Boustead Singapore makes offer for real estate unit; analysts say S$0.90 offer price undervalues Boustead Projects

BOUSTEAD Singapore : F9D 0% is looking to take its mainboard-listed real estate subsidiary Boustead Projects : AVM 0% private at S$0.90 per share. That is a premium to Boustead Projects’ last traded price before the offer was announced, but analysts noted it is below the company’s net asset value (NAV) and that the deal appears to favour the parent company.

Boustead Singapore, an engineering services provider, announced after market close on Feb 6 an offer to privatise Boustead Projects in order to “simplify the group structure and reduce organisational complexity”.

The S$0.90 offer price is 7.1 per cent above Boustead Projects’ close on Feb 6 at S$0.84, but is only 71.1 per cent of the company’s last reported NAV of S$1.265 per share as of Sep 30.

Arun George, an analyst at Global Equity Research who publishes on Smartkarma, called the offer price “unattractive” and noted that Boustead Projects’ share price had exceeded the offer price as recently as June last year.

Given that Boustead Singapore hopes to privatise Boustead Projects, George said there is a “possibility of a bump”. The offer price is not final.

Investors appeared to agree, as they sent Boustead Projects shares above the offer price of Feb 7. They were trading at S$0.91 as of 2.26 pm, up 8.3 per cent for the day.

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CGS-CIMB analyst Ong Khang Chuen, meanwhile, said the offer price “favours Boustead Singapore”.

The brokerage’s own estimate of Boustead Projects’ revalued NAV is S$1.79, which is roughly double the offer price.

The transaction would be positive for Boustead Singapore, Ong added, and would result in an earnings per share increase of 11.5 per cent for FY2024. CGS-CIMB has an “add” call on Boustead Singapore and a target price of S$1.35.

Boustead Singapore owns 54.9 per cent of Boustead Projects.

Boustead Singapore’s chairman and group chief executive Wong Fong Fui has a deemed interest of 74.2 per cent in Boustead Projects, as he also controls 43.1 per cent of Boustead Singapore. Wong is also deemed interested in a 19.3 per cent stake of Boustead Singapore held through nominees. Wong will act in concert with Boustead Singapore to take Boustead Projects private. The offer does not extend to his 19.3 per cent stake held through nominees.

Wong and his son Wong Yu Loon will abstain from any decision-making as directors in connection with the privatisation.

Shares of Boustead Singapore were trading at S$0.855 as of 2.26 pm, up 3.6 per cent.