FY08 results above expectations : FY08's net profit declined 43.5% to HK$20.0m, exceeding of our expectations of HK$14.7m. This was largely due to a HK$8.1m loss arising from a long position in futures contracts taken up by the management which was intended to hedge against the Group's future coffee requirement. However, prices of coffee beans fell sharply in 2H08, resulting in mark-to-market losses of HK$8.1m, higher than the value estimated in 3Q08's results.

Dividends cut : In line with the decrease in earnings, Tsit wing cut back on its final dividend to 2.5 HK cts (from 7.5 HK cts in FY07). Including interim dividend of 3.5 HK cts, dividend yield works out to 5.5% based on last transacted price of S$0.20.

Earnings forecast lifted : We forecast sales to decline in FY09F as we expect sales volume to be hit with the global economy in recession as well as Average Selling Price ("ASP") reduction, led by lower coffee prices which has fallen by approximately 10~15% year-on-year according to International Coffee Organization. On the same note, we have lowered our raw material price assumption by 12.5%, lifting our Gross Profit Margin ("GPM") assumption to 36.3%, in line with 36.1% GPM achieved in 4Q08. As such, we have lifted our earnings estimates, expecting FY09F earnings to grow 8.1% to HK$21.6m.

Maintain Sell with target price adjusted to S$0.155 : Given the uncertain and challenging economic climate, we see risk to our ASP assumptions which might lead to margins and earnings volatility. Hence, we prefer leave our valuation metric unchanged, valuing Tsit Wing at 0.6x FY09F P/B (from 0.6x FY08 P/B previously) and derive our target price of S $0.155. Maintain Sell.