Record earnings in FY08. Straits Asia Resources Ltd's (SAR) FY08 results were ahead of the street's as well as our expectations. Revenue accelerated by 133.2% to US$585.2m on strong coal prices and higher production volumes, leading to a 335.6% surge in net profit to US$124.4m. Average selling price (ASP) of thermal coal rose 66% to US$70/ton in FY08 on robust demand for energy, while production volume more than doubled to 8.6Mt from 3.5Mt, thanks partly to contributions from Jembayan mine which was acquired in Dec 07. In terms of its interim performance, 4Q08 revenue grew 147.2% YoY to US$151.8m, while net profit for the quarter soared 316.4% YoY to US$39.7m. A final dividend of 2.18 US cents has been declared, bringing total dividends for the year to 6.83 US cents (yield: 12%), in line with the group's 60% dividend payout policy.

Profit margins are looking good. Gross profit margin for FY08 ballooned by 16.6ppt to 39.4% on sky-high coal prices, while net profit margin expanded by 9.9ppt to 21.3%. We are anticipating further improvements in profit margins in FY09 as SAR has contracted higher coal prices for its output this year. 73% of its FY09 output has been priced at US$114/ton, representing a 63% surge from the US$70/ton ASP achieved in FY08. Nevertheless, we have conservatively assumed a lower blended ASP for FY09, implying an additional 10.8ppt improvement in gross profit margin to 50.2%.

Vast improvement in cash flows. Operating cash flow improved to US$191.5m from US$33.0m a year ago thanks to strong coal prices and higher output. This led to a significant improvement in net cash flow to US$141.4m vs. US$6.8m a year ago. We believe that SAR will continue to deliver strong operating cash flows in FY09 given its strong order book, and this will support its ability to repay borrowings and sustain dividend payouts. Nevertheless, we have assumed a more conservative dividend payout ratio of 40% to allow for cash conservation in the event of a protracted credit crunch.

Still deserves a BUY. Management did not have any updates on its parent company's divestment exercise, except that talks were still in progress. We have raised our WACC assumptions to take into account higher borrowing costs and have eased our thermal coal price assumptions beyond FY10 in view of the weaker demand for energy. As a result, our DCF-based fair value estimate eases to S$1.15 (from S$1.35). We maintain our BUY rating on the stock.

In line. 4Q08 core net profit of S$15m forms 15% of our full-year estimate and consensus. FY08 core net profit of S$94m forms 96% of our forecast. A DPS of 2cts was announced for FY08, yielding 6.5%.

Lumpy revenues due to conservative accounting. Revenue for FY08 fell 49% yoy to S$302m as recognition of residential presales under the Deferred Payment Scheme has been deferred until projects receive their temporary occupation permits. The bulk will only be booked this year. Hotel and rental revenue, which made up less than 10% of the total, remained flat in FY08.

Significant provisioning should not be far away. Ho Bee incurred fair-value losses of S$3.7m in 4Q08, with S$2m for the impairment of residential properties. We suspect this was for The Pinnacle at Sentosa, for which IOI Property also wrote down value in its recent results. The quantum of provisioning in 4Q08 was immaterial. Some listed developers had already aggressively written down their asset values in the quarter and we expect Ho Bee to follow suit in FY09.

Gearing up to de-gear. Net gearing remained high at 1.21x. But with five projects due for completion this year, management hopes to receive over S$950m of proceeds from 1Q09 to 3Q09. Letters have been sent to buyers, urging them to seek financing. The level of potential defaults could be a crucial determinant of Ho Bee’s financial sustainability. Assuming asset write-downs but barring major defaults, its balance sheet should improve, with net gearing edging towards 0.7x at end-FY09 on our estimates.

Earnings cut. We lower our core FY09-10 EPS estimates by 10-27% to account for slower inventory turnover and lower ASPs. We also introduce FY11 estimates.

Trough valuations with potential catalysts from presale receipts. Our end- CY09 RNAV has been lowered from S$1.57 to S$1.26. Ho Bee trades at its historical low of 0.2x P/BV (0.45x in 2003). Assuming selling prices fall by 50% from their peak and land-bank values are written down consequently, we estimate its adjusted P/BV at 2003 levels. Pessimism on the stock appears to reflect some insolvency risk. Our target price, still pegged at a 50% discount to RNAV, has been lowered from S$0.76 to S$0.63. Maintain Outperform nevertheless. The successful collection of presale receipts and a better balance sheet could be re-rating catalysts.

Excluding impairment loss, FY08 results in line with expectations but below consensus estimates – BBR’s FY08 net profit declined 19.9% to S$3.6m, mainly due to provision for impairment loss in value of investment securities of S$2.5m relating to an investment in a toll road in Daejeon, Korea and provision for impairment loss in value of land of S$2.6m relating to the freehold property at Holland Hill. This did not come as a surprise to us as we have already accounted for it in our RNAV calculations. Excluding these provisions, results would have been in line with our forecast but below consensus estimates of S$10.4m. Share of results from associates came in at S$3.0m, in line with our estimates primarily from Nassim Hill development which BBR holds a 48% stake.

Margins likely to be remain weak but cash flows to improve from Government initiatives – BBR’s outstanding order books for its construction contracts as at FY08 stood at $320m. Based on our estimates, private/public sector jobs mix is approximately 25/75. Given Singapore Government’s pump-priming initiatives, we have included S$100m of contract wins for FY10F in our earnings forecast. However, we do not expect margins for these contracts to be fantastic as contractors are expected to price down for new tenders, in line with the decrease in materials cost, and expected increase in capacities of contractors in FY10 when most jobs are slated for completion. On a positive note, the Singapore Government agencies are providing more frequent and prompt payments to construction firms for work done to ease cash flow of construction firms undertaking public sector projects. As such, we expect BBR’s cash cycle to improve slightly in FY09F.

Earnings forecast lowered – We have lowered our FY09F earnings estimates by 34.0% to S$7.0, after adjusting for the faster than expected completion of construction projects in FY08 and lowering our gross margin assumption by 1.7 ppt to 4.9%, in line with the gross profit margins achieved for 4Q08.

Maintain HOLD; Target price lowered to S$0.03 – We continue to use sum-of-the-parts valuation methodology to value its property development and construction business. We have revalued all of the Group’s unsold development projects at lower than recently transacted price to assume 100% sales in current market and value construction business at 3x FY09F (from previously 5x FY08F) construction earnings. We increased our discount factor to SOTP valuation to 40%, in line with the discount applied to other property stocks under coverage, bringing our target price to S$0.03 (from S$0.04 previously), representing a 17% discount to FY09 book value. Maintain HOLD.

Doubts on receivable and cash balance. After a two-day halt, Fibrechem announced that the group has encountered some difficulties with its auditor, Deloitte & Touche, in relation to the finalization of the audit of its trade receivable and cash balance as of end 2008. The group has therefore delayed the release of its FY08 results, which was supposed to be due on 23 Feb.

Resignation of Executive Chairman & CEO. Fibrechem also announced that Mr James Zhang, the Executive Chairman as well as CEO of Fibrechem has resigned from his positions with immediate effect. Mr Xu Xu Hui, the Executive Vice Chairman has been appointed as the acting CEO to take over Mr James’ role in running the daily operations.

Appoint an independent investigator and finance advisor, nTan Corporate Advisory Pte Ltd to carry out investigation into transactions in question (which no further details were revealed in the announcement) and to advise on the appropriate measures to be adopted by Fibrechem to safeguard its assets and continue its operations. In addition, the board has formed an Independent Working Committee comprising Mr Ong Tiong Seng, Dr Chong Weng Chiew, Mr Lin Chin Tong and Ms Tan Sin Mui.

Dampen sentiment on S-shares. There are no details provided, as to explanation for auditor's disagreement on the balance sheet figures and reasons for James’s resignation. But, Fibrechem’s balance sheet issue would trigger off investors' fears over credibility and corporate governance of SGX-listed Chinese companies again. The hardest hit S-chips following Fibrechem’s two-day trading halt were China Hongxing (-24%) and Celestial (-27%). We believe this incident will continue to exert some downward pressure on S-chips in the near term.

No prior warning signs based on 9M08 accounts. Fibrechem’s cash position seems reasonable as of Sept 2008, with net cash increasing 32%, from HKD412m as of end 2007 to HKD544m. The Group churned net profit of HKD400m in 9M08, of which: (1) about HK80m was tied up for higher working capital requirement as cash conversion cycle lengthened from 41days to 48 days, within the historical range of 32 – 57 days in 2004 – 2007. The group’s receivable days lengthened by 6 days to 51 days over the same period, within the 40 - 70 days historical range in the past 4 years; and (2) a capex of HKD200m spent for expansion. Including the HKD200m deposit paid for the purchase of new equipment, total capex amounted to HKD400m, whichfalls in its historical range of HKD200m - HKD500m in the past 4 years.

Suspend rating on Fibrechem. The trading of Fibrechem's shares will remain suspended till further notice. We are suspending rating on the counter pending further clarification on this matter.

Both top and bottom lines hit. 4Q08 revenue came in at S$338.2m, down 31.9% YoY from S$496.5m. Net losses ballooned from S$7.9m in 4Q07 to S$129.2m in 4Q08. All this boiled down to a fall in demand for crude steel and steel-related products in the PRC, coupled with steel prices that fell 35% QoQ in 4Q08. The Group also recognised a one-time impairment loss of S$20.9m on its fixed assets, which were mainly drop in values of its furnaces and sintering equipment. Stripping out this impairment would have added back 3.9S¢ to its loss per share of 24.1S¢.

Sales were surprisingly strong in 4Q08. The Group had sold approximately 350,000 tonnes of 850mm hot-rolled coils (HRCs) and 260,000 tonnes of 1,250mm HRCs during the quarter, which in total was only 40,000 tonnes or 6% lower than 3Q08 sales tonnage of around 660,000. This was unexpected given that the entire Chinese steel industry was facing oversupply and lack of demand. Sales of 1,250mm HRCs had fallen notably by around 22% QoQ for 4Q08 whereas 850mm sales remained firmed during the period. We reckon this boiled down to the 1,250mm HRCs having more designated uses towards infrastructure projects, which slowed tremendously in China during 4Q08.

Full year performance suffered mainly due to 4Q08. Revenue grew 47.4% from S$1.54b in FY07 to S$2.27b in FY08, mainly due to higher production capacity and also higher average steel prices. However, due to a loss of S$129.2m in 4Q08, this pulled the Group’s FY08 bottom line into the red with a net loss of S$75.8m compared to a NPAT of S$93.8m in FY07. We had also been too conservative with our 4Q08 forecasts, underestimating top line by around S$160m and overestimating net losses by around S$32m, as we had anticipated much weaker sales in 4Q08.

Valuation and recommendation. We believe the Group was profitable in Jan 09 due to stable steel prices, but much remains to be seen if it can maintain such a performance throughout the year with so much uncertainty in the global economy and continued oversupply in the Chinese market. We also exercise caution on the Group’s 1.5x net gearing level. We hence lower our previous FY10 P/E rating from 4.4x to 4.0x to attain a new target price of S$0.595 (previously S$0.655). Maintain NEUTRAL.

