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.