Wednesday, January 19, 2011

Boustead - worth your consideration

Boustead in 4 main divisions:

(a) Energy related engineering – provides vital process technologies for oil & gas/petrochemical industries, solid waste energy recovery, utilizing attentive fuels

(b) Water & wastewater engineering – for industrial and municipal plants

(c) Real estate solutions – provide designs and build engineering expertise on industrial parks & facilities, as well as new townships

(d) Geo-spatial technology – location intelligence solutions

Let’s segment Boustead to some key qualitative areas:

1) Value preposition:
Branding & trust
Recognition & reputation
Low cost to imitation (e.g. Geo Spatial)
Global presence

2) Market segment:
Cater to specialized groups of companies as their clientele – segment marketing approach

3) Core competencies:
Delivery of quality results with trust and credibility built over the past 180 years, using asset-light strategy with a focus on low debt position and an emphasis on net cash/free cash flow

Strong management with FF Wong steering the company forward whom won awards and voted by Forbes as one of the top one of the Asia Pacific’s 200 best corporations under US$1 billion in revenue in 2008 and 2009

Unique focused differentiation for energy-related (BIH), real estate solutions and geo-spatial technology

4) Sustainable Competitive advantage – 3 yes and 1 no

Valuable capabilities – yes

Firms may not deliver similar and consistent optimum results like Boustead whom have years of experiences and reputation as a trusted partner. Hence, repeat clientele to justify its value

Rare capabilities – no

For example, water and wasterwater engineering division may face stiff competition from technology-based companies and other state/corporate-owned enterprises worldwide

Costly to imitate – yes

The brand name and recognition of Boustead has positioned well into the minds of corporate, such that a company with similar offerings will find it hard to replicate the high level of standard. Another point is the Geo-Spatial technology that is something which is niche-based and not easy to imitate

Non-substitutable capabilities – yes

Have strategic equivalents – unique processes and solutions to drive results, such as the new townships expertise offered in the real estate solution division

5) Distribution/infrastructure/value chain:
Good partner networks globally

6) Tangible and intangible internal resources:
Financial – yes
Reputational – yes
Technological – yes (e.g. geo-spatial “ESRI” software)
Physical – yes (e.g. boilers to power plant)
Structural – yes (e.g. well-defined organization structure)
Others – yes (e.g. in-depth knowledge in executing the deliverables)

7) Possible risks:
Revenue is contract-based, dependable on market conditions at times, therefore run the risk of order book cancellation

Earnings could be split by %-% payment terms – possibility of clients' default during bad times or negotiate to lower payment/extending credit

Salcon faced by competitive pressures from water technology firms whom innovates

Vested in Boustead :)

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