Flametree Holdings Limited (FHL) has made an exit offer in cash to acquire all the issued shares of Agva that it does not already own. Agva’s CEO (Mr Albert Lim) is also a director of FHL. FHL and Mr Lim have an aggregate interest of 76.45% in Agva. Mr Lim has undertaken to vote in favour of the delisting. Westcomb Capital will be the independent financial advisor to this offer.

The exit offer. The exit offer is 7.0 S¢ cash for each share. FHL has no intention of increasing the exit offer price. The delisting resolution and exit offer is conditional on the approval of at least 75% of the shareholdings in the company. We note that FHL and Mr Lim already more than make up that proportion. However, the delisting and exit offer is also conditional on the resolution not being voted against by 10% or more of the total number of shares in issue at the Special General Meeting.

The rationale. The trading liquidity of Agva shares has been thin. Average daily volume traded for the past six months was 24,890 shares. Agva has been trading between 3.5 S¢ and 8.0 S¢ (it hit 8.0 S¢ on only two days) for the past six months. Trades were only done on 29 days out of a total of 126 trading days in the past six months. Agva has also not raised any funds from the capital markets since its IPO in 2003.

The share options. As at 21 Feb 09, Agva has 8.1m outstanding share options. The offeror has proposed to pay a nominal sum of 0.1 S¢ for each share option Accept the offer. As at end FY08 Agva has a NAV of 6.0 US¢ per share. This includes its cash balance of US$5.9m (2.7 US¢ per share) as at end FY08. Based on current exchange rate, the NAV translates to 9.1 S¢. Agva did not declare any dividends for FY08, despite being in a net cash position and having generated profits and strong operating cash flows. We feel that minority shareholders should accept this offer, get their cash and exit this illiquid counter. We will be ceasing our coverage if and when Agva delists.

UOL's 4Q08 core net profit of S$82m forms 31% of our full-year and consensus. Despite strong development revenue, a S$128m net loss was incurred in 4Q08 as UOL wrote down S$210m on its commercial properties. Falling RevPAR and occupancies also took their toll on hotel performances. The UIC general offer may be the only thing to look forward to but even excitement on this front may be muted given the current office down-cycle. We lower our FY09-10 earnings by 18% to account for slow inventory turnover, lower rentals and lower hotel valuations. Consequently, our target price drops from S$2.02 to S$1.51, still based on a 50% discount to a lowered RNAV of S$3.02. Our new target implies 0.35x P/BV vs. 0.4x currently and a trough P/BV of 0.25x. We believe a bottom is not far off but maintain Underperform on limited re-rating catalysts in the near term.

KS Energy’s FY08 net profit of S$51.9m (-30% y-o-y) was slightly below our expectations, mainly due to higher than expected operating expenses and lower contribution from its JV. While we have adjusted our FY09/10 earnings forecasts upwards on the back of lower interest expense, our Fully Valued rating on KSE remains, given its relatively rich valuation. Our TP has been adjusted slightly to S$0.49.

FY08 results slightly below. KS Energy (KSE) posted FY08 headline net profit of S$51.9m (-30% y-o-y) on revenue of S$611.0m (+52% y-o-y). The drilling and capital equipment business was the main topline driver, on the back of full year contribution from AOS (vs 7 months in FY07), charter income from a new jackup rig, and non-core asset disposals. Gross margins remained stable, but higher operating expenses impacted EBIT margins, which dipped 1.1ppt y-o-y to 12.5%. KSE also posted lower than expected contributions from associates/JVs of S$3.6m (-65% y-o-y). We estimate recurring FY08 net profit to be c. S$42.9m (+11% y-o-y), after excluding disposal gains from available-for-sale equities of S$11.3m. KSE also declared a final dividend of 1.8 Scts per share, bringing total DPS to 5.75 Scts for FY08, representing a yield of c. 8%.

Gearing reduced. The group’s net gearing has been reduced to 0.76x, vs 1.4x a year ago, following the successful rights issue during the year and the reduction in debt over the last quarter. This has led us to adjust our FY09 and FY10 earnings forecasts upwards by 9-14% as interest expense going forward will be reduced.

Valuation remains rich. Our TP has been raised marginally to S$0.49 (prev S$0.46) on an adjusted FY09 net profit forecast for KSE, and is based on 3x recurring blended FY08/09 PE for its distribution business and 4x for its drilling services business. We maintain our Fully Valued call as the counter remains pricey relative to its peers, while fleet expansion opportunities continue to be limited, in our view.

Impairments hit bottomline. Parkway Holdings (Parkway) reported its FY08 results yesterday. Topline inched ahead 9% YoY to S$945.3m while bottomline crumbled 88% YoY to S$34.8m. The bottomline was wrecked as Parkway booked impairments amounting to S$52.4m in 4Q08 alone. Stripping out exceptionals and recurring Parkway LifeREIT expenses, operational net profit would have risen 19% YoY to S$104.2m. Of the impairments, S$34.4m was due to late payments by a corporate. Management is confident of retrieving these late payments as these are backed by letters of guarantees. We have factored it back into FY09F financials. Parkway did not pay any final dividends in a bid to preserve cash.

Operational update. Patients staying in the hospitals for shorter days coupled with lower admissions primarily accounted for the muted results. Fortunately, day surgery cases rose 11% to buffer earnings. Management has also launched a "Fixed-fee surgical packages" that are 10-15% discounted from original prices in order to drive its day cases to buffer the continuing slide in admissions. As the largest private healthcare provider in Singapore, Parkway stands as a pre-emptive compass for the medical services industry. At this point, the needle seems to be pointing south. As such, management has indicated that capex plans will be watched closely. Repairs and upgrades vs. outright new equipment purchases will be the order of the day. Renovations for wards will also be undertaken to capitalise on slower admissions.

Novena Hospital. Management updated that it has indeed elected Colliers and will try to push out the first 80 suites in FY09 to help defray development costs which is working out to the tune of ~S$400+m in view of lowering construction costs. Target selling psf was not divulged but we expect our previous floor of S$3500 psf to hold for the first tranche to be marketed to top-tier, cash-rich senior consultants that are either renting at Novena Medical Centre or at Paragon.

Maintain HOLD. We have tweaked our estimates in view of the slightly better than expected sales, impairment charges and refined our minority interest numbers. From a core operations standpoint, we anticipate S$75.6m in earnings as Singaporeans, feeling the full brunt of the recession, will lay off procedures that do not require immediacy. Our fair value remains at S$1.15 despite a lower valuation peg of 15x (prev. 16x) FY09F EPS as our core earnings have been bumped up slightly. Maintain HOLD. We will become buyers as it approaches S$1.00 (trough valuation).

FY08 net profit of S$8.0m was within our expectations of S$8.7m. Revenue rose strongly by 130% yoy to S$31.1m on strong demand for offshore logistics support services as new vessels were added to the fleet. However, gross margin dipped to 45.9% from 48.7% in FY07, the result of the global slowdown and lower average charter rates due to a higher mix of longer duration charters. A final dividend of 0.06 Scts was declared. We expect Ezion to remain profitable given its unique vessel fleet targeting the maintenance support services of the oil & gas industry. Unfortunately, given the weak investor sentiment for small cap stocks, there appears to be a lack of interest in Ezion. As such, we are ceasing coverage on Ezion. The forecasts in this report have not been adjusted for the FY08 results. Previously, we had an Outperform recommendation with a target price of S$0.47.

FY08 results in line with expectations : Ezion reported net profit of S$8.0m, in line with our earnings estimates of S$8.1m. The Group's revenue & gross profit for FY08 increased 130.1% & 116.6% to S$31.1m & S$14.3m respectively, slightly ahead of our forecast of S$25.3m & S$12.7m, mainly due to the increase in the revenue of S$15.6m from the offshore logistics support services as a result of the contribution from the additional vessels in FY08 and full year of operation of the division in FY08 as compared to 9 months of operation in FY07. However, higher than expected operating expenses in FY08 brought earnings in line with our forecasts.

Earnings forecast lowered : We have lowered our FY09F earnings estimates by 15.0% to S$21.9m after adjusting for the higher operating cost. Dividends declared : Ezion declared Sg 0.06 cts of final dividends, providing a dividend yield of 0.5%.

Maintain BUY with target price of S$0.20 ? We continue to value Ezion at S$0.20 based on DCF valuation methodology. With an upside potential of 54%, we maintain our BUY recommendation on Ezion.

Kingboard's 4Q08 net loss of HK$20m (vs. profit of HK$81m in 4Q07) was bigger than our loss expectation of HK$14m. However, the results included a HK$77m impairment charge for old inventories and HK52m gains from derivative instruments. Excluding these, it would have reported a net profit of HK$5m, ahead of our expectation on better-than-expected GP margin. Full-year core net profit was 14% above our forecast and consensus. We have kept our FY09-10 estimates relatively unchanged as we had pared down our expectations in January. Our target price, still based on 0.43x CY09 P/BV, has been lifted slightly from S$0.26 to S$0.27. We believe all negatives are priced in, as evident in its resilient share price. Maintain Outperform, as we believe the group has the financial capability and strong parentage to ride through the difficult times.

E&E's 4Q08 net profit of US$5.1m (-62% yoy) came in 19% below our forecast and consensus. Key variances were higher-than-expected opex ratio and interest expense, partially offset by better-than-expected GP margins. Full-year net profit of US$42.6m (+23% yoy) was 3% below our estimate. We have conservatively lowered our FY09 profit forecast by 4%, to assume a much weaker 1H, and by 25% for FY10, to assume a more gradual recovery. We also introduce FY11 forecasts. Our target price, still based on 1x CY09 P/BV, has been trimmed from US$1.94 to US$1.91. Maintain Outperform, nevertheless, for its attractive yields, strong free cash flow, and leading position in China.

2Q slightly weaker QoQ. We recently caught up with AusGroup Ltd (AusGroup) management. The group had posted A$130.1m in 2QFY09 revenue, up 15% YoY and about 0.3% lower QoQ. Net profit came in at almost A$5m, 30.6% lower YoY and 13.9% lower QoQ. The results were slightly weaker on a QoQ basis - gross margin slipped to 11.8% this quarter from 12.8% in 1Q09, while net margin hit 3.8% versus 4.4% achieved a quarter ago. Its 2Q results exceeded our estimates because of a delayed impact of market shrinkage on ongoing projects and some flow through of conservative variation claims from previous quarters.

Revenue and margin pressure. While we have adjusted our estimates slightly to take the 2Q figures into account, we still expect significant contractions in 2H09. Our 2H09F revenue estimate is only 60% of the 1H09 figure, as the company feels the impact of a shrinking order book and slowing project wins. The group said its order book stood at A$168m as at 31 Dec 2008, versus A$297m at end FY08 (year-end: June). The global financial and economic crises are impacting planned capex in both the minerals resources and oil & gas industries. AusGroup has already fallen victim to an order termination and an order suspension - impacting 2H revenue. Apart from top line pressure, our key concern is the effect on margins as AusGroup competes for a significantly smaller pie.

