in CSC.CSC began in 1975 as Ching Soon

Engineering, undertaking excavation works and H-section steel piling works. In 1979, the

company diversified into reinforced concrete piling works and other general civil

engineering works. CSC was incorporated in 1997 as the holding company for the group

and was listed on the Singapore Exchange in April 1998.

CSC is now a leading specialist contractor in Singapore, specialising in the areas of

foundation and geotechnical engineering with strong design-and-build capability. Some

high profile foundation projects that were completed during FY03/06 include bored piling

for The Pinnacle @ Duxton and driven piling for oil storage tanks at Jurong Island.

Construction company Tat Hong (TAT SP, S$1.19, Neutral) and its related parties (the Tat

Hong group) became a major shareholder of CSC in 2005 through a general offer.

Following a series of transactions, the Tat Hong group now holds a collective stake of 52%

in CSC.

Two acquisitions to take CSC to the next level. CSC announced the acquisition of L&M

Foundation Specialist (L&MFS) for S$17.3m and the acquisition of G-Pile Sistem (G-Pile)

for a maximum RM27.5m in 2006. The purchase of L&MFS was completed in Nov 06 while

the purchase of G-Pile is still pending completion.

L&MFS is the profitable unit of LMI Group with a track record of 17 years in heavy

foundation piling. Besides being a major foundation and geotechnical engineering

specialist contractor in Singapore, L&MFS has significant presence in fast-growing

regional markets like Malaysia, Vietnam and the Philippines. As of Sep 06, L&MFS has an

order book of S$36.5m that will increase CSC?s order book by close to 70% from S$52.5m

to S$89m when combined.

G-Pile, on the other hand, provides high-capacity hydraulic jack-in piling services in

Malaysia and generated net profit of RM2.4m and revenue of RM44.1m in FY06/06. The

acquisition of G-Pile comes with an aggregate profit guarantee of RM7.6m for FY06/07

and FY06/08.

The acquisition of L&MFS and G-Pile will make CSC the biggest specialist foundation

engineering contractor in Singapore, as well as one of the largest in the region.CSC announced the acquisition of L&M

Foundation Specialist (L&MFS) for S$17.3m and the acquisition of G-Pile Sistem (G-Pile)

for a maximum RM27.5m in 2006. The purchase of L&MFS was completed in Nov 06 while

the purchase of G-Pile is still pending completion.

L&MFS is the profitable unit of LMI Group with a track record of 17 years in heavy

foundation piling. Besides being a major foundation and geotechnical engineering

specialist contractor in Singapore, L&MFS has significant presence in fast-growing

regional markets like Malaysia, Vietnam and the Philippines. As of Sep 06, L&MFS has an

order book of S$36.5m that will increase CSC?s order book by close to 70% from S$52.5m

to S$89m when combined.

G-Pile, on the other hand, provides high-capacity hydraulic jack-in piling services in

Malaysia and generated net profit of RM2.4m and revenue of RM44.1m in FY06/06. The

acquisition of G-Pile comes with an aggregate profit guarantee of RM7.6m for FY06/07

and FY06/08.

The acquisition of L&MFS and G-Pile will make CSC the biggest specialist foundation

engineering contractor in Singapore, as well as one of the largest in the region.

Poised to ride on construction boom. After several years of contraction, the

construction industry in Singapore is likely to have posed a strong turnaround in 2006 with

total construction demand estimated to be close to S$12bn. With the start of major projects

like the two integrated resorts, the Marina Bay Financial Centre (MBFC) and Orchard Turn,

as well as proposed petrochemical facilities on Jurong Island, the recovery of the

construction industry is gaining momentum. We understand that the foundation works for

one such mega project - the Marina Bay Integrated Resort, will be tendered out in three

phases, with the first phase scheduled to start work soon. The contracts are worth a total

of S$200-300m and CSC has confirmed that it will be bidding for these contracts.

Construction demand in Singapore is projected to rise to some S$13-15bn a year over the

next five years. As the largest foundation specialist contractor in Singapore following the

acquisitions, CSC is well-positioned to benefit from the recovering construction sector.

Earnings to more than double by FY03/08. CSC posted a net profit of S$3.8m or 0.4

Scts per share in FY03/06. Assuming that 1) results from both L&MFS and G-Pile are

consolidated for the full year of FY03/08, 2) L&MFS?s contribution to be S$2.9m (net profit

generated in FY09/06) and 3) G-Pile?s contribution to be S$1.9m (based on aggregate

profit guarantee of RM7.6m for FY06/07 and FY06/08), CSC?s total net profit could amount

to S$8.6m in FY03/08, even if its own earnings were to stay flat.

To partially finance the acquisition of G-Pile, CSC will issue S$3.2m worth of convertible

notes to the management vendors of the G-Pile shares. This means an additional 64m

CSC shares upon the conversion of these notes at the conversion price of 5 Scts a share.

Assuming the notes are issued at the start of FY03/08 and they are converted six months

later, CSC?s diluted EPS in FY03/08 would be 1 Sct, or more than twice what the group

achieved in FY03/06.CSC posted a net profit of S$3.8m or 0.4

Scts per share in FY03/06. Assuming that 1) results from both L&MFS and G-Pile are

consolidated for the full year of FY03/08, 2) L&MFS?s contribution to be S$2.9m (net profit

generated in FY09/06) and 3) G-Pile?s contribution to be S$1.9m (based on aggregate

profit guarantee of RM7.6m for FY06/07 and FY06/08), CSC?s total net profit could amount

to S$8.6m in FY03/08, even if its own earnings were to stay flat.

To partially finance the acquisition of G-Pile, CSC will issue S$3.2m worth of convertible

notes to the management vendors of the G-Pile shares. This means an additional 64m

CSC shares upon the conversion of these notes at the conversion price of 5 Scts a share.

