FY08 results in line with expectations ? FY08 revenue grew 58% to S$83.7m, in line with our forecast of S$84.5m, attributable to growth from trading and rental as well as the foundation engineering segments. PSL achieved GPM of 28.1%, higher than our expectation of 21.9% mainly due to the tight capacity of foundation engineers during FY08, leading to exceptional margins achieved. On top of GPM expansion, operating expenses were well managed, leading to 81.6% surge in FY08 PATMI to S$13.1m.

Dividends to be decided on a later date ? The Group did not declare any final dividends as at results reporting date. Given the better than expected results as well as the strong FY08 and expected FY09F operating cash flows of S$12.8m & S$12.7m respectively which is sufficient to finance its hire purchase obligations, we expect the Group to reward shareholders in the form of final and special dividends amounting to S$0.015~0.020 per share. We understand from management that the exact quantum of dividends to be declared will be announced by end of 1Q09. Including S$0.005 per share of interim dividends paid out during FY08, dividend yield is expected to range between 23.5~29.4%.

Earnings estimates revision ? Given that construction demand is expected to reach S$22~28b in 2009, which is around 2007's level where construction demand reached S$24.5b, we have lowered our revenue forecasts, expecting FY09F's revenue to decrease 33.6% and bring our GPM assumption to 24.9%. Hence, we expect earnings to soften 55.9% to S$5.8m in FY09F.

Maintain BUY recommendation with target price revised to S$0.13. Based on last transacted price of S$0.085, PSL is currently trading at 0.3x FY09F P/B. With earnings expected to revert to mean, we find it appropriate to change our valuation metrics to 0.5x FY09F P/B (from 5x FY08F P/E previously), deriving our target price of S$0.13, approximately 3x FY09F P/E. With upside potential of 53% and strong dividend yield of approximately 23.5~29.4% expected, we maintain our BUY recommendation on PSL.