4Q headline net profit may fall by c.45% if the Group recognizes further impairment losses on its 22% stake in Auric Pacific. Excluding exceptional items, we estimate that full year net profit should be c.7% lower y-o-y at $84m. The counter is trading at P/B of 1x. However, we believe the high cost of investment for the Novena hospital will continue to cap share price gains in the near term. Maintain Hold, TP: S$1.28.

4Q08 profit drop of 45%? Assuming the Group recognizes further impairment losses on its 22% stake in Auric Pacific, as per 3Q08, there could be a further c.$11m charge. This could cause 4Q08 net profit to fall by c.45%. However, we estimate that the Group’s 4Q/FY08 topline should be within our estimates. Excluding exceptional items, net profit is likely to dip c.7% y-o-y to $86m expected to be largely on higher staff, operating lease and other operating expenses. Parkway should be releasing its results in the week of 16 Feb.

Adjusting our forecasts. We adjust our assumption and factor in an -8% and -2% dip in inpatient admissions and day cases (FY09F) in Singapore respectively. This is offset by lower staff costs arising from the Group’s restructuring. We trimmed our forecasts by 3-4%.

Maintain Hold. Valuations appear low relative to historical values. It is trading at parity to book value. However, the Group’s hefty investment in their Novena hospital and uncertainty over the take-up and ASP of the medical suites may cap gains in the near term. Our sum-of-parts TP is now $1.28 on lower FY09F earnings (13x), offset by a higher market value of its stake in PREIT. Maintain Hold. We pefer ParkwayLife REIT [Buy, TP: $1.11] for its attractive c.8% yield, limited gross revenue downside, and with financing secured (till c.2011).