Assuming the notes are issued at the start of FY03/08 and they are converted six months

later, CSC?s diluted EPS in FY03/08 would be 1 Sct, or more than twice what the group

achieved in FY03/06.

Share price could trade up to S$0.33. CSC traded at a P/BV multiple as high as 5.5x

during the 1998-1999 construction stocks up-cycle. Given the improved visibility and

robust growth in the next few years, we believe the market could ascribe a similarly rich

multiple to CSC?s stock. Based on a P/BV multiple of 5.5x and book value of 6 Scts as of

end-Sep 06, CSC?s share price could trade up to S$0.33. This translates into a FY03/08

P/E of 33x, based on our conservative FY03/08 EPS estimate of 1 Sct. While this is at a

premium to the average P/E of 26x that construction stocks in Singapore are trading at,

given CSC?s leadership position in the industry and robust growth going forward, we

believe the premium is reasonable.CSC traded at a P/BV multiple as high as 5.5x

during the 1998-1999 construction stocks up-cycle. Given the improved visibility and

robust growth in the next few years, we believe the market could ascribe a similarly rich

multiple to CSC?s stock. Based on a P/BV multiple of 5.5x and book value of 6 Scts as of

end-Sep 06, CSC?s share price could trade up to S$0.33. This translates into a FY03/08

P/E of 33x, based on our conservative FY03/08 EPS estimate of 1 Sct. While this is at a

premium to the average P/E of 26x that construction stocks in Singapore are trading at,

given CSC?s leadership position in the industry and robust growth going forward, we

believe the premium is reasonable.After several years of contraction, the

construction industry in Singapore is likely to have posed a strong turnaround in 2006 with

total construction demand estimated to be close to S$12bn. With the start of major projects

like the two integrated resorts, the Marina Bay Financial Centre (MBFC) and Orchard Turn,

as well as proposed petrochemical facilities on Jurong Island, the recovery of the

construction industry is gaining momentum. We understand that the foundation works for

one such mega project - the Marina Bay Integrated Resort, will be tendered out in three

phases, with the first phase scheduled to start work soon. The contracts are worth a total

of S$200-300m and CSC has confirmed that it will be bidding for these contracts.

Construction demand in Singapore is projected to rise to some S$13-15bn a year over the

next five years. As the largest foundation specialist contractor in Singapore following the

acquisitions, CSC is well-positioned to benefit from the recovering construction sector.

Earnings to more than double by FY03/08. CSC posted a net profit of S$3.8m or 0.4

Scts per share in FY03/06. Assuming that 1) results from both L&MFS and G-Pile are

consolidated for the full year of FY03/08, 2) L&MFS?s contribution to be S$2.9m (net profit

generated in FY09/06) and 3) G-Pile?s contribution to be S$1.9m (based on aggregate

profit guarantee of RM7.6m for FY06/07 and FY06/08), CSC?s total net profit could amount

to S$8.6m in FY03/08, even if its own earnings were to stay flat.

To partially finance the acquisition of G-Pile, CSC will issue S$3.2m worth of convertible

notes to the management vendors of the G-Pile shares. This means an additional 64m

CSC shares upon the conversion of these notes at the conversion price of 5 Scts a share.

Assuming the notes are issued at the start of FY03/08 and they are converted six months

later, CSC?s diluted EPS in FY03/08 would be 1 Sct, or more than twice what the group

achieved in FY03/06.CSC posted a net profit of S$3.8m or 0.4

Scts per share in FY03/06. Assuming that 1) results from both L&MFS and G-Pile are

consolidated for the full year of FY03/08, 2) L&MFS?s contribution to be S$2.9m (net profit

generated in FY09/06) and 3) G-Pile?s contribution to be S$1.9m (based on aggregate

profit guarantee of RM7.6m for FY06/07 and FY06/08), CSC?s total net profit could amount

to S$8.6m in FY03/08, even if its own earnings were to stay flat.

To partially finance the acquisition of G-Pile, CSC will issue S$3.2m worth of convertible

notes to the management vendors of the G-Pile shares. This means an additional 64m

CSC shares upon the conversion of these notes at the conversion price of 5 Scts a share.

Assuming the notes are issued at the start of FY03/08 and they are converted six months

later, CSC?s diluted EPS in FY03/08 would be 1 Sct, or more than twice what the group

achieved in FY03/06.

Share price could trade up to S$0.33. CSC traded at a P/BV multiple as high as 5.5x

during the 1998-1999 construction stocks up-cycle. Given the improved visibility and

robust growth in the next few years, we believe the market could ascribe a similarly rich

multiple to CSC?s stock. Based on a P/BV multiple of 5.5x and book value of 6 Scts as of

end-Sep 06, CSC?s share price could trade up to S$0.33. This translates into a FY03/08

P/E of 33x, based on our conservative FY03/08 EPS estimate of 1 Sct. While this is at a

premium to the average P/E of 26x that construction stocks in Singapore are trading at,

given CSC?s leadership position in the industry and robust growth going forward, we

believe the premium is reasonable.CSC traded at a P/BV multiple as high as 5.5x

during the 1998-1999 construction stocks up-cycle. Given the improved visibility and

robust growth in the next few years, we believe the market could ascribe a similarly rich

multiple to CSC?s stock. Based on a P/BV multiple of 5.5x and book value of 6 Scts as of

end-Sep 06, CSC?s share price could trade up to S$0.33. This translates into a FY03/08

P/E of 33x, based on our conservative FY03/08 EPS estimate of 1 Sct. While this is at a

premium to the average P/E of 26x that construction stocks in Singapore are trading at,

given CSC?s leadership position in the industry and robust growth going forward, we

believe the premium is reasonable.