Boustead

Businesses

1. Energy Related Engineering (24% Revenue) (Doing well)

• Downstream Oil & Gas / Petrochemical Infrastructure (Doing well)
• Global leader in designing, engineering and supplying waste heat recovery units (WHRUs)
• Upstream Oil & Gas / Petrochemical Infrastructure (Doing well)
• Well-recognised leader in supplying wellhead control systems, hydraulic power units, integrated control and safety shutdown systems, chemical injection skids, fire and gas detection systems and other process control systems.
• Solid Waste Energy Recovery
• Regional specialist in designing, engineering and supplying mini-power plants, solid waste energy recovery plants and associated combustion technology

2. Water & Waste water Related Engineering (5% Revenue)

• Seawater desalination, ion exchange, waste water reclamation (Shifting toward high-end, niche market)

3. Real Estate Solutions (49% Revenue)

• Designing and building industrial buildings, in Singapore

4. Geo-spatial Technology (22% Revenue) (Doing well)

• Exclusive distributor of Esri for Singapore, Malaysia, Indonesia, Brunei, Bangladesh, Timor Leste and Australia. Esri is the global leader of geographic information systems.

General Market Cycle

Bull Market

• Average 3 yrs 6 mths

Speculative Phase

• ~ 1 year
• Up almost every month
• Due to government policies to try to boost confidence
• Economy still in bad shape
• Unemployment still high
• Economic outlook bleak
• Interest Rates very low
• Blue chips will run first, then smaller stocks

Consolidation Phase

• ~ 9 months to 2 years
• Less than 3 consecutive months of index going up
• Experts questioning the effectiveness of government policies
• Eg. Double dip recession possible?
• Every 10 - 15% drop in index is good time to accumulate

Growth Phase

• Economy starts to pick up
• Unemployment improving but still high
• Economic outlook better but still uncertain
• Interest Rates still low
• Historical high not broken

Super-growth Phase

• Economic outlook very good
• US GDP > 3.5%
• Historical high broken
• Interest rates > 3.5%

Bear Market

• 3 consecutive down months
• Index drop by 30%

Karin Analysis

What it does

1. Distribute electronic components and cables.
2. Provide integrated circuit application design solutions to electronic manufacturers.
3. Provide computer data storage management solutions and services.
4. Distribute consumer electronic products in China. (Apple Inc products, something like epicenter)

Financials

Please note that all figures are reported in HKD. Divide by 6.25 to convert to SGD.

Why buy?
1. Karin's Revenue been increasing. Please note that Karin has recently gone into distribution of Apple products, a high revenue, low margin business (not necessarily bad! lots of business to be made!)

(Total revenue of Karin for 5 years starting from 2008 on the right)

 2. Karin's Operating Income has also been increasing significantly over the years.

(Net income of Karin for 5 years starting from 2008 on the right)

3. Dividends has been stable and relatively high. 2012 dividends works out to be about 5% p.a. (price at $0.32)

(Dividends per share of Karin for 5 years starting from 2008 on the right)

4. Cash has been consistently increasing over the years. Cash per share is about $0.06. (About 20% of share price at $0.32)

(Cash + equivalents of Karin for 5 years starting from 2008 on the right)

5. Almost zero long term debt.

(LT Debts of Karin for 5 years starting from 2008 on the right)

6. Equity increasing steadily at a good rate.

(Equity of Karin for 5 years starting from 2008 on the right)

Why not?
1. Although at quite a slow rate, number of shares has been increasing, diluting shareholder's value.

(Total common shares outstanding of Karin for 5 years starting from 2008 on the right)

Value

1. Book Value per share: $0.37
2. P/E: 7.0

Final Verdict

Although number of outstanding common shares are increasing faster than we would like, Karin has strong income statements, balanced sheets, growth rate and value. Growth in equity overwhelms growth in number of shares. Definitely worth considering.

Sarin Analysis

What it does

1. Sells precision technology products for the planning, processing, evaluation & measurement of diamonds and gemstones

Business

Sarin is the only listed company in this business of diamond processing, evaluation and measuring. It has a full suite of products for all the requirements from when the diamond is mined to when people buy diamonds from a retail shop. Below are the processes which require precision technology that Sarin provides (taken from 2011 Annual Report).


 Click here for the list of all Sarin's products.

 Financials

Why buy?
1. Sarin's Revenue been increasing, especially in the last 2 years.


2. Sarin's Operating Income has also been increasing significantly over the years.


3. Cash has been consistently increasing over the years. Cash per share is about $0.10 - 0.15


4. Divident is relatively high and consistent. Divident of about 3% annually. Promised 38% payout of earnings by management (as seen by 2009 Annual Report below). Actual payout ratio is actually 50%.



5. Zero long term debt (which is especially impressive for a technology company with needs for large R&D spendings).


6. Operating cashflow positive and increasing over the years.


Why not?
1. nil

Value

1. Book Value per share: $0.17
2. P/E: 16.7
3. ROE: 39%

Paying a P/E of 16.7 with such a high growth rate is considered very reasonable.

Sarin does not include its branding in its financial accounts. Having an estimated 80% market share in the world in an industry where trust is of key importance is definitely worth something. (It is the reason why coca cola can trade at such high PE.)

Final Verdict

Sarin is definitely a company worth looking at. It has strong financials, good divident payouts, great business model and high growth rate. Although, one might be held back by the large increases in price recently, it is still cheap if growth rate and branding is taken into consideration.