Strategic realignment towards quality of revenue. We have previously commented on AusGroup's growing pains since FY08 as it transformed itself into a multinational and multiplatform business. The company is finally showing some signs of "growing up", in our view. Its business strategy is now aligned towards quality of revenue, not quantity. Meanwhile, project management and execution also seem to have improved. The implementation of a process driven approach is evident in the quality of disclosure for its 1H results. The new focus on execution and revenue quality is essential in a low margin environment.

Waiting and watching. We stay cautious on revenue and margin estimates and will track the company closely in the months ahead. We maintain our HOLD rating on AusGroup. AusGroup's performance in 2H09, its ability to secure new orders, and further clarity on its business environment will affect our rating. Our new fair value estimate is S$0.16 or 4x FY09F earnings (prev: S$0.17).

Net profit for FY08 increased by 9.2% to RMB346.4m, which was better than our RMB314.6m forecast. Stripping out the non-core RMB25.8m income from service contracts, core net profit would have been RMB320.6m. The service contracts refer to contracts with about 145 distributors to help promote urea sales. This is in anticipation of the completion of its third urea plant which will increase urea capacity from 720k to 1,120k/annum. The total value of these contracts is RMB76.3m and RMB50.5m will be reflected as deferred revenue in FY09. FY08 revenue rose 35.3% to RMB2,084.9m, better than our RMB1,882.0m forecast.

Revenue increased due to three key reasons. (1) Average selling price for urea, methanol and compound fertiliser (CF) increased by about 9.1%, 10.6% and 60.9% respectively. (2) Sales quantity of urea and compound fertiliser increased by 11.6% and 9.9% respectively. (3) China XLX expanded into new markets in the North-Eastern and Central parts of China. This resulted in an increase in its capacity utilisation rate from an average of about 70% in FY07 to 83.7% in FY08.

Income tax credit for overprovision helps boost FY08 net profit slightly. Income tax expense for FY08 fell to RMB3.4m as compared to RMB16.1m in FY07. The decrease in income tax comprised of tax credit for overprovision of FY07 tax and a net RMB3.9m provision relating to 5% withholding tax on FY08 unremitted profits of Henan XLX, which is a subsidiary. The China subsidiary enjoyed full exemption from income tax in FY07 and FY08 as a wholly foreign owned enterprise. It will be subsequently taxed at a 50% reduction in income tax in FY09, FY10, and FY11.

Net profit for the quarter declined 37% due to high cost of sales. 4Q08 net profit fell 37% YoY to RMB45.7m. This was due to higher cost of sales for urea and methanol, as ASP for urea and methanol could not increase inline with higher anthracite coal prices (coal was purchased at RMB1,350/tonne from Aug to Sept 2008). However, the company expects its margins to improve in 1Q09 as coal prices have eased to RMB1,100/tonne as of Feb 2009.

Capex of RMB600m in FY09 is manageable. Management has indicated that its capex plans in FY09 will be roughly RMB600m, comprising RMB280m for its third plant, RMB70m upgrading of railway track to plant, RMB50m for increases in CF, and RMB160m for upgrading plans for its old and new plants. As of 31 Dec 2008, China XLX has a cash position of RMB200m, total bank loans of RMB578m and a gearing ratio of 0.32x. China XLX’s has an interest coverage of 4.8x. The company declared a first and final dividend of S¢1.6 for FY08. Pending our earnings revision for China XLX, we have a price target of S$0.47 based on 9.7x FY09 P/E.

Revenue in FY08 declined 18.1% to S$32.3m, mainly attributable to the slowdown in the semiconductor. Gross profit margin ("GPM") declined slightly from 28.6% to 28.5% despite lower revenue base. The stable GPM was the reflection of low fixed cost and high production flexibility.

Selling and marketing expenses declined 4.2%, in line with lower revenue base. Administrative expenses slid 5.8% to S$5.9m due to lower revenue and 10-15% pay cut instituted for its senior management. Impairment in value of inventories amounted a hefty S$3.1m due to lower net realizable values for inventories.

Cash decreased S$9.1m to S$18.2m was mainly due to S$5.6m from higher working capital requirement, S$1.0m from purchase of UOB preference shares and S$1.5m from development project expenditure.

We maintain our FY09-10 forecast. While sales of distribution segment remained relatively unchanged at S$5.1m in FY08, manufacturing segment reduced by 21% to S$27.2m due mainly to sagging demand. The decline in semiconductor equipment business has not bottomed out yet. The overcapacity in the industry has already taken tolls on some chipmakers, leading to bankruptcy and consolidation of industry players. As such, 2009 is another tough year for MIT to turnaround given that new capex on semiconductor equipment may be pushed further back.

We prefer to adopt conservative stance on valuation grounds by applying discount to FY09 NTA. Based on 0.40xNTA per share FY09, we derive a target price of S$0.07. Downside potential is also limited by its strong balance sheet hoarded with 8.2 Sg cts cash per share and virtually zero debts. Maintain HOLD.

Above Street and our estimates. 4Q08 revenue grew 12.4% yoy to S$51m, fuelled by Hospital Services (+20% yoy). Stripping out one-off fair-value gains from the disposal of Raffles Hospital in FY07, FY08 core profit was up 35% yoy to S$31.5m, or 16.7% above our estimate and 8% above consensus. The main differences were higher operating margins and lower interest payment.

Margins and balance sheet improved. 4Q08 EBITDA margins expanded 1.1% pts yoy (1.3% pts qoq) to 24.5% despite higher staff costs, suggesting still-strong operating efficiencies. What contributed to the reduced interest payment was prudent debt management, which brought down borrowing and turned the balance sheet into a net cash position of S$17.9m in FY08 (net debt of S$5.5m in FY07). Operating cash flow remained robust and unchanged from a year ago, at S$40m.

Broke even in insurance management business. The group has also been seeing healthy patient load increases in Jan-Feb 09, while average occupancy rates are hovering at 50-60% (45-50% in FY07). RFMD will, moreover, enjoy a deductible tax incentive of S$2.5m-3m from the government’s Jobs Credit scheme in FY09.

Operational efficiency will forge defensive qualities. RFMD has not elaborated on its expansion strategy or provided sufficient figures for a full appreciation of its good set of results. As such, we believe its ability to bolster margins has not been well appreciated. Higher non-bed-related fee income could come from: 1) recently initiated customer segmentation to derive higher revenue from primary healthcare services; and 2) a channelling of insurance customers to Raffles Hospital, strengthening margins in Hospital Services. We have revised our hospital growth assumptions to 10-15% for FY09-10 (from 8-12%) to capture higher non-bed medical income.
Estimates raised; upgrade to Outperform from Underperform; target price raised to S$0.88 (from S$0.64). Our FY09-10 estimates have been raised by 18.3- 15.5%. Our target price rises from S$0.64 to S$0.88, in line with our higher CY09 P/E target multiple of 13x [(1 - growth/ROE)/(cost of equity - growth)] from 11.9x. We also introduce FY11 forecasts. On the back of our renewed confidence in the group, we upgrade the stock from Underperform to Outperform.

Below expectations. 4Q08 net loss of S$32m (S$9.7m profit in 4Q07) was wider than our assumption of S$16.7m because of lower-than-expected sales, and higher- than-expected opex and write-offs. Full-year net loss of S$17.9m was much larger than our loss forecast of S$2.4m.

Sales contracted 24% yoy to S$217m in 4Q08, as there was a sharp decline in orders, especially from mid-4Q08 onwards. In terms of notebook casing volume, the contraction was even steeper at 34% yoy (4.9m units vs. 7.4m a year ago), worse than the combined volume of the top-5 Taiwanese notebook ODMs, which was up 25% yoy to 31m units. This suggests further market-share loss.

EBITDA margins slipped into negative territory in 4Q08, hit by a combination of: 1) lower sales; 2) higher opex; 3) inventory write-offs; 4) forex loss; and 5) retrenchment charges. As a result, a huge loss of S$32m was incurred in 4Q.

Net gearing improved from 0.63x as at end-September to 0.53x, as a result of better cash cycle days (aided by shorter inventory days) and lower capex in 4Q. As suspected, the company did not declare any final dividend vs. 0.8ct a year ago.

Tough times ahead. We believe Huan Hsin’s notebook casing business will continue to be affected by the slowdown faced by its Taiwanese ODM customers, which are expected to post flat yoy shipment growth in 2009. To conserve cash, Huan Hsin will be keeping its capex in 2009 below S$15m, a fraction of the S$119m in FY08. It will also focus on improving its working capital and consolidate its facilities in China as well as reduce its workforce to lower costs.

Cutting forecasts; target price reduced from S$0.26 to S$0.25. We now expect losses again in FY09 due to an anticipated weak 1H (vs. net profit of S$15m previously), and have slashed our FY10 profit forecast by 64% to assume slower sales and margins. We also introduce FY11 forecasts. Our target price, still based on 0.3x P/BV, has been lowered from 26cts to 25cts. Maintain Neutral as downside should be limited by its historical low P/BV. We would advise investors to switch to Meiban (MEI SP, S$0.145, Outperform) for plastic exposure.

MCL Land took a hefty US$180.2m write down of development properties for sale to post an FY08 net loss of US$107.3m, compared to a net profit of US$61.9m last year. Omitting the write down, core profits were actually in line with expectations, improving 23% yoy, following the completion of The Grange, Mera Springs and The Esta in FY08.

MCL has become the first developer under our coverage to make a write down of its landbank, and the scale of the write down is much larger than the US$28m we had expected. We estimate that the management is forecasting property values to decline by about 20% on the average, prompting the prudent write down.

The Group expects The Fernhill, Tierra Vue and Hillcrest Villa to be completed this year, Waterfall Gardens and D’Pavillion to be completed in 2010 and the Peak@Balmeg in 2011. The progress of the sales of new units at the Peak@Balmeg and D’Pavillion has been slow, with 25% and 28% of the units being committed for sale respectively, but cash flows will continue to come in from the other projects under construction.

We expect MCL to continue to market the remaining units at the Peak@Balmeg and D’Pavillion in phases. New launches are likely to be phased out further into the future. Having already been written down based on current weak market conditions, these future projects could still turn profitable when they are subsequently launched at a time when the market has recovered.

MCL’s balance sheet remains strong with a net gearing of about 0.5x, which we expect to be pared down as projects become completed this year and next. However, it has a high exposure to the mid-end residential segment, which may continue to see weak demand as the recession persists. Maintaining our HOLD recommendation with a target price of $0.74, pegged to a 70% discount to RNAV.

As expected, FY08 revenue grew strongly backed by strong pre-sales of Espa, Leonie Parc View, Montebleu and The Centrio in 2007. Top line surged about 126% YoY from S$105.5m to S$238.0m. Operating expenses was well contained and consequently, net profit rose 44% from S$52.4m to S$75.2m in FY08. During the year, Soilbuild booked revaluation gain of about S$25.6m for the completion of Tuas Lot. Adjusting for this gain, Patmi was about S$54.2m.

