Boustead AGM – 26.07.13

This evening’s Boustead Annual General Meeting (AGM) was held at the Roxy Square and as I happened to attend this event, I would like to summarize and recap what has been discussed to fellow and potential investors who might be interested in the company.

 

This is also my first time seeing the Chairman of Boustead, Mr. Wong live in person. He seems to be very humorous, joyful, fun and light hearted towards the shareholders. Definitely one of the more fun-going Chairman I have witnessed in the AGM.

 

Without further a due, we’ll begin with the Q&A sections of the EGM and AGM.

 

 

 

As the EGM was scheduled ahead of the AGM, the one and only resolution was to pay in scrip-dividend method. One of the queries asked was why Boustead continued to elect for a scrip-dividend when its take-up rate is low and which may take up unnecessary admin costs. The reply given to this from the Board was that the admin fee costs are very minimal (<S$10K), but they would consider to cancel off the scrip-dividend method in the future if response are unfavorable.

 

The next question relates to the Real Estate division and as expected the query for REITS came out. One of the shareholder asked about the direction Boustead is going to take the Real Estate division moving forward – whether the company is moving into the direction of building a non-industrial design facility to sectors like Rolls Royce or building industrial properties to have it eventually inject into a REIT. Mr. Wong responded by saying that the company would still take up contracts unrelated to industrial design because of its attractive returns. As for the REIT, the one thing Mr. Wong had regretted about it was that Boustead had sold industrial properties to Mapletree group in the past, only to have them listed as what investors now known as the “Mapletree Industrial Trust (MIT)” with former Boustead industrial properties. If they had set up a REIT back then, he would have not sold off its properties to competitors in order to raise cash.

 

The next question to the Board was at which direction and profit margin is Boustead going to focus on its 4 core businesses in the next couple of years. Mr. Wong responded by saying that the Energy Related division is always going to be the drive for Boustead and foresees a growth of 10% year on year on the Energy related division. As for the Water & Wastewater Engineering division, order book has been piling up but margins are low and competition is higher, thus resulting in a low growth division compared to the other 3. The Real Estate division is tricky because it depends on the lumpy orderbook but just having said this, Boustead has managed to secure a mega $100m contract for Seagate which is something the company can look out favorably for. The company is also in the midst of negotiating a couple of other mega contracts in the process.

 

There was also one shareholder who raised the question on gain/loss on available-for-sale investments on Notes 31 of the Annual Report. The Board responded by saying that the company has invested in an Australian-listed stock and made a minor gain realized on its books. IMO, I’m quite unsure why Boustead is moving into all these share investment. Is that even necessary at all?

 

The next question was raised on the Libya project. Whilst the total project and losses are already written off in the book, the company is still in the midst of legal claims sued by banks on non-performing loans. If find liable, the company will have to pay off $28m for the claims. The Board however, assured investors that the company is most likely to win the battle and with that they did not make any provisions to their books.

 

Last but not least, Mr. Wong has assured shareholders that Boustead is moving into the right direction with all the growth related divisions making good progress over the last couple of years. The huge pile of cash Boustead is holding right now will be invested in a low risk blue chip bonds such as CapitaLand and Biosensor. When opportunity arises, Boustead is going to reap its rewards from it.

 

I haven’t been able to summarize all the discussions over the AGM but hope I have put out the overall picture there. Boustead isn’t the easiest business to understand (you might disagree with me) and with lumpy contracts, earnings are not going to be easy to project and recurring. For fellow shareholders who went to the AGM this evening, appreciate if you could share more on the discussion on Boustead.

 

*I apologize if any of the above stated is incorrect.