we have no intention to let them enjoy those benefits.

Stanley Lim: Thatís extremely good to know for all the Boustead shareholders. Thank you so much for your time, Keith. It has been a really insightful interview and I guess I will take away. Itís really Ė Boustead is trying to form itself to be able to continue to grow for the future and that really would not just include your three core businesses, and you guys are really open to other new businesses coming into the fall, and Iím really excited to see your development and I wish you all the best Keith. Thank you very much.

bobozou

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Re: AVM.SI - Boustead Projects
« Reply #2 on: December 13, 2018, 06:20:48 AM »
Apologies ahead if I missed something obvious, but it appears to be trading at close to (slightly below) book value;  what makes you say it's at 40% discount to NAV?

Gregmal

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Re: AVM.SI - Boustead Projects
« Reply #3 on: December 13, 2018, 08:10:17 AM »
BV generally is an accounting metric vs NAV is fair market value.

writser

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Re: AVM.SI - Boustead Projects
« Reply #4 on: November 06, 2019, 08:35:14 AM »
Apologies ahead if I missed something obvious, but it appears to be trading at close to (slightly below) book value;  what makes you say it's at 40% discount to NAV?

Real estate is valued at cost + depreciation. Appraised value is much higher. I accumulated a position in this name. Looks cheap with a possible catalyst.
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SoonParted

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Re: AVM.SI - Boustead Projects
« Reply #5 on: November 06, 2019, 12:24:09 PM »
For those who own some--can you get it through the US ticker BSTJF without paying an obscene bid-ask spread?  It only appears to trade a few times a year.

Gregmal

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Re: AVM.SI - Boustead Projects
« Reply #6 on: November 06, 2019, 12:33:17 PM »
For those who own some--can you get it through the US ticker BSTJF without paying an obscene bid-ask spread?  It only appears to trade a few times a year.


No. Even the liquid ADR's are often significantly more challenging than just going direct. This one, you're guaranteed to get fleeced.

SoonParted

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Re: AVM.SI - Boustead Projects
« Reply #7 on: November 06, 2019, 12:43:21 PM »
For those who own some--can you get it through the US ticker BSTJF without paying an obscene bid-ask spread?  It only appears to trade a few times a year.


No. Even the liquid ADR's are often significantly more challenging than just going direct. This one, you're guaranteed to get fleeced.

It's odd how it works OK for some thinly traded ADRs and OTC tickers, but not others.  I recently bought Ryman Healthcare, RYHTY, which trades just once or twice a week, and paid about 0.8% over the New Zealand price, which is a quite reasonable spread I think.  But other times--no way.

Gregmal

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Re: AVM.SI - Boustead Projects
« Reply #8 on: November 06, 2019, 12:55:11 PM »
Yea I just try to avoid in general if I can. I dont have many but even stuff like Vitrolife or Burford which trade enough that you should be able to get fair executions, it's inconsistent at best. Boustead is fairly illiquid even on the main exchange. Just asking for problems there.