FY2008 results. Ho Bee reported FY2008 revenue of S$302.1m (-49.3 yoy) and net profit of S$100.0m (-65.0% yoy). Revenue fell because of lower revenue from property development projects. Net profit dropped as a result of lower turnover and revaluation loss of S$2.3m in FY2008 compared to revaluation gain of S$87.7m in FY2007.

Outlook for FY2009F. Ho Bee expects this year to be challenging due to the global financial crisis. However, it highlights that it will be recognizing revenue from five residential projects, Vertis, Quinterra, The Coast, Paradise Island and Orange Grove Residences, which were substantially sold.

Earnings estimates for FY2009F to FY2011F. Ho Bee is likely to remain profitable for the next three years as it will record revenue from residential projects that have been sold. We expect it to report net profit of S$160.2m, S$70.5m and S$68.2m for FY2009F, FY2010F and FY2011F respectively.

Downgrade from BUY to HOLD recommendation, fair value reduced from $2.08 to S$0.42. Given the recession, we believe that there is room for property prices to drop further. In particular, we expect the property prices for high-end homes to drop by up to 30%, which is more than the other segments of the market. This will affect Ho Bee’s residential projects on Sentosa Cove. Moreover, buyers are cautious and sales transaction volumes are low. As a result, we are applying a 75% discount to the RNAV of S$1.67, which gives a value of S$0.42 for the stock.