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The Truth About Boustead Singapore's 1H FY2026 Profit Drop They Didn't Show · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  Okay, let's unpack this. We are diving into a company with just an extraordinary
• 0:12
  history, Boosted Singapore Limited.
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  We're talking about a company founded way, way back in 1828.
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  It's often cited as Singapore's oldest continuously operating business,
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  but they are very much a modern global infrastructure and technology group today.
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  They're all over the place. Asia, Australia, Europe, the Americas.
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  A phenomenal legacy. And so what we're going to do in this deep dive is really
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  get straight to the core of their latest results. Exactly.
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  We're looking at the unaudited financials for the first half of fiscal year
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  2026. That's the six months ending September 30, 2025.
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  Our mission is to figure out what
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  drove the performance and maybe more importantly, what the outlook is.
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  And we really have to start with the tone, which was set by the CEO, Mr. Juan Fanfui.
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  He didn't pull any punches, did he? Not at all. He used phrases like a very
• 1:03
  challenging operating environment and a tapered investment climate.
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  So, you know, right away, that sets the expectation that these aren't going
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  to be stellar results. Yeah, that language is a clear signal.
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  And the headline numbers confirm it immediately.
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  Group revenue was marginally lower year on year.
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  It was $294.0 million this half versus $295.2 million last year.
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  So it's basically flat. I mean, in this kind of inflationary environment,
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  flat is effectively going backwards.
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  It's stagnation, precisely. Now, here's where it gets a little tricky.
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  And it's the first thing you notice when you read the report. OK.
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  If you look at the statutory net profit, it only dropped by 3% to S$34.9 million.
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  Right. And if the environment is so terrible, a 3% dip sounds almost like a
• 1:49
  win, you know. It does seem acceptable, doesn't it?
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  But the company in their own report immediately steers you away from that figure.
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  They point you to a much, much starker one.
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  A 27% drop in their adjusted net profit. So why are they doing that?
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  Why tell us to focus on the much worse number?
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  Because that reported 3% drop isn't the real story of their operations.
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  That S$34.9 million figure was materially boosted by some one-off factors.
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  It's basically accounting noise.
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  Okay, so it's masking some underlying weakness. A lot of underlying weakness.
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  The reported number gives a false sense of security. So let's peel that back.
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  What was the specific windfall that made this statutory profit look better than it was?
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  The critical factor was a big swing in the share of loss from their associates
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  and joint ventures. Okay.
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  And this was almost entirely due to the reversal of a $7.0 million liability.
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  This was a fee that had been imposed by a landowner in a previous period.
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  And they managed to get it reversed this half. They did. And that's a huge non-operational
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  benefit that goes straight to the bottom line.
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  It has nothing to do with how well they sold their services this period.
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  I see. So if you want the clean apples-to-apples comparison of how the business
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  actually performed, you have to pull that $7 million out.
• 3:02
  Exactly. And the company does the math for you. They point you straight to the
• 3:05
  adjusted net profit of $28.1 million.
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  And that's the number that's down 27% year-on-year. That's the number.
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  And that tells you the true story of the profitability squeeze they were feeling.
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  And you can see that squeeze traveling all the way down the income statement.
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  Gross profit was 5% lower at S110.3 million dollars. And look at the gross margin.
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  It compressed from 40 percent in the last period down to 38 percent now.
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  And margin compression is always the first red flag, right? Yeah.
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  It means you're taking on less profitable work or your costs are going up and
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  you can't pass them on. It's a classic sign of operational stress.
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  And it connects perfectly back to that challenging environment the CEO mentioned.
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  Because at the same time, their expenses were also climbing. Right.
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  Overhead selling, distribution, admin costs, they crept up 3 percent to S66.9 million dollars.
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  So they're making less on each sale. And it's costing them more to run the business.
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  And don't forget the cost of money. Finance expenses shot up 30%,
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  a really substantial jump to S1.2 million dollars.
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  Which is a direct result of higher interest rates and more borrowing. Yes. So you add it all up.
