HPL’s FY08 profit of S$33m was in line with our expectations, once its revaluation loss of S$38m was excluded. We remain concerned about its relatively high gearing ratio and its exposure to high-end hospitality and high-end property development. Maintain Fully Valued, TP S$0.68.

FY08 Profit Down 78%. HPL registered a 78% yoy drop in earnings to S$33m against revenue growth of 34% to S$612m. The divergence in performance was due to a revaluation loss of S$38m in FY08, against a gain of S$104m in FY07. Excluding the exceptional loss, its FY08 net profit was in line with our expectations. The Group declared a dividend of 1 ct/shr (FY07: special dividend of 22 cts/shr).

Still Relatively Highly Geared. Though its hotel business is cash flow generative, its current cash in hand remains low at S$41m, against a net debt position of nearly S$1.3bn. Its gearing ratio of 1.1x remains one of the highest among Singapore-listed hoteliers.

All Business Segments Seeing Headwinds. Going forward, its core business segments of high-end hospitality and high-end property development are likely to suffer. The former will be affected by a cut back in discretionary spending amidst the current economic climate, and the latter from a lack of confidence within the high-end segment. In view of such uncertainty, the Group will consolidate and conserve its resources in FY09. We maintain Fully Valued, TP of S$0.68 premised on a 60% discount to RNAV of S$1.70 (prev S$1.90).