Rotary has clinched a S$48m EPC contract from PTT Tank Terminal Company Thailand, for the construction of an ammonia storage tank and facilities at the Map Phut petrochemical hub in Rayong Province, Thailand. The scope of work includes supply of equipment and materials, engineering, construction, commissioning and start-up of the PTT Tank Project. Work has commenced and would be completed months.

Rotary has also clinched two contracts worth S$36m from Neste Oil Singapore undertake work at Neste’s S$1.2bn NExBTL Renewable Diesel Plant in Tuas. The contracts are for electrical and instrumentation (E&I) work as well as mechanical, piping, painting and steel structures work. The mechanical and piping contract expected to be completed by Mar 2010 and the E&I installations, by mid-2010.

Industry awakens. These contracts fall within our contract-win assumptions for FY09- 10, in the range of S$50m-200m sizes expected for the South-East Asian region. With the worst of the recession behind us, it would be reasonable to expect more contracts that were earlier postponed. We believe the PTT and Neste projects mark the start of more regional contracts. The recent award of a US$10bn contract by the Merapoh Resources refinery project in Kedah, Malaysia to South Korea’s SK Group is another positive sign. Malaysia also has another US$4.6bn oil-refinery project in Perak state, in conjunction with a Qatar company. This project will comprise an oil refinery, a petrochemical plant and storage facilities, and is expected to come onstream in two years.

Order book. With these new orders, Rotary’s order book has been lifted to S$1.52bn. We believe there is scope for further growth in 2009 as there are still projects in the region, in particular, Malaysia and Indonesia.

Maintain Outperform and target price of S$0.90, still based on 11x CY10 P/E. More order wins and the successful execution of projects could be catalysts for its share price, we believe. Given a growing proportion of higher-margin overseas contracts in its order book, we will be reviewing our FY10-11 forecasts. Rotary is trading at 9.5x CY10 P/E, at a steep discount to its regional peers, Dialog in Malaysia and Sino-Thai Engineering (average 15.5x).