Boustead Singapore Offers $213M Buyout of Property and Engineering Division

SGX-listed investment firm Boustead Singapore is proposing to take its property and construction division Boustead Projects private in an offer that values the company at S$281.9 million ($212.5 million), adding to a recent flurry of property company buyouts.

Boustead Singapore offered on Monday to pay S$0.90 per share in cash to acquire the equity it does not already own in Boustead Projects with a goal of delisting its subsidiary from the Singapore Exchange to focus on rebuilding and streamlining its operations, especially its pandemic-hit engineering and construction business, according to a regulatory filing.

“The proposed acquisition will allow the offeror to simplify the group structure and reduce organisational complexity, providing the offeror with greater control and flexibility to mobilise and optimise its resources across its businesses,” the statement read. “The simplified group structure will allow for a sharper focus in operations and increase competitiveness, enhancing shareholder value.”

The Boustead offer for its property division, which has seen its stock slide 10 percent over the past year, marks the third privatisation scheme involving Singapore-listed property firms in the past six months, with this latest announcement coming in a little over week before the latest expiration date for a S$588 million all-case buyout bid for Chip Eng Seng which was first announced on 24 November.

Discounted Offer

The take-private bid favours Boustead Singapore according to Khang Chuen Ong, equity research analyst at CGS-CIMB Securities, noting that the offer price represents a 50 percent discount to his target revalued net asset value (RNAV) – which adjusts company’s assets and liabilities to market value – for the property firm of S$1.79 per share. In its 2022 annual report, Boustead Projects showed a net asset value per share of S$125.3, which was down from S$136.9 in 2021.

Despite the markdown, Ong sees the deal as beneficial to Boustead Projects as the parent company’s financial strength will allow it to support growth.

“Boustead Singapore has a strong net cash position with minimal capex needs – we think this can be tapped into by BPL (Boustead Projects) which recently entered into various investments/partnerships to chart its next leg of growth,” he said.

Boustead Singapore argued the offer gives shareholders an opportunity to cash in on their investment quickly, without incurring brokerage costs and at a premium to prevailing market prices considering the stock’s low daily trading volume.

At S$0.90 per share, the offer price is 7.8 percent greater than the stock’s last traded price of S$0.835 apiece on 3 February, and 1.3 percent more than the volume-weighted average price of S$0.889 for the 12 months before that last trading date.

Boustead Singapore said taking its listed unit private will not only help it focus on rebuilding its engineering and construction business, but will also reduce reporting and compliance related obligations related to being a listed company.

Following the announcement, shares in Boustead Projects rose 8.33 percent to S$0.91 each on Tuesday from S$0.84 apiece on Monday.

The group’s net profit plummeted by 91 percent to S$11.3 million in the financial year ending March 2022 from a record S$131.7 million the year prior when it booked a one-off gain from a set of assets it divested to Boustead Industrial Fund.

Last year’s net profit was also less than half its bottom line of S$30.6 million for its 2019 financial year.

Growing Portfolio

In its real estate development business, Boustead Projects had five wholly-owned properties worth S$110 million across Singapore, China and Vietnam as of end-September, in addition to stakes in five joint venture projects valued at S$516 million.

Its Boustead Industrial Fund – a real estate trust which it sponsors and manages with Metro Holdings and which is backed by an unnamed institutional investor – is set to have S$749 million in total assets under management across 16 properties in Singapore should it follow through on a S$98.8 million deal to purchase the J’Forte Building announced last week.

While Boustead and Metro have not revealed the identity of the institutional backer for the industrial fund, Boustead in 2017 had set up a joint venture with the Abu Dhabi Investment Council (ADIC) through a fund managed by UBS Asset Management.

Last June, the property firm led a consortium in acquiring an 18-storey commercial tower at 28 and 30 Bideford Road near Singapore’s Orchard Road for S$515 million. The property added to its real estate portfolio that already features ALICE@Mediapolis smart business park in One-North and GSK Asia House in nearby Rochester Park.

It also teamed up with Vietnamese conglomerate Khai Toan Joint Stock Company last May in a joint venture to acquire, develop and own a portfolio of logistics and industrial properties across the Southeast Asian nation.

Privatisations Gain Momentum

Boustead Singapore’s offer today places it among a growing club of Singapore investors looking to privatise publicly listed property vehicles, including mainland money managers Celine and Gordon Tang, who are struggling to close a S$588 million deal to buy out Chip Eng Seng.

Having already sweetened their offer for the Singapore listed builder to S$0.75 per share, the Tangs’ investment firm, Tang Dynasty Treasure, has now twice extended the original 5 January closing date for the privatisation with the latest deadline set for 16 February.

In September, Frasers Property’s proposal to privatise Frasers Hospitality Trust at S$0.70 per share failed to attract enough acceptances to clear the 75 percent threshold after valuing the REIT at S$1.35 billion.

That same month, local property player Hwa Hong Corp was delisted from the Singapore Exchange following a successful S$261 million privatisation deal following a long-standing dispute among members of the family which controls the company.