Z-OBEE Holdings reported a set of 3QFY09 results that was below our expectations. Despite our downward revision in forecasts recently, revenue fell greater than expected at 52.0% YoY (-52.2% QoQ) to US$17.1m, due to continuous slackening in demand of the PRC consumer market. The slowdown also took a toll on its gross margin, which fell to 7.2% from 11.4% in 3QFY08 (2QFY09: 8.8%) amid pricing pressures and lower sales from its higher-margin solution segment. Together with an increase in finance lease costs for its Surface Mount Technology (SMT) lines, higher rates for trade receipt loans and tax expenses, net profit slid 98.4% YoY (-99.0% QoQ) to US$0.2m. For 9MFY09, revenue stood at US$89.9m (-4.2%), meeting 69.9% of our FY09 sales forecast, while net profit reached US$4.0m (-56.3%), or 65.7% of our full-year projection. We will be speaking to management later for more clarity. For now, we put our HOLD rating and S$0.03 fair value estimate under review.