Stock Upgraded: Rotary price target raised to $0.745 by OCBC Research!

Rotary announced yesterday that it has secured an engineering, procurementand construction (EPC) project for Phase 7 petroleum storage and relatedfacilities on the Jurong Island. Oiltanking Singapore Ltd is the repeatcustomer, who has a working relationship with Rotary for the past 15 years.This latest contract win from Rotary will add S$41.0m to its order book,and we estimate that Rotary's current net order book is S$611.3m. Thislatest contract win has reinforced our belief that the huge UniversalTerminal contract secured in January will not crowd out its bread-andbutter small-mid size EPC contracts, as Rotary has the resources to handlethe record order books on hand. This contract win is expected to becompleted by end 2006, and we now expect net profit to rise fourfold YoY to S$33.5m in FY06 (vs. S$31.2m previously). We have raised our fair valueestimate for Rotary to S$0.745 (vs. S$0.73 previously), based on a similar2.2x P/B ratio, and 9x FY06 PER. We remain positive on Rotary's businessopportunities, which include the booming demand for petroleum storage inChina and Singapore and increasing works for offshore structures. MaintainBUY on Rotary.