3 Things To Know About Boustead Industrial Fund | Boustead Projects

January 8, 2021

Boustead Projects announced on 31st December 2020 that it will be launching a Boustead Industrial Fund where it has 25% stake in it. At the time of writing, its share price has already jumped from $0.80 to around $1.01 - a whooping 25% jump after the announcement.

Boustead Projects Launches Boustead Industrial Fund

For a quick background, Boustead Projects is a real estate developer, specializing in smart eco-sustainable business park and industrial developments. It has developed more than 3 million square metres of real estates across Singapore, Malaysia, Vietnam and China. Boustead Industrial Fund would have 3 stakeholders namely:
  1. Boustead Projects or its nominee at 25% of the fund
  2. Metrobilt Construction Pte Ltd, an indirect wholly-owned subsidiary of Metro Holdings Ltd at 26% of the fund 
  3. AP SG 21 Pte Ltd, a special purpose vehicle for institutional real estate investors at 49% of the fund
In the event that Metrobilt does not subscribe to the fund, Boustead has agreed to subscribed other by itself or through its nominees the 26%. That will effectively Boustead's holdings of the fund at 51%. The total valuation of Boustead Projects’ interest in the properties stand at $331.2 million, an excess of $206.9 million over the book value. So... how will the establishment of this Boustead Industrial fund help Boustead Projects? Lets dive into the important details to know below.

#1 Boustead Projects - Increase in NTA

Sourced from Boustead Projects announcement dated 31st December 2020 As referenced from the table above, with the establishment of the fund, net tangible assets (NTA) of the company will increase to $431.2 million. Thereby the NTA or NAV/share will be increased to $1.388/share. Sourced from Shareinvestor Comparing it against Boustead’s historical NAV/share, this is definitely a boost for the company. Boustead’s NAV/share trended around 0.504 – 0.73/share since 2012. The huge jump to $1.388/share makes current share price a discount to the asset value of Boustead. Boustead share prices have been trending around $0.60-$0.93 - typically in quite a close range to its NTA/share. Hence, if we were to take it as a reference, Boustead Projects could potentially trade close to its revalued NTA of $1.388 per share.

#2 Boustead Projects - Jump in EPS

Sourced from Boustead Projects announcement dated 31st December 2020 The total book value of the properties carried in Boustead Projects' book is worth $125.3 million. It will be sold to the Boustead Industrial fund at a consideration of $332.2 million. This gives it a sharp 're-valuation' profits of $206.90 million. Even after the relevant costs deduction, profit after tax of Boustead will increase by almost 7-fold to $142.4 million. Naturally, earnings per share of Boustead will see a boost from 7.2 cents to 45.8 cents per share. That is an increase of 536%!

#3 Boustead Projects Future Outlook

The proceeds of the transaction will be broken down as such:
  • S$98.0 million to discharge the existing encumbrances over the Initial Industrial Properties;
  • approximately S$0.9 million for the estimated professional and other fees and expenses
  • approximately S$72.7 million for the Proposed Subscription
  • approximately S$19.6 million for associated taxes, rectification works, estimated aggregate Monthly Shortfall Amount and payment in relation to the Capital Top-Up Deed.
There will be $132.7 million left after the transactions above. This money could be used for many purposes such as:
  • Acquisition of new properties
  • Upgrading existing ones
  • Special dividend
During this pandemic, these funds could also provide a boost to its sustainable cash flow.

Conclusion

The transaction will have an immediate effect for the 2021 financials of Boustead. Investors who have bought prior to this transaction are bound to have reaped the benefits of it. Boustead Projects are now priced at a discount to the RNAV of S$1.388/share once the deal is sealed. In the long-term, it might be hard to predict as it is unclear how the management team will utilize the proceeds left.
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