1. SIA Engineering secured a 3 year fleet management contract worth roughly USS$80m from Gulf Air. Under ther terms of the contract, SIAEC will work with Gulf Air to in house MRO services involving "A" checks and "C" checks, fleet management and other engineering services for 29 Airbus aircraft, half of which are narrow bodied aircraft, which typically has lower value maintenance content. This award complements an earlier award of US$21m, bring the total maintenance contract value to roughly US$100m.

2. Net Profit should rise by S$8m to S$215.6m in FY10 and $13m to $254.4m in FY11. We estimate that this contract by Gulf Air will offset about half of the SIAEC loss(-$15.6m in FY10) from the grounding of SIA's 17 aircraft. The discrepancy can be attributed to the fact that all of SIA's aricraft are larger longer haul aircraft with higher maintenance content. Even so, this is an extremeley positive development and shows SIAEC ability to diversify away from SIA.

3. Faith restored. The market has priced SIAEC at PE levels below the SARS period, which is unjustified, given that SIAEC ahs diversified substantially away from SIA. This contract is an added testament to the fact. Our previous price target of S$2.45 on the stock was based on 12x PE multiple, based on historical 8 year average. We maintain our price target given the ample 43% upside to our target price. Recommend BUY.