Boustead

[kennynah]

.. FF Wong (CEO of Boustead) has purchased 1,000,000 shares at a price of S$0.86 on April 13, 2010. 160,000 shares were purchased from the open market while the remaining 840,000 shares were bought through a married deal. With this transaction, his stake in Boustead rises to 33.01% or 166,819,208 shares.

wah... very rich man.... you shareholders should meet him ask him out for kopi-o... your right as a shareholder to speak with the manager in charge...

[Poles]

why pay more??

[kennynah]

there's so much money aeroplane one can fold in the office....

[Musicwhiz]

why pay more??

Hi Poland,

There are several ways of going about trying to answer this question.

1) Ask the CEO himself by inviting him for tea
2) Try to infer the reason(s) for the purchase which was nearly double the price which he paid a year back, by examining the recent corporate announcements, financials and prospects/plans of the Group to determine if the shares still offer value

I would think going about (2) is much more tedious than diong (1), but the problem with Option (1) is that most of us cannot cozy up to the CEO of a listed company to find out more about the reasons for purchase, and anyway he is under no obligation to disclose more than he should (actually, legally if he has any inside news he is not allowed to divulge it either).

Note that his purchase was made on April 13, 2010, more than 1.5 months before the release of the full-year 2010 results due some time in late May 2010. I think there's a rule which states that insiders are not allowed to buy/sell shares of the company within +/- 1 month of the release of the financial results. Hence, we can perceive his buying as "buying in advance" as by mid-April he should have some idea of the strength of the full-year results (most companies try to close year-end books by the 10th to 11th of the month).

In addition, in his position as CEO, I am sure he has information on the various divisions' plans and how they will perform, as well as industry knowledge gained from years of experience on the job. Queries and enquiries' volume will also dictate the state of the economy and industry many months down the road, so from a top-down perspective it will be easy to see if the business is recovering for Boustead.

It would make logical sense for him to consider buying shares back at depressed prices one year ago, but now, in the presence of additional clarity arising from the economic recovery, he may feel that the current S$0.86 offers good value.

Just the rantings of a small retail shareholder.

[helios]

Option 3:-

Last year, the CEO spoke on the ACE BlueSky Forum on 'Build and reinvent your business model' ... Do you attend such public forum platforms?

[Musicwhiz]

Option 3:-

Last year, the CEO spoke on the ACE BlueSky Forum on 'Build and reinvent your business model' ... Do you attend such public forum platforms?

Hi San San,

I read some excerpts from his speech but did not attend the forum itself.

[Musicwhiz]

Note: I am vested. Am very pleased they increased their cash balance (net cash is S$199 million), and also had strong operating cash inflows along with an increase in NAV. ROE was 20% in spite of the drop in profitability.

Business Times - 26 May 2010

Boustead proposes special div in spite of weaker FY2010 earnings

By ANGELA TAN

SINGAPORE - Boustead Singapore Limited reported on Wednesday its net profit for the fourth quarter ended March 31, 2010 fell 59 per cent to $14.2 million (US$10.0 million).

FY2010 net profit fell 28 per cent to $43.1 million.

The $67.8 million sale of an industrial leaseback asset coupled with a significant reduction in the share of results from associates were the main reasons for the decline in FY2010 net profit.

Fourth quarter revenue slumped 47 per cent to $101.6 million, while full year fell 15 per cent to $438.4 million.

Its core energy-related engineering revenue was negatively impacted by weakness of Pound Sterling.

Its board is proposing a final cash dividend of 2.5 cents per share, which together with the interim dividend of 1.5 cents per share would total 4.0 cents per share, comparable to FY2009.

In addition, due to its strong cash position, the board is proposing a special dividend of 1.5 cents per share.

During FY2010, cash and cash equivalents increased by $43.8 million (after taking into account the effect of foreign exchange rate changes) to $222.4 million.

The group expects to improve on its FY2010 performance in FY2011.

[millionairemind]

MW - Was this drop in profitability expected??

Is this going to affect your judgement on this company??

Will it be a continuing trend of declining profitabilities from now on??

I am not vested.. . (heck, I don't even have a single LONG position currently ) but am interested to hear from a FA pt of view.

[Musicwhiz]

MW - Was this drop in profitability expected?? - Yes, I had known about this since 1Q 2010 when CEO mentioned it. Recessions will come and go and company profits will rise and dip. What's more important is their cash flow generation ability, cos that's what pays my dividends!

Is this going to affect your judgement on this company?? I was slightly disappointed with certain aspects of the results (e.g. cancellation of the S$175 million project for Salcon), but understand that this is part of business deals (not all work out!). Knowing FF Wong is a conservative CEO and businessman (from the audiocast), I have faith that he can continue to deliver good results and ensure cash continues to flow into Boustead's coffers. In fact, he had rejected so many projects/contracts due to low IRR, and I admire him for standing by his principles (of not accepting a sub-par return for shareholders and not "diving in" recklessly).

Will it be a continuing trend of declining profitabilities from now on?? I wish I could give you a crystal ball to see that! Haha. The way I see it, profitability takes a back seat to cash flow generation, as accounting profit can sometimes be manipulated. Cash cannot unless it's outright fraud. I would think Boustead is able to, if not grow, then at least maintain their current profitability. Cash should continue to amass though.

I am not vested.. . (heck, I don't even have a single LONG position currently ) but am interested to hear from a FA pt of view.

Hi MM, please see replies in BOLD. Thanks.

[millionairemind]

Thanks for the reply.