Finance cost increased a hefty 86.2% YoY to S$6.8m in FY08 due to full-year amortization of CB interest and higher working capital term loan. Total borrowings increased further from S$376m in 3Q08 to S$406.7m in 4Q08 on higher drawdown to finance on-going projects. Debt-to equity reached a high of 2.7x back in 2Q08 which raised concerns. In 4Q08, Soilbuild raised approximately S$12.6m from rights issued and repurchased about S$15m worth of CB. These measures were intended to reduce funding cost and shore up its capital base – debt-to- equity improved to 2.0x in 4Q08.

Rental income target of S$10m was achieved attributable mainly to 100% occupied Eightrium. In accordance with Soilbuild’s dividend strategy to match payout with recurrent cashflow from rental, management has declared SG 4 cents (2 cents final and 2 cents special) dividend for FY08. This represents a yield of about 7.4% with book closure on 12 May 09.

Maintain BUY with target price reduced to S$0.83. On account of the continuous uncertainty in the global economy and local property market, we are adopting a more conservative stance in our RNAV estimate by only revaluing assets with higher near term visibility (namely those with revenue contribution up to FY10E). As such, our RNAV per share is reduced by about 5% to S$1.39. Soilbuild is currently trading at about 60% discount to our RNAV estimate. Giving a 40% discount due to illiquidity of its stock and current market discount to NAV, we derive a new target price of S$0.83. Maintain BUY.

Earnings suffer a huge blow. The Group registered a top line of S$92.5m for 2Q09, down 8% YoY from S$100.0m, on the back of lower ASPs of steel products, and sluggish demand due to the economic downturn. NPAT for the quarter, as a consequence, was down 81% YoY to S$1.5m. This huge drop was mainly due to a S$5.7m provision made to mark certain categories of inventories to net realisable value in light of the steel price plunge during the quarter. Gross profit margin moderated slightly to 16.7%, 0.4ppt lower compared to a year ago.

Staff costs and other defensive efforts. Manpower expenses fell 20% YoY for 2Q09 to S$2.5m due to quick cost-cutting measures introduced in light of dire business conditions and lower personnel incentives. The Group’s inventory level also remained relatively flat for 2Q09. This reflects management’s efforts to scale back purchases and hold lower balances of inventory in anticipation of slower moving orders and any further potential drop in steel prices, in the midst of a sizeable slowdown in sales.

Changes to our estimates. We have cut sales volume assumptions from a growth of 15% to a fall of 7.5% for FY09. We have left our steel price sensitivity assumptions unchanged (-8%) across the same period as current average steel prices for FY09 are 5.9% lower than FY08. However, we have adjusted both average steel prices upward by 15% between FY09 to FY10 as we foresee a recovery in business activity and the steel industry during that period. These changes collectively have resulted in our revenue forecasts falling 19.6% from S$458.8 to S$369.1 in FY09 and 14.7% from S$504.7m to S$430.3 for FY10. EPS estimates have fallen 40.6% from 6.4S¢ to 3.8S¢ for FY09 and 16.4% from 6.7S¢ to 5.6S¢ for FY10.

Valuation and recommendation. Despite extremely challenging times, the Group has done reasonably well to still deliver a profit and generate positive operating cash inflow of S$6.2m. We upgrade HUPSteel from NEUTRAL to BUY despite a new lower target price of S$0.15 based on our retained target of 4x FY09 P/E (trough valuation multiple for the past five years).

Key positives: (1) Improvement in margin despite lower sales, reflecting its success in improving yield and controlling costs. Bottom line would have been much better if not for the S$9.2m impairment of property and equipment, S$3.8m provision for onerous contracts, and S$6.1m allowance for inventory obsolescence; (2) Better working capital management and tight capex control. This enabled Hi-P to generate S$26.6m of free cash flow, lifting its net cash position further to S$125.9m or 47% of its current market cap; (3) Higher dividend payment of 2.2cts (vs. 1.5cts a year ago) translating into a decent yield of 7.3%

Key negative: Continuous weakness in revenue, reflecting the tough end market faced by customers. The yoy drop in revenue is also partly due to conversion of some business from full turnkey to consignment mode

Hi-P painted a challenging outlook for FY09, and expects lower yoy revenue in 1Q09. However, it aims to maintain similar profitability through better cost control. Our previous meeting with management suggests that they will be focusing on bottom line in FY09 rather than sales. Also, management aims to generate FCF via controlled capex as well as tight working capital management.

The stock looks attractive at 0.48x P/BV and 2.2x historical earnings with ability to generate strong FCF and sustainable healthy dividend yield of more than 7%.

Technically, the stock has stayed below its 30-day SMA and is now testing its resistance at $0.34 and S$0.375. Both indicators are looking down at the moment. However, the bullish divergence on both augurs well for the medium term. Short term, there could be some weakness which would provide an opportunity to accumulate, preferably near the S$0.26-0.28 support levels.

Gallant Venture has confirmed that it has received notification from the Supreme Court of Indonesia over its decision against it in a land dispute at Bintan Resorts. The court has ordered them to relinquish rights over the ownership of 963,353 sq m of land and pay damages to plaintiff PT Raflesia Marawisata. The total compensation amounts to Rp. 33.25m (S$4,300) for a survey fee, Rp. 57.54bn (S$7.4m) for loss of rent between 1996 and 2005, and a cash charge of 500,000 rupiah. Gallant says it will file a special appeal against the judgment with the Supreme Court of Indonesia.

This has also finally confirmed earlier Business Times articles alluding to this, but Gallant had not fully commented on it previously, as it had not received the notification prior to yesterday. As has been maintained by Gallant all along when news of the lawsuit arose, Gallant will suffer no adverse financial impact from the outcome of the lawsuit, given a full indemnity offered by its substantial shareholder Parallax Venture Partners XXX. Furthermore, damages awarded under the judgment total less than 0.6% of the Gallant Group's net tangible assets of about $1.3bn. There will also be no adverse impact the operations as the plot in question is currently vacant land.

With regards to its core operations, our view on Gallant remains neutral, where the current economic climate is not conducive to land sales, and therefore the overall development of Bintan Resorts. Gallant currently trades at a 82% to its last reported book value per share of $0.52. Our long term price target of $1.05 is intact, but is based on the long-term development plans of Bintan Resorts, which we estimate to take the next 15-20 years. While we maintain a Buy recommendation on fundamentals, we do not expect the stock to outperform in the current market, due to a lack of positive catalysts. Gallant releases its FY08 results on the 25th of February. We expect its earnings to remain slightly above breakeven, and with neutral cashflow. We will provide updates accordingly.

The outlook for the shipping building industry continues to deteriorate, in our view.Management presented a notably downbeat 2009 outlook highlighting the risk offurther delivery delays and order cancellations. Management also guided thatmargins for the shipbuilding & shipping divisions will continue to come underpressure and that planed expansion of the ship yards has been scaled back.Trading at 1.5x P/B we maintain our underperform rating and PO of S$0.45/share.

Cosco has reported FY08 results with PATMI of S$302.6mn, down 10% YoY. Theresults were below expectations, with YTD PATMI representing only 90% of oursand 93% of consensus estimates. 4Q08 was loss making (PATMI -S$24mn) dueto the recognition of S$173mn of one-off write-downs & provisions. FY08 netmargins declined to 8.7% vs 14.9% in FY07.

One-off write-downs and provisions were attributable primarily to lossesrecognized on ongoing projects (S$89mn, including higher steel and operationalcosts and resettlement expenses), provision for doubtful debts (S$61mn), and thewrite-down of steel inventory (S$21mn). Management commented that all write-downs relating to ongoing projects and inventories have now been accounted for.

We have trimmed our FY09/10 estimate by <3%. Our 2009 earnings estimatesare currently 20% below consensus due to i) lower shipyard margin assumptions,ii) 86% decline in revenues from shipping division (all charter contacts will expireby end 2009), & iii) assumption of 25% cancellation of order book.

FY08 results in line with expectations ? Chip Eng Seng achieved net profit of S$43.9m, in line with our S$44.2m earnings estimates, due mainly to faster than expected contribution from associated companies but partly offset by higher administrative expenses. Share of profits from associated companies decrease marginally to S$49.2m in FY08 but came in slightly ahead of our forecast of S$40.6m. The Parc Condominium & CityVista Residences was 38% & 26% completed at FY08, which was ahead of our expected completion of 35% and 20%.

Lower construction cost likely to benefit Chip Eng Seng in two ways ? Firstly, easing of the construction cost would likely benefit the Group's property development projects, Elias Road project in particular which is expected to be launched in 2Q~3Q09. As such, we have lowered our construction cost assumptions and breakeven estimates by a conservative S$10 psf. Secondly, the Group made S$11.9m of provision for foreseeable losses for its construction segment, mainly arising from the development of its joint venture property development projects. With construction works still ongoing and if easing construction cost trend persist, we may expect some write backs from these provisions in FY09~10F.

Dividends to be decided on a later date ? The Group did not declare any final dividends as at results reporting date. The Group has consistently been rewarding shareholders with minimum ordinary dividends of S$0.0075 per share for the past 4 financial years and sweetening dividend payouts through special dividends during good years. We believe the Group will likely maintain its ordinary dividends payout. We understand from management that dividends, if any, to be declared out of FY08 profits will be announced by end of 1Q09.

Maintain BUY recommendation with price target raise to S$0.29. Based on last transacted price of S$0.17, Chip Eng Seng is currently trading at 0.5x FY09F P/B. We continue to use sum-of-the-parts valuation methodology to value its property development and construction business. We have revalued all of the Group's unsold development projects at lower than recently transacted price to assume 100% sales in current market and continued to value construction business at 3x FY09F construction earnings. We lowered our discount factor to SOTP valuation to 40%, in line with the discount applied to other property stocks under coverage, raising our price target to S$0.29 (S$0.20 previously), a 22% discount to FY09F NAV.

4Q08 core net profit of S$62m came in within expectations, forming 27% our full year and consensus. Wheelock took an impairment charge of S$200m in FY08 for investments in SCGD and HPL. Revenue grew 19% yoy on strong accretions from Scotts Square, Ardmore Park and Wheelock Place. Tenant renewal rate for the latter is commendable at 94% for retail and 85% for office based on 2009 leases. Net cash position remains the key feature. We estimate Wheelock can raise another S$1bn in debt before net gearing touches 0.4x. Target price, still based on 20% discount to RNAV, is lowered slightly by 1% to S$1.49 on adjustments to our recognition schedules and the current market value of properties in Ardmore Park. With strong funding capacity and negatives from devaluation of SCGD and HPL accounted for, we think 2009 could turn out to be an interesting year for Wheelock. Maintain Outperform.

