Mike Kruger of MPK Partners presented his in-depth investment thesis on Boustead Projects (Singapore: AVM) at Best Ideas 2019.

Thesis summary:

Boustead Projects does the design and project management of Class A industrial real estate in Southeast Asia for multinational corporations in high-value industries; actual construction work is outsourced. Since 2010, Boustead has used its balance sheet to build certain properties, which are then leased to the client. Despite this, net cash is one-fourth of the recent market cap.

The shares recently traded at less than one-third of NAV. Boustead is not a typical family-owned Asian real estate stock that languishes at a discount with no catalyst in sight. Founder FF Wong has delivered a compounded total return to shareholders of 18+% since 2000.

Two catalysts are in place: First, backlog has soared 150+% to all-time highs recently, which should benefit earnings by the June 2019 quarter. Second, Boustead will likely put its owned properties into a REIT (comps at 1.0x NAV of higher) over the next couple of years.

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About the instructor:

Mike Kruger’s first investment experience was watching his shares of Berkshire Hathaway get cut in half during the tech-mania of the late 1990’s. But he didn’t panic, and today manages a global focused value portfolio of equities and distressed debt in New York City. He previously worked as a former equity and credit analyst at Promethean Asset Management LLC in NYC, and prior to that as a high-yield credit analyst at Liberty Mutual in Boston. He holds a Bachelor’s degree from the College of Arts and Sciences at Cornell University.