Boustead Holdings Bhd (Nov 30, RM5.34) Maintain buy at RM5.25 with revised target price RM5.96 (from RM6.70): Boustead Holdings reported 9MFY10 net profit that came to 61% of our full-year estimates and 62% of consensus estimates. Earnings of Boustead Naval Shipyard (BNS), in which the company owns 80%, came in below our projections. We had projected for higher recognition from the RM700 million SLEP (Service Life Extension) job this year than was actually recognised. We expected about RM100 million would be recognised this year but in 3Q only RM25 million has been recognised so far. The group notes that recognition will be higher towards the end of the five-year job and as such we revise our estimates for that.

For the 9MFY10 period, the group has seen year-on-year fresh fruit bunch (FFB) growth of 1% so far, better than the industry average decline of 1%. Higher crude palm oil average selling price (CPO ASP) in 4Q will give numbers a boost. To note, CPO ASP for the quarter was at RM2,565 per tonne compared with Malaysian Palm Oil Board average of RM2,637 per tonne.

We view that 2011 will be a better year. Besides the full-year contributions from the SLEP job, earnings from the RM1.3 billion submarine service contract will also kick in. The maiden contributions from Pharmaniaga will come in 2011 and possibly the six recently awarded vessel jobs that could be worth RM7 billion. A bonus for earnings would be a new property development project or sale of Sumatran estates. Also, CPO ASP forecast in FY11 is higher at RM2,700 compared with FY10's RM2,600. We project 28% EPS growth in FY11.

We adjust FY10 numbers down by 12.8% to reflect lower BNS earnings. FY11 is also adjusted down for BNS earnings as well as from higher interest expense following the RM600 million MTN issuance. FY12 is only adjusted for higher interest expense. With the adjustment to FY11 EPS, our target price (TP) reduces from RM6.70 to RM5.96 and with a 12% upside, we maintain our 'buy' call. To recap, our TP is derived from FY11 EPS pegging a 12 times PER (+1 standard deviation above historical average). We view this as justified as the group has managed to trade up to 14 times previously when CPO prices exceeded RM3,000 per tonne and BNS numbers were strong from the navy vessel contributions. Also, dividend payout has outperformed ours as of 3Q (27 sen payout versus our 23 sen estimate) and we are raising our full-year payout estimate to 34 sen. As such, we are expecting a 7 sen single tier final dividend in 4QFY10. -  ECM Libra Investment Research