With earnings steady like a rock, we see little downside earnings risk for ARA Asset Management (ARA) due to its highly scalable fee-income based model. Our target price is adjusted slightly downwards to 60cts, based on 10x P/E FY10 trough earnings. Opportunistic new funds and M&A activities could provide earnings surprise in the near term. Maintain BUY.

Delivering with prudence. FY08 was largely uneventful as the group consolidate its position and did not raise new funds which on hindsight could have diluted performance. Gross revenues were 13% higher at S$70m, mainly on the back of full year contribution of its fee income from ARA Asia Dragon fund. Net profit margins remained relatively stable at c. 52%, resulting in a NOPAT of S$36.5m (+8% y-o-y). The group also proposed a final dividend of 2.24 Scts per share, bringing total dividend per share to 3.8 Scts, translating to a yield of c. 10%.

Adjust fund raisings assumptions, mark-to-market Reits. We mark to market the various reits AUM valuations as at 31 Dec’08 and moderate fund raisings assumptions due to increasingly tight capital markets. Our forward estimates assumes: (i) further 10% decline in asset values in its listed reits as at Dec’09, (ii) adjust new funds raised over FY09 to US$350m (previously US$500m), contributing only in FY10. Our forward FY09-10 EPS forecasts are thus reduced by c. 12% respectively to 6.1 cts and 6.7 cts.

China Fund- the next catalyst? Declining real estate prices in China & Japan, could present buying windows of opportuntities for ARA in the near term. In this aspect, we believe that ARA could launch a new China fund given (i) relative attractive value proposition compared to Japan, (ii) group has begun expanding its networks and presence there. The launch of a new fund, we view, is likely to serve as the re-rating catalyst for the stock in the near term.

FY08 revenue grew 27% YoY to S$130.1m mainly due to progressively recognition of 6 development projects ? The Treeline (TOP in Apr 08), St. Patrick's Loft (TOP in Nov 08), Axis@Siglap (TOP in Jan 09), The Montage, The Marque@Irrawaddy and The Medley.

Revenue from hotel and investment property also improved from S$37.3m to S$48.5m in FY08. This was backed by higher RevPar of S$176.1, an increase of near 23%. AOR however dropped by 4.6ppt to 87.9% for the full year.

Cost of sales and operating expenses remained mainly in line with revenue growth and our expectation. However, Roxy recognized fair value loss of S$2.8m on its investment properties (Roxy shopping center) and made provision for impairment loss of S$1.7m on The Ambra in 4Q08.

FY08's net profit growth of 28% to S$24.7m was lifted by earlier fair value gain in the year. Roxy has currently S$257.8m of unrecognized presale to be booked progressively into FY11.

Balance sheet strengthened significantly with the assistant of two TOPs in FY08. Debt-to-equity ratio improved from 4.1x in FY07 to 2.4x in FY08. During the year, CBRE revalued (on a desktop basis) Grand Mercure Roxy Hotel at S$278.4m, a drop of about 9%.

Net cash flow from operation saw black at S$12.6m for the first time since FY05 as the Roxy begin to reap fruits from its properties. Total cash holding increased from S$10m in FY07 to S$50m in FY08. (partly due to IPO proceeds during the year)

Reiterate BUY; target price revised upward to S$0.31. We see value in Roxy. We see stability in Roxy. Our RNAV per share estimate is revised upward to S$0.51 from S$0.41. However due to illiquidity of its stock and current market discount to NAV, we applied a discount rate of 40% to its RNAV per share. We derived a target price of S$0.31, representing a potential upside of 59%. We reiterate a BUY.

SGX, in consultation with the MAS has today introduced further measures to accelerate and facilitate listed issuers’ fund raising, including REITs. The measures will take effect on 20 Feb 2009 and will be in effect until 31 Dec 2010.

1. SGX has decided to increase the limit to allow issuers to issue up to 100% of its issued share capital via a pro-rata renounceable rights issue, subject to the condition that the issuer make periodic announcements on the use of the proceeds as and when the funds are materially disbursed, and provides a status report on the use of proceeds in the annual report. REITs can make use of this measure subject to compliance with provisions of trust deeds, applicable legal requirements and any limitations in existing mandate from shareholders.

2. MAS will be consulting on a proposed requirement for REITs to hold Annual General Meetings to promote good corporate governance and to be in line with the practices for listed companies and business trusts.

3. SGX will allow listed issuers to undertake placements of new shares priced at discounts of up to 20% subject to the conditions that a) the issuer seeks shareholders' approval in a separate resolution at a general meeting to issue new shares on a pro-rata basis at a discount exceeding 10% but not more than 20%; and b) the resolution seeking a general mandate from shareholders for issuance of new shares on a non pro-rata basis is not conditional on this resolution.

4. Subject to compliance with the Companies Act and other statutory requirements, an issuer will not be required to seek shareholders’ approval for Scrip Dividend Schemes as long as shareholders are provided with the option to elect for their distributions to be paid in cash.

5. Allow placements to substantial shareholders without shareholders' approvalas long as the following safeguards in place: a) the substantial shareholder does not have representation on the board of the issuer; does not have control or influence over the issuer in connection with the day-to-day affairs of the issuer and the terms of the placement; b) the placement is effected through an independent process such as book – building; c) the placement is made to more than one placee; and d) the proportion of issued shares of the issuer held by the substantial shareholder immediately after the placement is not more than the proportion of issued shares of the issuer held by it immediately before such a placement.

6. Allow underwriters to include non-major shareholders of the issuer as sub- underwriters

7.To further shorten the market exposure period for participants of rights issues, the exchange will allow “when-issued” trading of the rights shares to commence on the next business day after the close of the rights offer.

Recapitalization and refinancing to dominate sector news flow. S$580million debt capital and S$1.4bn equity capital have been raised from the market YTD. With sector-wide deleveraging and optimal gearing ratios likely lower than in the past, capital raisings will likely continue to dominate sector news flow in the short term. We estimate that about S$4.1bn equity capital would be required to overhaul the entire sector’s balance sheet. Average S-REIT gearing is at present 35%, which would drop to 25% if S$4.1bn of fresh equity capital were raised.

Availability of the right kind of debt is the critical issue. Cambridge Industrial Trust and CapitaCommercial Trust have in the past few weeks announced successful debt refinancings (albeit at higher cost and, in the case of Cambridge REIT, more restrictive terms). Debt of sufficiently long-dated maturity is however not sufficiently available, and to properly match REIT liabilities with their long-duration assets, we continue to believe that additional equity capital is required.

Dividend retention is not enough. Dividend retention or scrip dividend has been proposed by some REIT managers to retain capital during this challenging period. S$348 million worth of distributions were announced and paid by the S-REITs sector in the latest quarter. But even assuming no deterioration in the underlying net property income, we estimate the S-REITs sector would generate an annualized dividend of only S$1.4bn, compared with S$2.7bn debt up for refinancing this year. In addition, we estimate that it would take the sector 2.5 years, on average, with zero dividend payout to restore its balance sheet to a level that we would consider reasonable.

A-REIT remains as our top pick. We favor larger cap S-REITs that have recapitalized with defensive fundamentals.

FY08 was a record year for Hyflux in terms of operating performance and orderbook growth. This year, the challenging climate and limited funding will inevitably suppress orderbook growth. But, we believe Hyflux can still make another record in FY09 if they can manage costs and execute well on the S$1b worth of projects in their existing portfolio. Maintain Buy, TP S$1.96.

4Q08 results broadly in line. Sales of S$179m exceeded our forecast of S$108m due to stronger municipal, partially offset by lower industrial sales. But, operating margin was lower at 13.4% compared to our 17% forecast because of higher selling costs. Coupled with a S$6.9m provision for trade and receivables for industrial customers, net profit of S$13.4m (-42% y-o-y) almost matched our S$14.2m projection. Gearing remained relatively flat at 0.54x. The company proposed a doubling in dividend to 3.43 Scts, translating to 2% yield.

Earnings visibility secured. Notwithstanding the challenging environment, Hyflux has reasonable revenue and profit visibility for the next two years, underpinned by S$1b of order backlog. Of which, 50% is expected to be recognized in FY09. In view of the abundant opportunities in Northern China and Algeria, management remains confident of growing net orderbook by 20% annually. We have assumed new EPC wins of S$270m in FY09 (FY08: S$819m) and S$27m of this to be realized this year.

FY09 earnings trimmed by 7%, to account for lower margin assumption. Consequently, our SOTP-based target price is revised to S$1.96, translating to 18% upside. Maintain Buy.

Meiban's 4Q08 net profit of S$6.9m (-8% yoy) came in 246% and 108% above consensus and our forecasts respectively on higher-than-expected sales, gross margins and opex ratio, forex gains (S$397k) and a tax write-back (S$761k). The above was partially offset by about S$1m of provisions for doubtful debt and stock obsolescence. Full-year net profit was 32% and 20% above consensus and our forecasts, respectively. Meiban declared a final dividend and special dividend of 1cts each, translating into a close to 14% yield. We have left our FY09-10 forecasts unchanged given the limited near-term earnings visibility. Our target price is unchanged at 30.5cts, based on 0.7x CY09 P/BV. The stock remains attractive at 3x CY10 P/E (against average historical) and less than 0.4x P/BV. Maintain Outperform.

Even after accounting for a 20% holding discount to Keppel Corp’s (KEP) RNAV, we still find value. While the stock has been plagued by news of order cancellations and returns (ROIC and ROE) are set to taper, these seem overly discounted from an earnings, P/BV and EV perspective. Furthermore, sound offshore oil exploration fundamentals lend weight to our view that KEP’s current valuation is unjustified.

We undertook a study of offshore oil fundamentals. Opportunities for deepwater oil are still prevalent, forming only 15% of global oil production. Oil majors are still focussed on this and, done correctly, the unit cost of exploration can plunge if a large oil discovery is made.

The outlook for deepwater rigs raises the possibility of tight supply until 2011 and we believe KEP will continue to be a beneficiary of this. Charter rates for deepwater rigs have risen and stayed buoyant even as oil prices have steadily declined. However, the situation is not rosy for shallow-water rigs, which should be in oversupply in 2009 and will require scrapping or cold-stacking to keep rates healthy.

The possibility of near-term negative news flow for KEP in the form of orders being jeopardised by financing difficulties remains. In a worst- case sensitivity analysis, KEP will find its net cash position eroded to a net gearing ratio of 0.2x by end-2009 with EPS declining by 8%. However, this is unlikely as it requires three clients – Seadrill, Rowan and Skeie – to default at the same time. As KEP has good recovery options in the event of default, it is an opportunity to accumulate.

On a SoTP and 1.6x P/BV basis, we find that KEP offers decent upside with yields hovering at 6%. Our view on KEP is largely a valuation call as upside catalysts will probably require some time to gestate in our view.

Slightly below expectations. FY08 turnover inched down 2.3% to S$3,784.1m although it would have increased by 4.6% in US$ terms. Net profit fell 44.6% to S$167.5m and was below our forecast and market consensus (according to Bloomberg data) of S$215.2m and S$192.1m respectively. This discrepancy was mainly due to Venture's CDO charges which had also brought 4Q08 net earnings down by 93.8% to S$4.6m. If not for the charges, earnings would have come in at S$68.5m and S$287.5m in 4Q08 and FY08 respectively.

