SC Global’s FY08 earnings of S$45m (+57% yoy) came in under our below-consensus estimates. Gearing dipped following the reclassification of AV Jennings as a subsidiary, but remains high. It chose not to pay any dividends for FY08 (FY07: 2 cts/shr). It also booked an impairment charge of S$30m on its Ardmore and Sentosa sites. Maintain Fully Valued, TP S$0.37.
FY08 Net Profit Up 57%... SC Global reported a 57% yoy growth in FY08 net profit to S$44.5m on flat revenue of S$129.1m. EPS of 11.3 cts came in under our below-consensus estimates of 12.9 cts (consensus: 13.8 cts). Following the acquisition of additional shares in AV Jennings (AVJ), SC Global lifted its shareholdings from 49.63% to 50.03% and consequently reclassified AVJ as a subsidiary. This effectively reduced its net gearing to a still relatively high 2.8x, from 3.4x a quarter earlier. It also obtained TOP for its Newton 200 investment property, and booked a fair value gain of S$33.1m on this. It did not declare any dividend for FY08 (FY07: 2 cts/shr).

But Ardmore & Sentosa Hit By Impairment. More significantly, SC Global became one of the first property companies to impair its development landbank, allowing for foreseeable losses of S$30m combined for its Ardmore and Sentosa sites. Assuming an equal split, this brings its Sentosa land cost to S$1,700 psf ppr, below that of Ho Bee’s Pinnacle Collection (see page 2).

Catalysts Lacking, Maintain Fully Valued. The high-end property market remains cautious with a lack of catalysts, particularly as SC Global’s relatively high gearing prevents it from being overly opportunistic in a physical market downturn. Nonetheless, with it having taken the first steps of impairment, we have scaled back our discount to RNAV from 70% to 60%. Maintain Fully Valued with a TP of S$0.37 (RNAV S$0.93, prev S$1.39).