Zacks_Analysts' Blog : CAEI Poised for Growth - Analyst Blog

China Architectural Engineering Inc. (CAEI) entered into an agreement with Shanghai Nine Dragon Co. Ltd. to undertake major projects located in the Nine Dragon Resort, Zhejiang, including a seven-star hotel, a marine park and luxurious villas. The projects, the combined value of which is expected to exceed $500 million, are expected to commence in the second half of 2009 and completed within three years.

This apart, CAEI is working on the Dubai Metro System as well as other projects in the U.S. and Doha, which will be completed by the end of 2009. The company is also bidding for major contracts on a new rapid transit system in Doha and on the next phase of the Dubai Metro. The company's international expansion strategy would help it to diversify geographically and accelerate future growth.

In the domestic market, the company expects to capitalize on the stimulus package of $586 billion announced by the Chinese government. According to the company, over $50 billion has already been allocated to construction spending. Historically, CAEI has been a large recipient of government projects. Given the company's research and development capabilities and strong relationship with the Chinese government, we believe the company will benefit significantly from the government's investment in infrastructure-related projects such as large-scale railway stations and airport terminals, and other public facilities in China.

CAEI posted a strong 43.4% growth in sales for the first quarter of 2009, driven by considerable progress on major international projects, such as the engineering and installation of station facilities for the Dubai Metro rapid transit system. CAEI's compound annual growth rate (CAGR) of revenue in the past five years was over 40%, double the industry growth rate during the same period.

CAEI specializes in high-end curtain wall systems (including glass, stone & metal curtain walls), roofing systems, steel construction systems, eco-energy saving building conservation systems and related products, for public works and commercial real estate projects.