We are retaining a HOLD rating for SPC. Its valuations arecheap at 4.6x 2009 PE, 0.6x P/BV, and 60-70% discount torefinery replacement cost. But with crude oil price at a 4-year low, refining margin at US$1-2, and anticipated weak4Q08 results due to a large inventory write-down, there islittle near term share price re-rating prospects. We cutFY08-10F earnings by 11-21% on lower near-term crude oilprice target, and reduced our sum-of-parts target price toS$2.16. Our long-term Brent crude price target and refiningmargin assumptions are unchanged.

Singapore refining margin is currently hovering at onlyUS$1-2 due to weak crack spreads for naphtha andgasoline, while crude oil price has plunged to a 4-year lowof c. US$40. Lower E&P profit, weak refining margins, and asharp inventory write-down could lead to a disappointingS$40-50m loss for 4Q08 vs net profit of S$119m in 4Q07and S$0.6m in 3Q08.

We cut near term Brent crude price target to US$99 for2008 (from US$103), US$60 and US$70 for 2009-10 (fromUS$80), and consequently reduced FY08-10F net profit by20%, 18%, and 11%, respectively. We expect SPC’searnings to tumble 54% in FY08F and drop 4% in FY09F,but grow 20% in FY10F on better oil price and refinery

Target price downgraded to S$2.16This is based on the lower oil price assumption and a de-rating of SPC’s refining business (from 4x to 3x 2009 PE).Our refining margin assumption of US$3 for 2009-10 andlong-term Brent crude price target of US$75 are unchanged.