Weakening macro outlook. While management has admitted that it would be affected by the present economic slowdown and has termed it a "dull year", the company also highlighted that it is moving away from the EMS space and venturing further into the higher-margined segment within the ODM division through the likes of engineering design and other initiatives. Additionally, Venture mentioned that it would continue to look to increase its market share.

However, certain customers are not doing well. Nevertheless, we believe that Venture would find it hard to advance against a rising tide. HP's recent financials saw printer unit shipments fall 33% while its profit guidance for 2Q09 was also below analysts' expectations. Additionally, Agilent also warned of widespread market weakness as orders for its Electronic Measurement business fell 28% with weak demand seen from the various MNCs.

Recommendation. We forecast Venture's core earnings (excluding the potential CDO charges) to decrease 24.4% to S$217.3m in FY09. While the macro picture of the company may have taken a step back, its valuations appear highly attractive with prospective dividend yield at 12.1% (which we believe is sustainable given Venture's cash generating abilities) and 4.8x FY09 P/E. Assuming Venture trades up to the industry average of 6.0x FY09 P/E, we maintain BUY with target price of S$5.15 (from S$7.40 previously).

We upgrade Neptune Orient Lines (NOL) from Sell to Neutral. We expect few positive catalysts but aggressive restructuring and cost-cutting in Q408 gives us confidence that risks to our earnings estimates are evenly balanced. At 0.5x P/BV 2009E, we think the stock is fairly valued. We believe a key downside risk is a poor outcome of rate negotiations for transpacific trade. A demand recovery mid- year might improve sentiment but we expect limited impact on profitability.

We believe NOL will have only limited scope to off-hire vessels and will have to manage growing capacity but falling demand on major trade routes. Delayed delivery of newbuildings will help free cash flow. Renegotiating existing charters might lower costs and is an upside risk to our estimates.

We raise our EPS estimates from S$-0.21/-0.17/na to S$-0.18/-0.14/0.10 for 2009/10/11. Our revenue forecasts remain largely unchanged. Management indicated that group SG&A costs have been reduced by up to 25% or US$250m. We lower our cost estimates, which drives the modest increase in our EPS estimates. Our 2009 net loss estimate of US$-264m compares to US$-148m (including US$72m in restructuring costs) in Q408.

We raise our price target from S$1.10 to S$1.20. Our price target is derived using UBS VCAM, assuming a WACC of 8.8% (previously 10.3%). The lower WACC reflects worse-than-expected 2008 results and higher gearing. We estimate a fleet break-up value of S$1.30/1.20 in 2009/10. We lower our DPS estimates for 2009/10 to reflect the new dividend policy.

Indo Agri has announced a “noncash” writedown of Rp663 billion, or around S$85.6m, arising from the changes in fair values of biological assets for 4Q08 and FY08. To recap, the reporting of gain or loss arising from the changes in fair values of biological assets is in accordance with SFRS 41 of the Singapore tax code. We emphasize that the write-down is non-cash and nonoperational in nature. IndoAgri expects to remain profitable in FY08.

IndoAgri assesses the valuation of its biological assets on a half-yearly basis based on the valuation reports prepared by an independent valuer. The valuations are prepared based on the discounted net future cash flows of the underlying plantations, with determinants such as projected CPO selling prices and discount rates.

Over the past 3 years, Indo Agri has booked almost Rp. 800bn in gains to biological assets, in tandem with rising CPO prices. In fact, the carrying value of its plantations in its balance sheet had already been revalued upwards even prior to its listing on the SGX via its reverse takeover. In the current environment where CPO has fallen by half over the past year, it is only to be expected that IndoAgri’s plantations should be revalued downwards in line with this CPO price trend.

We are adjusting our reported net profit forecast downward to Rp.1,223.9bn for FY08, from Rp. 1,900.3bn previously. Naturally, there is no change to our core net profit forecast, which strips out the effects of non-cash biological gains and losses. This remains at Rp.1,551.3bn for FY08. IndoAgri releases its FY08 results on 27th February. We maintain our Buy call and target price of S$1.65.

Venture reported net income of S$167mn (down 44% YoY) and sales revenue of S$3.8bn (down 2.3% YoY) in FY08. If we excluded the S$114.5mn mark-to- market CDO loss & S$6.3mn impairment loss on an associate, operating income was down merely 3.3% YoY. Despite huge CDO loss, the company announced a final dividend of 50 cents per share for FY08.

After S$56.9mn mark-to-market CDO loss in 9M08, VMS wrote-down another S$57.6mn in 4Q08, which brought the total mark-to-market CDO loss to 114.5mn in FY08 (Vs S$16.2mn in FY07). We expect the CDO loss should come to an end in FY09 because VMS only has CDOs worth S$ 18.8mn on the books or 11% of the host value by the end of 4Q08.

In our view, FY09 is likely to be a challenging year for VMS. But we believe best of class design & manufacturing capabilities & economies of scale should help VMS to increase market share among existing customers and secure new customer qualifications, partially offsetting the impact from the global slowdown and making it one of the most competitive high-mix design-oriented manufacturers.

We have cut our earnings estimates by 16%/19% respectively for FY09/10E but reiterate our Buy rating with reduced PO of S$ 6.1. Venture is now trading at 5x FY09E P/E, which we believe is very attractive compared to its global peers. We continue to like VMS’s competitive position, economies of scale, and R&D capabilities in the high-mix ODM universe, which differentiates it from its peers.

The PTC announced an overall 4.6% reduction in bus and train fares from 1 April 2009. This more than offsets the fare increases awarded over the past 3 years. The fare revision for 2009 has been brought forward to April instead of October. 2 key measures will be in place – i) fare rebate and ii) transfer rebate. The next revision will take place in 1 July 2010.

Fare rebate between 1 April 2009 and 30 June 2010: For a period of 15 months, all adult/senior citizen concession EZ-Link fares will see a 2-cent reduction per trip across all fare bands. Child/student concession EZ-Link fares will be reduced by 1-cent per trip.

Transfer rebate increase from 1 April 2009: Transfer rebate for all adult/senior citizen concession EZ-Link journeys will be increased by another 10 cents to 50 cents. This is on the back of the earlier increase of 15 cents which was effected in October 2008. Similar to the 15-cent rebate, this 10-cent increase in rebate will also be two-third borne by the public transport operators (PTOs) with commuters bearing the remainder.

Passing on more than Budget savings: The above measures will cost the PTOs S$80MM in lost revenue over the next 15-month, effectively passing on more than the savings from the Government Budget of S$37MM.

Profitability impact: Excluding the savings passed on from the Budget, the incremental cost to the PTOs amount to S$43MM for the 15 months, of which we estimate CD will share 55% and SMRT 45% based on ridership share. This could partially be offset by ridership improvement on lower fares as commuters switch from private to public transport.

ComfortDelgro’s overseas earnings to compensate and spur growth: CD’s Singapore bus and train business is only 23% of its revenue and 20% of EBIT, with growth prospects coming largely from overseas, especially China and Australia (where fuel cost is subsidized or passed through) which we remain positive. We reduced our FY09/FY10 earnings estimates by 2.3%/3.9%. Maintain OW and our Dec-09 DCF PT of $2 (WACC: 9% with a long-term growth rate of 2%).

SMRT's high Singapore exposure might be disadvantageous: SMRT derives almost all its earnings from Singapore. Hence, it might be more exposed to the fare regulatory risks. It also faces the potential saturation of the Singapore land transport business over time. We reduced our FY10/FY11 earnings estimates by 6.8%/6.6%. Maintain Neutral and our Dec-09 DCF PT of $1.80 (WACC: 7.5% with a long-term growth rate of 1.5%).

Key downside risks to PT for CD & SMRT: (1) Ridership decline, (2) fuel cost surge.

We are downgrading FNN to Hold, from Buy. It was announced that The Coca-Cola Company (Coke) will not be renewing its bottling agreement with F&N Berhad, FNN’s 58% owned Malaysia’s subsidiary, from 26 Jan 2010. While bottomline impact is relatively minimal to FNN, this development does not bode well in the near term given that the Group is attempting to build up its F&B business in the face of receding contribution from its property business.

Non-renewal of Coke bottling agreement. The Coca-Cola Company (Coke) will not renewing its Bottler's Agreement with F&N Berhad (FNHB), FNN's 58%-owned subsidiary in Malaysia, when it expires on 26 Jan 2010. Revenue from Coke products (Coca-Cola and Sprite) is about RM$421m, which is about 35% of FNHB's soft drinks revenue. The other brands, such as 100Plus, F&N carbonated drinks, Seasons and Fruit Tree accounts for about the other 65% of soft drinks revenue.

Small impact to Group but untimely event. We estimate that Coke's products account for 4% of its revenue and c.3% of FNN Group’s operating profit contribution. While the impact seems to be relatively minor to FNN, the termination of the agreement in Malaysia does not bode well for the Group given that contribution from its property is receding and focus is for the defensive F&B division to provide support in current times.

Downgrade to Hold. Our TP is revised down to $2.76 on a 30% discount to our RNAV of $4.46. This equates to 0.7x P/B, which is the average trading level from 1998 to 2003 (prior to the equities bull market).

GIL's FY08 core net loss only accounts for 71% of our loss forecast and 63% of consensus. The smaller-than-expected loss was due to 4Q08's higher business patronage and drop/head, further boosted by better luck. Three key highlights from yesterday's conference call: 1) the Sentosa IR budget has been raised to S$6.59bn from S$6.0bn; 2) GIL will be incurring pre-operating costs in 2009, estimated at S$450m; and 3) GIL has guided for a lower project IRR to the tune of 13-14% from 15-20% previously. Our FY09-10 earnings have been adjusted by -268% to +65% to reflect year-end financial adjustments and revised Sentosa assumptions. Accordingly, our sum-of-the-parts target price drops to S$0.33 (from S$0.36). With prolonged weakness expected in the UK and limited re-rating catalysts until Sentosa IR opens its doors in 1Q2010, GIL remains an UNDERPERFORM.

FY2008 results. StarHub reported FY2008 operating revenue of S$2,127.6m (+5.7% yoy) and net profit of S$311.3m (-5.8% yoy). It also declared a final dividend of S$0.045 per ordinary share, bringing the total dividend for FY2008 to S$0.18 (+12.5% yoy) per share. This was higher than the total dividend of S$0.16 last year. Net profit dropped because of higher acquisition and retention costs. This was a result of mobile phone numbers becoming portable on 13 June 2008. In addition, tax expenses were higher in FY2008 because there was credit adjustment for deferred tax assets and tax adjustment for revision in corporate tax rate in FY2007.