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  Lower gross profit, higher overheads, rising debt costs.
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  It all led to their underlying operating profit being 9% lower than last year. It was a tough half.
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  Okay, but here's where it gets really interesting, because that overall sluggishness,
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  it hides these radically different stories happening within their four divisions.
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  It's truly a tale of two halves.
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  Let's start with the champion, then. The geospatial division.
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  This was the undisputed winner. Absolutely. It didn't just meet expectations.
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  It actually surpassed its previous half-year revenue record.
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  Revenue was up a strong 10% to $118.7 million, a fantastic result that really
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  bucks the overall trend of the group.
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  And what I find fascinating is the quality of that growth. It wasn't just,
• 4:52
  you know, one-off hardware sales.
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  No, it was fueled by a higher percentage of multi-year subscription contracts,
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  specifically in key moments like Australia and Singapore.
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  That's high-quality recurring revenue. And that translated directly to the bottom
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  line. Their operating profit grew 19 percent.
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  That shift to a subscription model is so important. It gives them predictable
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  income and insulates them just a little from that tapered investment climate
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  affecting the rest of the business. It's a huge positive signal.
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  OK, now let's pivot to the real estate solutions division.
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  This is where we start to see the pain. Or maybe patience is the better word.
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  Patience is a good way to put it.
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  This segment saw revenue down 9 percent to TIS 95.6 million dollars.
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  Now, you might see that and assume, you know, the market's weak, deals are stalled.
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  But the company gave a very specific reason for this. They did.
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  This is a classic timing issue that you see in big construction and engineering projects.
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  Right. They said the revenue decline was because most of their major projects
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  are still in their earlier stages.
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  So under accounting rules, you can only recognize revenue as you hit certain milestones.
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  If the big milestones haven't been hit yet, the revenue looks low,
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  even if you're spending a ton of money and doing a lot of work. Exactly.
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  The work is happening, but the revenue just isn't on the books yet.
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  We need to remember that detail because it comes back in a big way when we talk about cash flow.
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  OK, now for a completely different kind of problem over in the energy engineering
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  division, revenue there was just marginally lower, down one percent.
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  Yeah, went up seventy four point three million dollars.
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  But this division was facing some serious external headwinds,
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  geopolitical, regulatory issues.
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  The primary one being the ongoing U.S. tariff situation. Correct.
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  And the hit to their profitability was just brutal, way out of proportion to
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  the revenue debt. That's what I was looking at.
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  While revenue was almost flat, the operating profit for energy engineering dropped
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  by 57 percent. A 57 percent decline.
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  That is the single biggest operational red flag in this whole report.
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  It tells you they were forced to take on work with severely compressed,
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  maybe even negative margins just to keep business flowing. Wow.
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  And finally, the smallest division, health care, saw the biggest percentage
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  drop in revenue. It plummeted 24 percent.
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  To $5.2 million. But that drop is really just an artifact of the comparison.
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  It's a bit misleading. The prior year had this massive one-off turnkey contract that was completed.
• 7:23
  Ah, I see. So when you take a huge non-recurring item out of the comparison,
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  the year-on-year number is going to look terrible, even if the core business is doing just fine.
• 7:31
  Exactly. It just makes the prior period look abnormally high.
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  Okay, so let's shift focus from the P&L to the balance sheet.
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  This is where we look for stability.
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  How's their financial health holding up in this tough environment?
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  It's robust, and that's vital.
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  Their net asset value per share held almost perfectly steady at 117.9 cents.
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  And critically, their liquidity is excellent. Okay, what are the numbers there?
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  The net liquid position, so that's cash, net receivables, minus all their borrowings,
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  it actually increased to a very healthy S 210.3 million dollars.
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  That's about 41.7 cents per share. That sounds strong.
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  But here's the thing that confuses me. If they're so liquid,
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  why does the cash flow statement show a big strain?
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  This is where all the pieces of the puzzle come together. You're right.
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  Despite reporting profits, the group had a net cash outflow from operating activities
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  of S-19.8 million dollars.
