FY2008 results. SC Global reported FY2008 revenue of S$129.1m (0% change yoy) and net profit of S$44.7m (+20% yoy). Net profit rose due to higher selling prices and lower cost of sales. Moreover, there was fair value gain of S$33.1m from the revaluation of its investment property, Newton 200.

Earnings estimates for FY2009F to FY2011F. SC Global is expected to remain profitable because it has achieved large sales of its residential projects in 2006 and 2007 and revenue will be recognized as construction progresses. Net profit is expected to increase from S$46.8m in FY2009F to S$143.0m in FY2010F because of recognition of revenue from the progress of construction of its projects. After that, net profit is likely to fall to S$52.5m in FY2011F as most of its projects have already been completed in FY2010F.

Outlook for FY2009F. SC Global highlights that it remains cautious on the property market. It is currently in the planning and design stage for its projects at Ardmore Park and Sentosa Cove. Its Australian subsidiary, AVJennings, has launched a targeted A$150m to A$200m AVJennings Residential Property Fund to acquire projects and take advantage of current market conditions.

Downgrade from BUY to HOLD recommendation, fair value reduced from $3.03 to S$0.67. As the property market continues to weaken and property prices are expected to fall, we are downgrading the stock from buy to hold recommendation. By applying a 60% discount to the RNAV of S$1.68, we derive a value of S$0.67 for the stock.