13-09-2015, 09:30 PM
CIMB did an inhouse presentation on BP recently. Nothing new that we don't know:
Boustead Projects Limited
Aiming to unlock hidden value
■ Property consultants’ valuation reports indicate significant revaluation upside for
group’s industrial leasehold portfolio, if marked to market.
■ Mid-term strategy to unlock value in leasehold portfolio through a REIT listing.
■ Currently trading at 0.61x historical RNAV vs. industrial REITs’ average of 0.98x
and 8.5x restated historical core P/E vs. industrial REITs’ 14.6x.
■ Historical RNAV/share is S$1.21, based on property consultants’ valuation reports.
Insiders bought shares at S$0.90 and S$0.76.
A leader in the industrial real estate design-and-build field
Recently spun off from Boustead Singapore, Boustead Projects (BP) is a leading player
in the industrial real estate design-and-build field, with a proven track record in the
delivery of high-spec industrial facilities to MNCs across various industries. Besides
turnkey design-and-build services, BP also offers its customers the option of leasing
from its custom-built industrial facilities.
Hidden value in mid-scale leasehold portfolio
BP owns a mid-scale leasehold portfolio comprising 16 industrial facilities, with total GFA
of 186,685 sq m and an overall occupancy rate of 96%. 13 of BP’s 100%-owned
leasehold properties were valued at S$368m by property consultants against their book
value of S$189m (historical cost net of depreciation). The valuation implies a cap rate of
6.64% on BP’s 1QFY3/16 annualised NPI, broadly in line with the 6.57-7.21% cap rates
for Singapore industrial REITs. Most of the facilities are custom-built and single-tenanted
based on long-term leases, hence income risk should be limited. The portfolio’s rents
are 20-30% below market average, allowing headroom for upward rental revisions and
flexibility in soliciting tenants when the leases are due for renewal.
Aiming for a REIT listing to unlock value
BP has a mid-term plan to launch a REIT with its leasehold portfolio. If successful,
shareholder value could be unlocked through either a special cash dividend or cash-inspecie
of REIT shares (industrial REITs are currently trading at 0.98x historical RNAV on
average). BP’s partnership with ADIC (a Middle Eastern sovereign wealth fund) could
accelerate the progress as the partners’ investment commitment of S$600m has
relieved BP’s capital concerns. Given its leasehold portfolio’s current worth of S$550m-
600m (including three leasehold facilities that are held under JVs), management
believes BP’s leasehold portfolio could reach the critical size of S$700m-1bn for the
REIT launch within the next 2-3 years.
Management and major shareholder buying reveals commitment
BP will pay no dividend for the next two years as cash will be reserved for leasehold
portfolio expansion purposes. Nevertheless, shareholders might derive comfort from
management’s and its major shareholders’ buying, which reveals their commitment.
BP’s two executive directors bought 662.8k BP shares for S$0.90 apiece (total value:
S$596.5k) from the open market. Mr Wong Fong Fui, group chairman and CEO of
Boustead Singapore (parent company of BP), known as a very discerning investor,
bought 6.77m shares (2.1% of BP’s stake) for S$0.76 apiece (total value: S$5.2m)
through a cross transaction.
Boustead Projects Limited
Aiming to unlock hidden value
■ Property consultants’ valuation reports indicate significant revaluation upside for
group’s industrial leasehold portfolio, if marked to market.
■ Mid-term strategy to unlock value in leasehold portfolio through a REIT listing.
■ Currently trading at 0.61x historical RNAV vs. industrial REITs’ average of 0.98x
and 8.5x restated historical core P/E vs. industrial REITs’ 14.6x.
■ Historical RNAV/share is S$1.21, based on property consultants’ valuation reports.
Insiders bought shares at S$0.90 and S$0.76.
A leader in the industrial real estate design-and-build field
Recently spun off from Boustead Singapore, Boustead Projects (BP) is a leading player
in the industrial real estate design-and-build field, with a proven track record in the
delivery of high-spec industrial facilities to MNCs across various industries. Besides
turnkey design-and-build services, BP also offers its customers the option of leasing
from its custom-built industrial facilities.
Hidden value in mid-scale leasehold portfolio
BP owns a mid-scale leasehold portfolio comprising 16 industrial facilities, with total GFA
of 186,685 sq m and an overall occupancy rate of 96%. 13 of BP’s 100%-owned
leasehold properties were valued at S$368m by property consultants against their book
value of S$189m (historical cost net of depreciation). The valuation implies a cap rate of
6.64% on BP’s 1QFY3/16 annualised NPI, broadly in line with the 6.57-7.21% cap rates
for Singapore industrial REITs. Most of the facilities are custom-built and single-tenanted
based on long-term leases, hence income risk should be limited. The portfolio’s rents
are 20-30% below market average, allowing headroom for upward rental revisions and
flexibility in soliciting tenants when the leases are due for renewal.
Aiming for a REIT listing to unlock value
BP has a mid-term plan to launch a REIT with its leasehold portfolio. If successful,
shareholder value could be unlocked through either a special cash dividend or cash-inspecie
of REIT shares (industrial REITs are currently trading at 0.98x historical RNAV on
average). BP’s partnership with ADIC (a Middle Eastern sovereign wealth fund) could
accelerate the progress as the partners’ investment commitment of S$600m has
relieved BP’s capital concerns. Given its leasehold portfolio’s current worth of S$550m-
600m (including three leasehold facilities that are held under JVs), management
believes BP’s leasehold portfolio could reach the critical size of S$700m-1bn for the
REIT launch within the next 2-3 years.
Management and major shareholder buying reveals commitment
BP will pay no dividend for the next two years as cash will be reserved for leasehold
portfolio expansion purposes. Nevertheless, shareholders might derive comfort from
management’s and its major shareholders’ buying, which reveals their commitment.
BP’s two executive directors bought 662.8k BP shares for S$0.90 apiece (total value:
S$596.5k) from the open market. Mr Wong Fong Fui, group chairman and CEO of
Boustead Singapore (parent company of BP), known as a very discerning investor,
bought 6.77m shares (2.1% of BP’s stake) for S$0.76 apiece (total value: S$5.2m)
through a cross transaction.