Performances of the various business units. StarHub reported strong growth in most of its business units: mobile revenue was S$1,079.0m (+4.0% yoy), Pay TV revenue was S$398.2m (+16.5% yoy), broadband revenue was S$253.2m (+2.5% yoy) and fixed network service revenue was S$299.9m (+7.1% yoy). This was because StarHub was successful in attracting new customers to its services. As at 31 December 2008, the number of customers for its mobile, Pay TV and broadband businesses were 1,765,000, 524,000 and 373,000 respectively. Pay TV outperformed as there was higher take-up of premium channel and strong growth in the subscriber base.

However, sale of equipment fell to S$97.3m (-9.8% yoy). We felt that this could be due to consumers turning more cautious in their purchases during the economic slowdown. Profit margin. Net profit margin increased from 15.2% in 3Q FY2008 to 16.3% in 4Q FY2008 mainly due to higher mobile, Pay TV and broadband revenue. Based on a year-on-year comparison, it fell from 16.4% in FY2007 to 14.6% in FY2008 because of higher cost of services and operating expenses.

As expected, FY08 revenue grew strongly backed by strong pre-sales of Espa, Leonie Parc View, Montebleu and The Centrio in 2007. Top line surged about 126% YoY from S$105.5m to S$238.0m. Operating expenses was well contained and consequently, net profit rose 44% from S$52.4m to S$75.2m in FY08. During the year, Soilbuild booked revaluation gain of about S$25.6m for the completion of Tuas Connection factories. Adjusting for this gain, FY08 Patmi should stand at about S$54.2m.

Finance cost increased a hefty 86.2% YoY to S$6.8m in FY08 due to full-year amortization of CB interest and higher working capital term loan. Total borrowings increased further from S$376m in 3Q08 to S$406.7m in 4Q08 on higher drawdown to finance on-going projects. Debt-to equity reached a high of 2.7x back in 2Q08 which raised concerns. In 4Q08, Soilbuild raised approximately S$12.6m from rights issued and repurchased about S$15m worth of CB. These measures were intended to reduce funding cost and shore up its capital base – debt-to- equity improved to 2.0x in 4Q08.

Rental income target of S$10m was achieved attributable mainly to 100% occupied Eightrium. In accordance with Soilbuild’s dividend strategy to match payout with recurrent cashflow from rental, management has declared SG 4 cents (2 cents final and 2 cents special) dividend for FY08. This represents a yield of about 7.4% with book closure on 12 May 08.

We are placing our rating, target price and estimates Under Review and intend to provide an update following a meeting with the management.

TP S$12.20 — GEH posted lower 4Q earnings due to lower non-par fund profit and impairment/mark-to-market losses on investments. 4Q08 new business premiums fell 67%qoq reflecting weaker market sentiment. 2008 embedded value/share was S$12.23. GEH declared a total DPS for 2008 of S$0.26. The result suggests a possible 40%qoq fall in profit contribution for OCBC's 4Q earnings, as well as likely weaker wealth mgmt fees. GEH remains at just 0.66x price-to-embedded value. We introduce FY2011 estimates.

4Q net profit 76.5m, (3Q: 135.2m, 2Q: S$15.7m) — Premiums fell 39%qoq to S$1,326m. Life profits S$115m (3Q: S$145m), comprising par fund profit S$27m, non-par profit S$67m (see below), ILP profit S$21m. Other operating income was a loss of S$18m as fees were offset by mark-to-market losses and impairment charges on investments. Expenses S$57m more than doubled qoq.

4Q non-par profit S$67m (3Q: S$103m) — due to [a] lower interest rates for unrealized MTM gains on debt, [b] MTM losses and impairment provisions on equities and other assets, [c] increase in long term contract liabilities due to an increase in applicable discount rates. GEH reported a final 2008 embedded value per share of S$12.23, with a new business embedded value of S$0.56.

Challenging business climate — The global downturn is likely to affect new business premiums as seen in 4Q08, while volatile equity and debt markets and interest rates may cause volatility in insurance earnings, particularly in the non-par fund. However GEH retains a solid, well capitalized balance sheet and continues to maintain market share leadership in Singapore and Malaysia.

Company announcement. Late last week, the Group revealed that its main profit contributor; the Shanghai Pudong International Airport Aviation Fuel Supply Company (SPIAFSC) would be facing losses in 4Q08. This loss was incurred mainly from the sharp decline in oil prices during the quarter, alongside the decline in the regulated domestic prices in the PRC in Dec 08. The estimated loss, subject to a final audit, is estimated to be around US$33m, and hence CAO will incur a net loss of around US$11m from its 33% stake in SPIAFSC.

Full-year contribution from SPIAFSC. We had initially estimated profit contribution of US$9.8m for 2H08 from SPIAFSC (1H08 was US$15.4m). We had already assumed a lower contribution for 2H08 versus 1H08 due to the already lower crude oil prices during 3Q08 compared to 1H08. 3Q08 profit contribution was US$5.2m, which was within our expectations.

However, the 4Q08 loss was unexpected. Incorporating the US$11m in losses, overall profit contribution from SPIAFSC should arrive at US$9.6m for FY08. Changes to our forecasts. Forward estimates of profit/loss contributions from SPIAFSC prove to be ever elusive due to future crude oil prices being an unknown factor. With crude oil prices currently back below the US$40/bbl handle, we are lowering our estimates of contribution from SPIAFSC for FY09 and FY10. Estimates for the Group’s two other business-arms (Jet fuel procurement and trading activities) remain unchanged.

Valuation and recommendation. We have updated the market-risk parameters and EBITDA cash flow inputs to our DCF model and derived a new target-price of S$0.65, compared to our previous S$0.705. Our terminal growth rate remains at 1.0%.

We therefore downgrade the stock from a NEUTRAL to a SELL call with a new target price of S$0.65, implying an 11% downside.

2Q09 within expectations. Eu Yan Sang International Ltd (EYS) posted a credible set of 2Q09 results, in line with our estimates. Revenue improved by 6.1% YoY to S$53.4m, while operating profit edged up by 1.8% to S$5.2m. PAT rose 39.1% to S$4.7m in the absence of forex losses and thanks to lower taxes (losses from Red White and Pure (RWP) were offset against group profits), but after taking into account losses from discontinued operations arising from RWP, net profit grew by a smaller 12.9% to S$3.5m. EYS's 1H09 earnings have met 52% of our full year estimate. No dividend was declared for the quarter.

Calling it quits with RWP. To recap, RWP was a bleeding concept store that EYS had attempted to dispose off last year. The disposal has since been called off, and EYS has since terminated the business, resulting in a one-time write-off which was reflected as a S$1.19m loss from discontinued operations. The non-recurrence of such losses will free up a substantial drag on the group's future earnings.

Margins held up well. Gross profit margin for 2Q09 came in at 52.0% (vs. 51.1% in 2Q08), PBT margin grew 1.1ppt to 9.3%, and net profit margin inched up by 0.4ppt to 6.6%. Moving into 2H09, we believe that these margins are sustainable, given that inflationary pressure has generally tapered off. Management indicated that cost of raw materials has been easing. On top of this, the recently announced Jobs Credit Scheme will take some pressure off its labour costs.

Sales still strong for now. According to management, sales achieved over the recent Lunar New Year period have been healthy. Going forward, however, a protracted recession and the threat of further job cuts could weigh on consumer spending. We anticipate the employment of promotional discounts as a means of countering weakening consumer spending, and this could hurt the group's revenue if volume growth does not catch up with price declines. Nevertheless, management remains optimistic about growing its volumes by shifting its target market from the premium market to the mass market.

Upgrade to HOLD. We are leaving our estimates unchanged given that 1H09 results are in line with our estimates. Keeping our 8x parameter intact and rolling over our valuation to blended FY09/10, our fair value inches up to S$0.30 (from S$0.29). Since the stock is trading close to our fair value, we upgrade our rating to HOLD.

STE recorded a FY08 net profit of S$473.6m from FY07’s S$503.5m, which included an impairment charge for investments of S$25.9m. Stripping this out, net profit was in line with our forecasts, and flat YoY. STE has also proposed a final dividend of 12.8cts per share, and coupled with the interim dividend of 3ct per share, STE has continued its policy of paying out 100% of reported earnings (including its impairment charge) as dividends, with a dividend yield at 7.7%. Return on equity was maintained at an impressive 30%.

All divisions performed according to guidance, with turnover growth up 6%, and all divisions recording higher turnover with the exception of Marine. EBIT, however, did decrease by 8% in challenging conditions, particular in the Aerospace division, where earnings were hampered by ramp-up costs for its Passenger to Freight conversion program.

The impairment charge referred to 3 quoted strategic investments, primarily in the Electronics division. These now have a carrying value of just around S$10m, and we do not expect any further charges. STE’s cash balance of S$1.05bn is held in low-risk interest bearing deposits, either with as bank deposits or loans to related companies with guaranteed returns.

For FY09 guidance, STE expects a higher turnover and comparable PBT as FY08. Specifically, Aerospace is expected to be flat, while Electronics should record higher PBT. Land Systems and Marine are also expected to outperform. STE’s orderbook stands at S$10.6bn, of which it expects to deliver S$3.6bn for FY09, or about 66% of our turnover projection.

We are trimming our FY09 forecast by 5% to be closer to STE’s guidance, and to factor in possible weakness – FY09 net profit still stands at a creditable S$515m. STE continues to be the star earnings performer in the Singapore market, despite adverse economic conditions. STE does not expect to cut its practice of paying out 100% of its earnings as dividends. This yields a dividend payout of around 8.3% for FY09. We are buyers of the stock to a 5% payout of FY09 projected dividends, or S$3.60.

Valuetronics (VHL) handed in its 3QFY09 results last Friday, with revenue up 3.5% YoY (-22% QoQ) at HK$247.9m and net profit down 41.9% YoY (- 43.7% QoQ) at HK$12.5m. The modest top-line growth was mainly due to strength in OEM segment (+7.6% YoY) partially offset by decrease in sales within its ODM segment (-12.8% YoY), whereas the soft bottom-line performance was due to a change in sales mix, increase in commodity prices, added depreciation expenses from its new Daya Bay facilities and higher operating expenses. For 9MFY09, revenue registered HK$800.8m (+17.9%), meeting 80.3% of our FY09 sales forecast (77.3% of consensus), while net profit hit HK$55.8m (-21.2%), or 68% of our earnings figure (69.3% of consensus). Going forward, VHL expects to see great uncertainty in demand patterns and significant fluctuations in exchange rates, but expects to benefit from the various measures implemented by Chinese and Hong Kong governments. We will be speaking to management later for more information. Until then, we are putting our BUY rating and S$0.17 fair value under review.

Stats has called off its US$813 mln (S$1,243 mln based on US$1=S$1.53) capital reduction / distribution plan, which was first proposed in Jan ’08, and which obtained shareholders approval in March.

Temasek spent S$1.6 bln (paying $1.75 per Stats share) to raise its stake to 83.05% from 35.6% during the takeover in early 2007. (If they had secured 90% or more, the offer price would have been $1.88.).

Temasek’s share of the distribution would have been about S$1 bln.

