and sustainable margins.based on 11x CY11 P/E (in

•

Engineering, Hiap Seng is one of the three big boys for construction and plant

maintenance for the petrochemical sector in Singapore. Its maintenance arm

provides recurring revenue and accounts for 25% of revenue. Hiap Seng has

emerged relatively unscathed from the recent economic crisis, with projected record

earnings of S$30m (2x its previous record in FY07) for FY10 on S$200m orders

secured.One of three kings on Jurong Island. Together with PEC Ltd and Rotary

•

many as seven mega-projects could be reignited on Jurong Island with estimated

contract values of S$8.8bn. We believe Hiap Seng could maintain its record earnings

on the back of strong order wins. We project a 35% 3-year earnings CAGR on the

back of S$225m-250m order wins assumed for FY11-12.Beneficiary of revival of projects on Jurong Island. As oil prices stabilise, as

•

recognised Hiap Seng’s record performance, possibly since its order backlog only

provides 1-year earnings visibility and given execution issues in FY08-09. We

believe such problems are over. Backed by a strong net cash position, Hiap Seng

now ranks among the cheapest of offshore & marine stocks under our coverage

(6.3x CY 11 P/E vs. peer average of 8.7x). It is trading below its 5-year historical

mean of 12.5x and offers prospective yields of 6.1% vs. a peer average of 2.4%.Deep discount and attractive dividend yields. We believe the Street has not fully

HIAP SENG ENGINEERING LTD

(Company Registration No. 197100300Z)

ANNOUNCEMENT

HS Compression & Process Pte Ltd awarded a US$12 million

(approximately S$17 million) contract for the provision of Gas Compressor

Packages and related services

The Board of Directors of Hiap Seng Engineering Ltd (the “Company”) is pleased

to announce that its 87%-owned subsidiary, HS Compression & Process Pte Ltd

has been awarded a contract worth approximately US$12 million (approximately

S$17 million) for the provision of Gas Compressor Packages and related

services (the “Work”).

The Work has commenced in Singapore and is scheduled for completion and

delivery to the Middle East by February 2011.

Barring any unforeseen circumstances, the Group expects a positive contribution

to its earnings from this contract but does not expect any material impact on the

net tangible assets or earnings per share for the current financial year ending 31

March 2011.

None of the Directors or controlling shareholders of the Company has any

interest, direct or indirect, in the above contract. The Directors are also not

aware of any substantial shareholders having any direct or indirect interest in the

above contract and have not received any notification of interest in the above

contract from any substantial shareholders.

By Order of the Board

Tan Hak Jin