1) In this thread I will present to you the case for Boustead Projects (BP) $AVM.SI with a catalyst right around the corner. Short term potential upside: 131%
BP is a real estate solutions provider listed in Singapore. The company is 53% owned by Boustead Singapore.
BP is a real estate solutions provider listed in Singapore. The company is 53% owned by Boustead Singapore.
2) The company has two divisions. The design-and-build division provides technical consulting services and design-and-build expertise for business park and high-tech industrial developments in Singapore.
3) The average profit before income tax of this segment in the last 5 years was S$18.2M. It’s an asset-light business, they use subcontractors to carry out construction and thus earn high returns on equity. Backlog is record high, it stood at S$621M as of June 30th 2019.
4) The other division: the real estate leasing business consists of a wholly-owned leasehold portfolio and a jointly-owned portfolio. The portfolio is grossly undervalued on their balance sheet as the company explained in their annual report. They also mention monetization.
5) This is a snapshot of my valuation. In a monetization scenario the value of the real estate portfolio alone is estimated at ≈ S$1.51 per share. Current share price is S$0.95.
7) Last Friday, the company made this announcement. They are setting up a property fund management subsidiary.
8) Let’s see what a property fund management company does exactly according to the Singapore company registry. The category includes REIT management. It seems likely a REIT IPO of the so called 'Boustead Industrial Fund' is imminent.
9) The Singapore REIT market is hot. The latest IPO was 14.5x oversubscribed and the offering was priced at 1.08x NAV. Mapletree Industrial Trust, an industrial REIT, trades for 1.65x NAV.
10) In case of an IPO I think it’s likely BP would pay shareholders a special dividend. In addition BP will earn management fees for managing the REIT: another asset light business. Let’s see how this plays out. Disclaimer: I’m long Boustead Projects, do your own DD.
