LCD monitor business to be affected by slowing PC sales. After several quarters ofdouble-digit yoy shipment growth, global PC demand is expected to slow to mid-to-lowsingle-digit growth because of a deteriorating economic environment and the creditcrunch. Already, industry researchers such as Dataquest, IDC, and iSuppli, havereduced their expectations to mid-to-low-single-digit growth for 2009. Growth shouldcontinue to be led by notebook and netbook products. Demand for desktop products isexpected to contract, resulting in lower PC monitor demand and affecting TPV’sbusiness. Although we believe the group will continue to outperform the industry (viamarket-share gains at the expense of smaller players), margins may be under pressurein the near term from intensified competition as competitors jostle for orders.

Lowering forecasts and target price, but keeping Outperform on valuationgrounds. We believe our earlier forecasts of qoq growth for 4Q08 are at risk.Accordingly, we have reduced our FY08 profit estimate by 7%. We further cut our FY09and FY10 forecasts by 10-11% to factor in lower gross margins for both PC monitors andLCD TVs. Following this, our target price dips from HK$3.96/S$0.75 to HK$3.91/S$0.73,still based on a slight discount to its previous P/BV trough of 0.7x. At 0.3x P/BV, webelieve the market has priced in most of the short-term negatives.