Broker's Take: CIMB initiates coverage of Boustead Projects, S$1.04 target price

CIMB RESEARCH has initiated coverage of Boustead Projects with an "add" rating, and a target price of S$1.04, on hopes that the company will launch a Reit over the next few years. The stock was trading at S$0.805 at 9.20am on Monday.

"The recent project wins will bring the total asset base to about S$750 million by fiscal 2019, marking a significant step of Boustead Projects towards its goal of an eventual Reit listing," said CIMB Research in a report dated March 24. "We believe Boustead Projects could be ready for a Reit listing by FY20-21F. This could be expedited, in our view, if Boustead Projects pools its portfolio with private property owners."

This Reit launch could re-rate the stock to S$1.30-1.39, it added.

Boustead Projects is a market leader in the niche industrial design-and-build field, CIMB said. Its past customers include Airbus, Rolls-Royce, IBM, Applied Materials, P&G, GSK and DB Schenker.

"The partnership with mid-eastern sovereign fund ADIC since 2014 has relieved Boustead Projects from capital constraints to bid for sizeable projects," it added. Notable projects won by the partnership included recently announced Mediapolis Development worth about S$160 million and the GSK project of S$130 million in March 2015.

In 2016, Boustead Projects formed a strategic framework with a China state-owned enterprise, Guangdong New Co-Op Agricultural Products Wholesale Centre Investments, to develop agricultural and commodity logistic projects in China.

Its order book is worth S$170 million as at end of its fiscal third quarter.