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  Cash was walking out the door. And the driver for that was a huge negative change
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  in working capital, right? S-58.3 million dollars. Supply-silly.
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  And what was the single largest part of that negative change?
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  A marked increase in net contract assets. Within the real estate solutions division.
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  There it is. The story confirms itself.
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  That timing issue isn't just an accounting quirk. It's a real-world cash drain right now.
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  So they're sinking capital-buying materials, paying workers on those projects
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  that are in their earlier stages, way in excess of what they've actually billed
• 8:54
  their clients for so far. Yes.
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  They are pre-funding these massive projects, but because their balance sheet
• 9:01
  and liquidity are so strong, they can afford to do it. It's a sign of confidence, really.
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  And that confidence allowed them to maintain the interim cash dividend at 1.5
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  cents per share, same as last year.
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  They basically said, look, our core businesses are reasonably profitable and
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  we have a healthy net cash position to weather this temporary working capital swing.
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  Okay, so let's talk about that future. What's the pipeline look like for the
• 9:25
  second half of the year? The pipeline suggests real confidence.
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  The group's engineering order backlog is sitting at about S-396 million dollars.
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  396 million. That is a very healthy number. It is. And it's the key to unlocking
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  that cash we just talked about.
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  S-274 million dollars of that backlog is in real estate solutions.
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  So as those projects move past the earlier stages and hit their payment milestones,
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  that revenue and cash should start flowing in a big way in the second half.
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  That's the expectation. And the remaining S-122 million dollars is in energy
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  engineering. Plus, they're still signing new deals.
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  Yeah. They secured S-193 million dollars in new contracts since the half began.
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  And another big one in November, post-period.
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  Worth over $100 million. So they are busy. All of which supports their official outlook.
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  They expect to deliver satisfactory results in FY2026, barring anything unforeseen.
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  But beyond just the operations, there's this massive strategic move they're
• 10:26
  making that could fundamentally change the company's structure.
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  You're talking about the listing of the UI boosted REIT on the Singapore exchange.
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  Exactly. This is a huge play.
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  It is. And the purpose is critical. It's a two-pronged strategy.
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  First, it's to monetize the real market value of their real estate portfolio
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  to get that value reflected properly.
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  Right, instead of just having it sit on the balance sheet at book value.
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  And second, it's about consolidating all those assets into one specialized vehicle.
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  But the real strategic benefit here isn't just a tidy balance sheet.
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  It's the cash. It's a massive cash injection it provides. Absolutely.
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  This is all about the recycling of capital. They are selling mature.
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  Valuable assets to the public market to raise a ton of cash.
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  And that cash is then freed up to be redeployed into the high growth parts of
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  the business. That's the plan.
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  You use that new capital base to future-proof the core businesses.
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  Maybe you accelerate growth in the already successful geospatial division through
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  acquisitions, or you stabilize the volatile energy engineering segment.
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  You're shifting from just holding passive assets to actively managing capital for growth.
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  So to summarize this deep dive, 1HFY2026 was, well, it was a complex half.
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  The operational core got squeezed, leading to that 27% drop in adjusted profit,
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  which was masked by that one-off reversal.
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  But the underlying story is one of resilience.
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  Financial health is strong. It's anchored by that record performance in the geospatial division.
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  And the challenges in real estate, like the negative cash flow,
• 11:55
  look temporary because they're backed by that massive S396 million dollar order backlog.
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  And the whole operation is gearing up for this major structural change with the REIT listing.
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  That focus on capital recycling seems to be the key to their entire forward-looking strategy.
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  And this raises a really interesting question for you, the listener, to think about.
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  Given that their whole strategy now involves actively listing these assets to
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  monetize the portfolio and recycle capital, this suggests a big potential shift.
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  How much will the group's identity evolve from its traditional role as an infrastructure
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  engineering group to something more like a prominent real estate asset manager,
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  or even a strategic investment firm that's just leveraging this huge new capital base.
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  A fascinating potential transformation for a company that's been around for
• 12:41
  nearly two centuries. Thank you for joining us for this deep dive.