Boustead Singapore Limited - Largest contract to date

The S$74m contract to build a high-tech development at Ubi. Boustead
Singapore Limited (“Boustead” or the “Company”) announced on 30 July 2007
that its 91.7%-owned subsidiary, Boustead Projects Pte Ltd (“Boustead Projects”)
had been awarded an S$74m contract to design and build a high-tech
development to be located at the Ubi District, Singapore. The development will
have a gross floor area of over 42,200 square metres and will comprise two
connecting seven storeys glass buildings. Furthermore, the high-tech
development will feature enhanced power supply, a fibre optic network, wireless
connectivity, an integrated building management system and provisions for dual
feed power supply and backup power generators. The high specifications are
catered to the back-office functions of trans-national companies, as well as firms
in the precision engineering and information technology sectors. Completion of
the development is scheduled for December 2008.

Clinched five substantial projects since February this year. With this
announcement, Boustead Projects has in total announced five substantial
contracts since February this year. The contracts, awarded by reputable
multinational clients such as Agility International Logistics, Berg Propulsion, and
Qioptiq Singapore, speak volumes on Boustead Projects’ expertise and their
ability to timely deliver.

Going forward. While we are positive over the prospects of Boustead Projects
for the next 2 to 3 years, we are equally optimistic over the long term prospects
of Boustead’s Energy-Related Engineering division. The buoyant environment of
the oil and gas industry should benefit Boustead’s energy-related subsidiaries
(Boustead International Heaters Ltd and Controls & Electrics Pte Ltd).
• Assumption. Assuming completion of the high tech development by end of
December 2008, the entire project (to be completed approximately 14 months
from now) will span 8 months of FY08 and 6 months of FY09. As such, we
assume that 57% of the S$74m contract will be recognised in FY08 and 43% in
FY09.
• Valuation and Recommendaton. Our valuation of Boustead is based on the
sum-of-parts (SOP) approach. We continue to apply a 14x P/E multiple on FY08
EPS for the Geo-Spatial business division due to its strong niche presence in
providing geographic information systems to clients in South East Asia and
Australia. For Boustead’s Water and Wastewater division, we use an
undemanding 13x P/E multiple1. For the rest of Boustead’s engineering business
activities, we apply a P/E multiple of 15x2 on the estimated FY08 earnings in view
of Boustead’s engineering expertise (especially Boustead Projects’ strong design
and build capabilities). Our fair value is S$2.47, which translates to a FY08 P/E of
14.5x and FY08 P/B of 4.1x. Although our fair value represents only a 13%
upside, we upgrade our recommendation to BUY in view of our optimism that
there will be more contract announcements in the near term.