Earning projected to decline 25.6% in FY09F due to contracting gross profit margins. We understand from management that copper price has plunged 60% from its peak, resulting in cheaper cost of inventories & falling selling prices at current market conditions. As such, we expect BH Global's GPM to contract at least till the end of 2Q09F, based on inventory turnover days of approximately 254 in FY08, as existing inventories are being drawn down for sales. We expect earnings to decline 25.6% to S$14.3m in FY09F, as a result of a 6.6% contraction in GPM forecasted and relatively inelastic operating expense in FY09F.

Strong financial position with cash position of S$8.1m at FY08. We project BH Global's cash conversion cycle to improve to 250 days in FY09F from better inventory management. BH Global is likely to remain in net cash position as the Group does not have any major capital expenditure plans for FY09F. At FY08, BH Global has net cash of S$8.1m, or 1.9 Sg cts per share.

Dividend payout likely to be maintained. Without any major capital expenditure planed for FY09F, we believe BH Global will be able to maintain its dividend payout for FY09~10F, backed by its strong operating cash flows, bringing the dividend yield to 6.7% based on last transacted price of S$0.18.

Reinstate coverage at HOLD with target price of S$0.16. BH Global is currently trading at 5.3x & 4.7x FY09~10F P/E. Despite the challenging outlook pointing to earnings risk, we believe BH Global will be able to ride out this cycle with its prudent management and relatively strong financial position given its net cash of S$8.1m. As such, we reinstate coverage on BH Global at Hold and value BH Global at S$0.16, pegged at 0.9x FY09F P/B which is above the peer's average P/B valuation of 0.5x, given BH Global's superior margins and ROE.