OCBC is Stats’ principal banker, while Goldman Sachs was the financial advisor to Temasek in the 2007 Takeover exercise.

Some may say the latest development was not a total surprise, given that shareholders approval was obtained almost a year ago.

Balance sheet also does not justify such a payout, given Net Tangible Assets of US$952.76 mln (US$1548.66 mln less US$595.89 mln of Goodwill & Intangible Assets, resulting from the acquisition of Chippac. (Admittedly, gearing has improved, with Short-&-Long-term Debts of US$473.45 mln, down from US$664.63 mln at end ‘07.) Stats swung into the red in Q4 ‘08 of US$22.15 mln first since Q3 ‘05 from US$41.35 mln profit a year ago.

Finally, note that at 40.5 cents yesterday, Stats’ market cap of S$892 mln was well below the proposed distribution! And it has been 4 months since Stats’ market cap first fell below the proposed distribution, reflecting investors’ skepticism!

Dismal 2Q09 results. Silverlake Axis Limited (SAL) reported a pretty dismal set of 2Q09 results last week, with revenue down 67.5% YoY at MYR16.3m. As expected, the twin blow of the financial crisis and economic slowdown has led to a drastic cutback in financial institutions' IT spending. We understand that SAL has only been able to win contracts for minor upgrades - most have put their major upgrades on ice. And because of the sharp revenue fall, net profit also tumbled 73.4% YoY to MYR11.8m. 1H09 revenue (-73.4% YoY at MYR28.6m) met only 28.6% of our FY09 forecast, while net profit (-79.9% at MYR15.4m) was just 24.6% of full-year estimate. SAL declared an interim dividend of 0.3 S cent (versus 1.5 S cents in 1H08), payable on 20 Mar.

Sequential improvement but overall tone still cautious. On a sequential basis, revenue was actually up 32.7% QoQ, while net profit jumped 224.3%. In terms of segments, its SIBS Licensing grew 160.3% QoQ (-73.9% YoY), followed by Customised Software Solutions, which rose 20.4% QoQ (-61.1% YoY). Maintenance Services inched up 9.0% QoQ (-21.9% YoY), while Software/Hardware Products tumbled 98.4% QoQ (-97.1% YoY) due to some timing delays in revenue recognition. But overall, it may be too early to say if the worst is over; management continues to expect the trend oftemporary delays in finalizing IT agreements to persist for the rest of FY09, given that economic sentiment is still expected to remain cautious.

2H likely better than 1H. SAL is still in talks with several customers for major upgrades of their core banking systems, although the timeline for winning these contracts remains unclear. Nevertheless, SAL believes it should be able to secure at least one major contract in 2H09, but even if it does not, management is confident that it will do better in the second half as the small contracts are still coming in.

Slashing FY09 estimates. Given the still uncertain economic environment, we now assume a bear case scenario i.e. no major contracts in 2H09 and a modest recovery in FY10. As such, we pare our top and bottomline estimates for FY09 by 41-49% and FY10 by 34-35%. Hence even as we push forward our valuation from 8x FY09 to blended FY09/FY10F, our fair value drops to S$0.12 from S$0.19. We retain our HOLD rating as SAL is committed to continue paying out dividend in 2H09 (expected 7.7% yield).

Jaya’s 2Q09 headline net profit of S$26.7m was above expectations, mainly due to vessel disposal gains more than offsetting large forex losses. Looking ahead, financing issues on its aggressive newbuild program and uncertainty surrounding its forex hedging positions will continue to be a drag on share price performance. Maintain Fully Valued.

2Q09 better than expected. Jaya’s 2Q09 headline net profit of S$26.7m (-17% y-o-y, +193% q-o-q) came in above expectations, even after accounting for a significant forex loss of S$31.7m. This was due to an unexpectedly large gain from vessel disposals of S$39.7m, and a S$2.8m unrealized gain on derivatives. Excluding the unrealized amounts, net profit would have come in at S$25.9m (-13% y-o-y, -43% q-o-q). Group revenue fell to S$37.8m (-49% y-o-y, -43% q-o-q) primarily due to the shipbuilding division recording lower progressive recognition on fewer vessels committed for sale, while gross margins improved significantly y-o-y to 55.6%, reflecting the higher value charter vessels. Jaya has also declared an interim dividend of 1.0 Scents per share.

Net gearing expected to step up further. While management has indicated that it will continue to pace its aggressive newbuild program to balance capex requirements against cash flows generated from its chartering operations and vessel disposals, we project Jaya’s net gearing to step up to 0.92x by end FY09, from 0.65x currently. This is after having assumed a 20% delay in its newbuild program.

Maintain cautious stance on Jaya. Despite raising our FY09 net profit forecast to S$61.9m to account for the larger than expected vessel disposalgains posted in 2Q09, we are maintaining our Fully Valued recommendation on Jaya. Financing concerns on its large capex program have yet to ease, while uncertainty surrounding its forex hedging positions will continue to be a drag on share price performance. Our TP of S$0.23 is unchanged, and is based on 0.45x FY09F P/B, in line with historical trough valuations.

Oversea-Chinese Banking Corp. Wednesday said its fourth-quarter net profit fell 30% on a sharp drop in non-interest income and higher loan allowances.

Net profit for the three months ended Dec. 31 was S$301 million, or 30 Singapore cents a share, down from S$428 million, or 53.1 cents a share, a year earlier, Singapore's third-largest bank by assets said in a statement.

The result was lower than the average estimate of S$312 million by four analysts polled by Dow Jones Newswires.

Non-interest income fell 44% to S$259 million from S$464 million as income from fees and life assurance dropped. The bank also reported net losses from foreign exchange, and securities and derivatives trading.

Net interest income, however, grew 28% to S$783 million from S$613 million.

The group's loan book increased by 12% on year to S$81.34 billion as of Dec. 31 - but was little changed from a S$81.32 billion book Sept. 30, indicating lending is slowing down.

Meanwhile, its nonperforming loan ratio increased to 1.5% at Dec. 31, from 1.3% in September.

OCBC said it set aside S$159 million in specific allowances for loans in the quarter, bringing net allowances to S$243 million, up from S$13 million a year earlier.

"Our results for the year, particularly in the last quarter, were impacted by the global financial crisis and economic downturn," Chief Executive David Conner said. "The current recession is expected to continue throughout 2009."

Conner said the bank will manage expenses "more tightly" and maintain a high alert for risk management given the uncertain outlook.

OCBC said it will pay a final dividend of 14 Singapore cents a share, which can be paid by cash or shares.

Weakness persisted in 2Q09. Koda Ltd's (Koda) 2Q09 results were below expectations. Revenue slipped 34.2% YoY (but grew 2.5% QoQ) to US$11.8m, while net profit slumped 85.6% YoY and 18.7% QoQ to US$0.3m. Weak demand was the key culprit for the weak revenue showing. While we were spot on with our revenue estimates, earnings fell behind as high fixed costs persisted despite slowing sales. What caught us by surprise was the absence of dividends - typically paid twice a year - given Koda's strong cash position. Management explained that the decision was driven by priorities of cash conservation and possible M&As.

Margins came under pressure. Profit margins declined during the quarter as a result of pressing raw material costs and fixed overheads expenses. Gross profit margin slipped 4.5ppt to 26.2%, and net profit margin shrank by 10.1ppt to 2.8%. Although commodity prices have generally fallen, the impact has yet to be felt by Koda due to time lags between contractual negotiations and actual implementations. We do not expect cost pressure to ease significantly in the coming quarter as management has hinted at limited avenues for cost cutting.

Not out of the woods yet. Moving into its seasonally weakest 3Q09, the situation is likely to remain bleak. Management has warned that it could slip mildly into the red as a result of the shorter working months and festive holidays during the quarter. In addition, its newly expanded plant in Vietnam will add create overcapacity and under utilization. As it is, its plants are already running at less than 50% utilization rate.

The silver lining. On a brighter note, the US market is starting to show signs of a revival. Inventories have been depleted and orders are starting to flow in again. The impact of these orders could be felt in 4Q09 or 1Q10. On the other hand, the crisis has just begun in Europe and UK, implying that these markets could experience further weakness before staging a cyclical recovery. We have cut our earnings estimates by 27% to 50% to account for the weaker-than-expected 1H09 results. In addition, we have trimmed our valuation to 0.5x FY09F NTA from 0.6x, bringing our fair value estimate to S$0.145 (previously S$0.185). The bleak outlook appears to be factored in at current prices, as such, we maintain our HOLD rating on Koda.

SingLand's 4Q08 core net profit of S$67.2m forms 40% of our full-year forecast and consensus. This was due to higher margins from Pan Pacific Singapore. Contributions remained strong from the rental and hotel segments but these were overshadowed by fair-value losses booked for its investment properties in 4Q08 amounting to S$319.7m. SingLand has taken the lead in cutting its asset valuations significantly by 8-10% and we expect S-REITs to follow suit. Risks of further write-downs remain high, in our view. Our target price, still pegged at a 40% discount to RNAV, remains S$3.54, in line with the valuation benchmark of S$3.57 set by UOL in its recent takeover bid for UIC. Maintain Underperform.

We maintain our Positive rating for the China Pharmaceutical Sector, and forecast companies under our coverage to record strong earnings at their forthcoming result announcements. We also expect the sector to maintain its positive growth momentum, backed by the ongoing healthcare reforms, higher disposable incomes, and a targeted government spending of Rmb850bn over the next three years to improve affordability of and access to better healthcare in the PRC.

Sihuan (SHPH SP, S$0.72, 1) - We expect the company to record yet another quarter of impressive growth (forecast net profit up 59.2% YoY), backed by the strong momentum of its core product Kelinao. Stock remains attractively valued at 4.3x 09PER, in our view, despite its 53% outperformance over the STI for the past three months.

United Laboratories (3933 HK, HK$2.99, 1) - In our view, the key risk at its coming result announcement would be the impact of declining antibiotic prices on its profit margin and earnings. The downside risk was low with the stock trading at 3.3x 09PER during our initiation in November 2008. However, with the share price rising 67% over the past three months, and the stock now trading close to 6x 09PER, the balance of risk has changed. We may look to take profit to avoid the earnings risk if the share price continues its run.

Wuyi International (1889 HK, HK$0.69, 1) - We believe that a strong sales performance by its new product Perilla Oil Capsule would trigger buying interest in this stock. For those that missed out on United Laboratories, we recommend picking up Wuyi at the current 09PER of 2.6x.

AsiaPharm Group (APHM SP, S$0.30, 3) - We find its share price unattractive trading at over 6x 09PER, but this company has the potential to surprise at the coming result announcement, with the continued strong growth for its cancer drug Lipusu, and better management of its distribution costs, which accounted for almost 50% of its sales for the past four quarters.

C&O Pharmacuetical (COPT SP, S$0.095, 3) - We expect its ongoing transition to take a bit of time, and see a lack of catalysts emerging in the near term. Despite the continued decline in its share price, we see a better investment option in Wuyi for a similar valuation (09PER of 3.0x for C&O, 2.6x for Wuyi).