Drastic drop in PCS sales in 4Q08: PCS segment posted a swift quarterly decline of 16.8% in 4Q08 as compared to a hefty increase of 34.6% in previous year. The rate of decline is unimaginably shocking for two key reasons. Firstly, fourth quarter is supposed to be the strongest quarter. Secondly, handsets have become a necessity and thus the demand should be relatively stable. But the results tell us otherwise. People are delaying their purchases even for small-ticket items like handset. Nevertheless, we do not expect the declining pace to accelerate into coming quarters. Instead, PCS sales should stabilize at current level, supported by replacement nature of mobile plan.

Dividend expected to decline in FY09: Telechoice declared dividend per share of 2 Sg cts for FY08, representing dividend payout ratio of about 64%. We expect dividend payout to decline in FY09 as profit of the company is expected to shrink.

Network Engineering segment ? the only potential growth driver: Among the three segments, Network Engineering is expected to fare better than the rest in FY09 as investment in infrastructure is being taken by many countries to stimulate their economies. The segment has shown encouraging improvement in PBT margin since 1Q08 as management shifted its focus on higher margin businesses.

Currency risks: Significant portion of sales from Network Engineering segment was from Indonesia. The Rupiah has depreciated considerably against Singapore dollar. The currency volatility remains and may have negative impact on Telechoice results.

Maintain HOLD recommendation with price target of $0.20: After adjusting down the dividend estimates, we derive a target price of S$0.20 using DDM. We believe Telechoice has sounder financial position than ever to face the severe economic crisis. The cash reserves combined with prudent cost control will enable Telechoice to seize new business opportunities and ready for the next upturn. We also like the counter for its asset light balance sheet, with PPE virtually nil. In 4Q08, non-current assets accounted for less than 3% of total assets. But on valuation front, we think the counter is fully valued based on its 1.3x PB and 7.9x PER in FY09.