Growing switchgear order book
Strong demand for mission-critical switchgears. SMB United announced that
its order book has expanded from S$40m in Aug 07 to current S$54m worth of
contracts for switchgears and related services. This includes contracts worth
S$21m for the supply of switchgears and dynamic UPS (uninterrupted power
supply) from a wafer fab plant. We believe is referring to IM Flash Technologies,
a JV between Intel and Micron at Woodlands. Other notable contracts include
Changi Prison, Orchard Turn and several data centres in Singapore. 40% of
these orders will be completed by end-2007 and the balance in 1H08.
SMB United’s second switchgear plant in Singapore (adjacent to existing factory)
will commence production in 4Q07. This will double total production floor space
available in Singapore to 120,000sf. The company will also kick-start the new
production facility in Vietnam in FY08, which will benefit from the strong demand
from the increased construction activities.
Contracts from IRs to provide catalyst. The Building & Construction Authority
(BCA) has revised its construction demand forecast for 2007 upward from
between S$17b and S$19b to between S$19b and S$22b, representing growth
of 18% to 37%. Major projects to be awarded in 2H07 include Khoo Teck Puat
Hospital, construction parcels for the two integrated resorts (IRs), redevelopment
of Ocean Building and several large-scale residential developments. More office
space and hotels are also being developed to meet increasing market demand.
SMB United is a strong contender for contracts from the two IRs at Marina Bay
and Sentosa due to solid track record in Singapore.
SMB United is a proxy to the recovery in the construction industry. Management
sees growing demand from the banking, semiconductor and marine offshore
sectors, which require mission-critical applications in their switchgear systems.
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