Booming oil and gas sector. Beginning trading on the SGX-ST today, RH Energy Ltd (RHE) fabricates and installs equipment and systems for oil and gas pipelines in the PRC. The industry has been growing rapidly in the last decade and shows no signs of slowing down. According to the BP Statistical Review of World Energy, China's oil consumption recorded a CAGR of 128% between 1996 and 2006 while global oil consumption has recorded a CAGR of 156% during the same period. In 2006 alone, China's oil consumption grew 6.6% YoY, far outpacing Asia Pacific's average YoY growth of 1.4%. Standard & Poor's expects global capital spending in this sector to grow by approximately 10% in 2007. The growing oil demand in the PRC will be driven by the country's rapid economic growth. Strong order book. As at 1H07, RHE order books stood at US$13.2m. We project RHE to secure another US$20m of orders for 2H07. Based on this, we project a 95% YoY growth in FY07 revenue to US$33.2m. Diversification into Build-Operate-Own. RHE has entered into a memorandum of understanding (MOU) to form a 51%-owned joint venture (JV) for the construction and set-up of compressed natural gas (CNG) pipeline network, infrastructure and stations in a new tourist development zone on Hainan Island. Construction is expected to commence in December 2007 and will complete in late 2008 or early 2009. RHE will book upfront revenue of approximately RMB 20m for providing equipment integration services, and thereafter collect an estimated RMB 32.5m per annum for 20 years for operating the CNG stations. Initiate with BUY. We forecast revenue growth of 95% YoY to US$33.2m for FY07 and net profit growth of 27% YoY to US$5.1m after taking into account one-off expenses incurred for the IPO. We expect further double digit growth in FY08 revenue and net profit. Based on FY08 PER of 16x, we derive a fair value of S$0.69. We initiate coverage on R H Energy with a BUY rating.