HPL-DBS

HPL’s FY08 profit of S$33m was in line with our
expectations, once its revaluation loss of S$38m was
excluded. We remain concerned about its relatively high
gearing ratio and its exposure to high-end hospitality
and high-end property development. Maintain Fully
Valued, TP S$0.68.
FY08 Profit Down 78%. HPL registered a 78% yoy
drop in earnings to S$33m against revenue growth of
34% to S$612m. The divergence in performance was
due to a revaluation loss of S$38m in FY08, against a
gain of S$104m in FY07. Excluding the exceptional loss,
its FY08 net profit was in line with our expectations. The
Group declared a dividend of 1 ct/shr (FY07: special
dividend of 22 cts/shr).
Still Relatively Highly Geared. Though its hotel
business is cash flow generative, its current cash in hand
remains low at S$41m, against a net debt position of
nearly S$1.3bn. Its gearing ratio of 1.1x remains one of
the highest among Singapore-listed hoteliers.
All Business Segments Seeing Headwinds. Going
forward, its core business segments of high-end
hospitality and high-end property development are likely
to suffer. The former will be affected by a cut back in
discretionary spending amidst the current economic
climate, and the latter from a lack of confidence within
the high-end segment. In view of such uncertainty, the
Group will consolidate and conserve its resources in
FY09. We maintain Fully Valued, TP of S$0.68 premised
on a 60% discount to RNAV of S$1.70 (prev S$1.90).