We see expenses declining on an overall basis with lesser fair value loss on financial assets and lower depreciation cost. Other operating expenses and administrative expenses dropped 41.9% and 8.8% respectively. These were offset by higher foreign exchange loss of about $0.5m.
Profit attributable to shareholders for 1Q09 stood at S$1.1m as compared to a net loss of S$0.08m in 1Q08.
Operating cash flow turned positive mainly due to lesser working capital used in development of properties, higher collections on receivables and increased in payables. For the quarter 1Q09, Koh Brothers generated net cash of S$13.5m.
We maintain our forecast and target price of S$0.15 given no fundamental change in Koh Brothers' business since our last call. The stock has surged past our fair value on recent rally and we downgrade the stock to SELL. Given the continuous decline in property prices, the remaining unsold units in The Lumos and recently launched Fiorenza are main draggers to its valuation. No doubt local construction prospect seems promising, margins are usually thin and difficult to lift overall valuation of the stock unless Koh Brothers can secure large projects on upcoming tenders.
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