Boustead sees better earnings as economy picks up

KUALA LUMPUR (April 7): Boustead Holdings Bhd is banking on better economy, higher government spending and higher foreign direct investment (FDI) for better earnings this year.

Boustead deputy chairman and managing director Tan Sri Lodin Wok Kamaruddin, who is expecting a much better year for Malaysians as a whole, said Boustead, as a diversified group, will benefit from that.

“We are in six key sectors of the Malaysian economy. With improved government spending, more economic activities, we will benefit directly and indirectly,” he told reporters after the company’s annual general meeting yesterday.

He said the government is bringing in more FDIs, which will spur demand for financing facilities and in turn benefit its banking arm.

Besides finance and investment, the group is in plantation, property, pharmaceutical, trading and industrial, and heavy industries.

Lodin, who expects all the group’s sectors to be resilient this year, does not discount the possibility that the group could see another boost from the disposals of more non-core assets, just like last year.

“It is yet to be seen. We will recognise the land sale in Seberang Perai Utara in the third quarter of this year. We will continue to look at restructuring the group by disposing of non-core assets,” he said.

He was referring to Boustead Plantations Bhd’s proposed sale of five adjoining freehold plots in Seberang Perai Utara, Penang, measuring 677.78ha in all, to a subsidiary of S P Setia Bhd for RM620.1 million. Boustead Plantations would gain some RM526 million from the sale.

For the plantation business, Lodin said if crude palm oil price remains at RM2,600 to RM2,700 per tonne, the group will enjoy an attractive margin as its production cost per tonne was RM1,600.

On its property development sector, which was the group’s main earnings driver last year, he said the group’s projects will continue to attract interest given their strategic locations, and cited the group’s township development Mutiara Rini in Skudai, Johor, and its high-end condominium One Cochrane in Kuala Lumpur, as examples.

The total gross development value of the group’s ongoing and new launches now stood at RM991 million.

On whether the group intends to spin off its investment properties and list as a real estate investment trust, Lodin did not discount that possibility, though it wouldn’t happen in the near term. The group has eight hotels, several office buildings and shopping complexes.

As for its shipbuilding business, which turned around last year, Lodin said the RM7.5 billion orders it had secured so far can last it up to seven years.

Lodin also said Boustead plans to open 15 to 20 BHPetrol stations this year and add convenient stores to its existing petrol stations to bring in more income.

Boustead has earmarked RM700 million for its capital expenditure this year, mainly to fund the construction of the Nucleus Tower in Mutiara Damansara, the development of the Royale Chulan Cherating, as well as to partly finance some of the new BHPetrol stations.

Boustead’s FY16 net profit grew 28-fold to RM369 million, from RM13.2 million in FY15, though revenue slid 3% to RM8.37 billion, from RM8.66 billion.

This article first appeared in The Edge Financial Daily, on April 7, 2017.

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