SC Global Developments

2Q FY2009 results. SC Global reported 2Q FY2009 revenue of S$226.4m (+599% yoy) and net profit of S$7.8m (-32% yoy). As SC Global’s stake in AVJennings Ltd increased to 50.03% in December 2008, the revenue of AVJennings Ltd had been consolidated as a subsidiary. This caused a significant increase in SC Global’s revenue. However, as AVJennings Ltd’s property business were mainly high volumes with lower margins, the net profit of SC Global was lower.

Earnings estimates for FY2009F to FY2011F. SC Global’s profit is expected to increase from S$34.0m in FY2009F to S$193.1m and S$195.8m in FY2010F and FY2011F respectively. This is because most of its residential projects are anticipated to be completed in FY2010F and FY2011F.

Outlook for FY2009F. SC Global highlights the recent strength in the Singapore residential property market. We expect it to launch properties for sale only next year when sentiment in the luxury market improves further. On the Australian market, it mentions that AVJennings Ltd continues to face market pressures and challenges.

Maintain HOLD recommendation, fair value raised from S$1.10 to S$1.52. Like other property stocks, SC Global’s share price has risen sharply in the recent rally. We are maintaining our hold recommendation as we feel that there is limited upside from its current share price. Nevertheless, as the sales momentum in the Singapore property market is expected to be strong, we are raising the fair value from S$1.10 to S$1.52. This is a change from 50% to 40% discount to the RNAV. The RNAV has also been raised from S$2.21 to S$2.53 due to the higher than expected increase in property prices.

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