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Boustead's Salcon could lure big fish soon
By VEN SREENIVASAN
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MAINBOARD-LISTED Boustead Singapore said last November that its wholly owned subsidiary Salcon Pte Ltd had been awarded a $25 million contract by the Public Utilities Board (PUB) to design and build Phase II of the Bedok NEWater plant. The plant will increase production capacity by 55,000 cubic metres per day, taking total capacity up to 87,000 cu m per day. Upon completion in the second quarter of 2008, it will be PUB's largest NEWater facility owned.
The November 2006 announcement was hardly noticed by the market. But that is not surprising, because Boustead is better known for its energy engineering and industrial parks businesses, which together account for about 75 per cent of its order book of more than $400 million.
In the energy sector, Boustead has made a name for itself as a leader in the design, process engineering and construction of equipment for refineries and petrochemical processing plants. It is also involved in numerous bio-diesel start-ups in Asia.
Boustead has also made its mark in the industrial parks and geo-spatial businesses, with its build operate-transfer and sale-and-leaseback of customised high-tech buildings. Both yield high returns, and the latter also offers potential for conversion into Reits (real estate investment trusts).
But while industrial parks and energy account for the bulk of Boustead's earnings, it is the company's water and wastewater engineering unit Salcon that could emerge as its star performer in the not-too-distant future.
Set up in 1980, Salcon is the leading international water and wastewater engineering specialist in Asia ex-Japan. With an order book of more than $100 million, it is the only Asian pre-qualified vendor outside Japan to some of the world's largest engineering, procurement and construction firms, including MNCs like Bechtel, Foster Wheeler, Hitachi Plant Engineering, Hitachi Zosen, Hyundai Engineering, Mitsui Engineering, Samsung Engineering and Simon-Carves. To date, Salcon has designed and built more than 500 industrial and municipal water and wastewater treatment plants in almost 60 countries. It has also constructed seven seawater desalination plants around Asia, including one for Senoko Power Station in Singapore.
It is already a seasoned player in China, having completed 68 projects in various cities and provinces since 1990, including 25 industrial projects for MNC clients like Taiwan Semiconductor Manufacturing and Matsushita. In 2005, it shifted its base from Shanghai and Beijing to the water-short Beijing satellite city of Tianjin, where demand for waste water and waste recovery systems is expected to remain strong even after the 2008 Olympics are over.
Salcon's reputation, track record and expertise have enabled it to pursue lucrative projects in Africa and the Middle East in recent years, as clean water has emerged as the single biggest challenge for many countries. Even as its El Hadba sewage treatment plant in Libya nears completion, Salcon is poised to clinch several new desalination projects in places like Saudi Arabia and Qatar.
What gives Salcon the edge over its competitors is technology. For example, at the Bedok NEWater plant, it is using the latest-generation highly crystalline polyvinylidene fluoride micro-filtration membranes and the world's first commercial 16-inch reverse osmosis membranes - technology that means the plant can operate more energy-efficiently and cost-effectively than those using conventional 8-inch reverse osmosis membranes.
The global clean water market of some US$365 billion is served by a fragmented supply side comprising scores of smallish companies. The inevitable consolidation is already beginning, with the big boys buying up smaller but successful players via mergers and acquisitions.
Giants like GE, Siemens, Vivendi and Pentair have coughed up some US$20 billion to gobble up smaller fish in the past five years.
Salcon, with its strong technology base and blue-chip client list, will in time look tantalising for some of these big boys. And if the recent purchase of Boustead's listed subsidiary by Raffles Education group is any indication, there could - in time - be suitors knocking on Boustead's door for Salcon.