Boustead

Boustead: Proposed to undertake a demerger of up to 49% stake in wholly-owned Boustead Projects (BP), by way of a distribution in specie to current shareholders. Subsequently, BP intends to seek listing on SGX's Main Board. However, no details have been given at this point on the number of shares that would be distributed. We opine that through the restructuring, Boustead will be able to unlock "hidden value" through more reflective valuations for the separate entities- holding co and real estate business, as opposed to having an appended conglomerate discount. BP is the group's real estate solutions provider with core engineering expertise in the design-and-build and development of build-to-suit projects comprising industrial facilities, industrial parks and business parks for multinational corporations and local enterprises. Its portfolio contains 14 industrial properties (13 Singapore, 1 China) worth an estimated market value of $367.5m, marked at an aggregate $162.5m on its books (as at Sep 2014). In addition, BP also part-owns four joint investments worth $21.6m, based on their costs. These will be adjusted upwards to their market valuation of $53m pending the spin off. Going forward, the real estate entity intends to undertake more industrial projects within Singapore and expand its portfolio of properties to grow recurring income stream, and may potentially undertake the formation of an industrial REIT. Boustead sits on Market Insight’s Value portfolio, and trades at 13.8x forward P/E and 2.6x P/B. The street has 3 Buy calls on Boustead with consensus TP of $2.23.