Boustead

Boustead: 4QFY15 net profit for the engineering group sagged 30% y/y to $17.9m, bringing FY15 earnings to $68.3m (-10%). Adjusting for non-recurring items and tax adjustments, core net profit for FY15 should have risen 3%.

Revenue for FY15 rose 8% to $556.4m, with the performance of its three main divisions as follows:
1) Energy-related engineering division - Revenue fell 4% to $190.3m, due to the challenging operating conditions in the O&G industry, which resulted in a slow depletion of the group’s order book backlog.

2) Geo-spatial technology division – Revenue crept up 3% to $110.6m, as demand remained firm across Australia and ASEAN.

3) Real estate solutions division – Revenue jumped 22% to $255.4m on more design-and-build sales. The on-going strategy is to expand the industrial leasehold portfolio to increase future recurring rental income.

Gross margin dipped marginally to 33% from 34%, while bottom-line was weighed by higher admin expenses (+21% to $52.4m), and a 36% spike in income tax to $22.6m, due to contributions from jurisdictions with higher tax rates.

The group's order book backlog currently stands at $388m, which should underpin revenue visibility over the year. It is however cautious of its business prospects given the current headwinds in the global O&G and industrial property markets.

While Boustead expects to remain profitable for FY16, the level of profitability is unlikely to match that of FY15 due mainly to the impact of the downturn in the O&G industry.

Proposed final DPS of 2¢, shaving FY15 payout (excluding dividend-in-specie of Boustead Projects) to 4¢ (FY14: 7¢), representing a yield of 2.8%.

At the current price, Boustead trades at 11.5x FY15 P/E and 1.93x P/B.