Parkway - Sell: Profit Let Down by Exceptional Losses

Maintain Sell — 4Q08 revenue of $241m (+4% yoy) is in line with our ests but several exceptional items resulted in $19.6m loss. However, recurring profit reached $31m and beat our below consensus S$26m est, thanks to a sharp 19% yoy reduction in staff costs which boosted margins. Dividend of 3.2cts for 2008 is much lower than 17.7cts for 2007, reflecting need to preserve capital.

Novena launch — Mgmt reiterated that completion schedule of the Novena suites remains unchanged and targets 80 units for sale for the first tranche. Indicative pricing has not been finalized and banks are financing at 65% LTV.

Hospital segment — Singapore Hospital 4Q08 sales fell 3% yoy but EBITDAR was up 20% to S$33m. However, foreign patient admission started to decline from Nov/Dec 08 onwards and will hurt prospects in 2009. International Hospital revenue rose 16% yoy, driven by Pantai, Cardiac Centre in Brunei and Apollo Gleneagles. A 28% equity interest increase in GHKL in 4Q08 also helped drive Int'l Hospital revenue and profits, with EBITDAR growing by 58%.

Healthcare — Increased patient volume and laboratory usage underpinned Singapore Healthcare 11% yoy sales growth, while International Healthcare was flat (+3%). Overall, Healthcare EBITDAR grew 17% yoy to S$18.4m.

New target price — We raise our earnings ests by 9% over 2009-10E to reflect impact of cost savings (eg. Jobs Credit Scheme); but, recommendation remains unchanged. Our TP is slightly raised to S$1.27, based on 15x 12-mths forward P/E. Our risk rating is changed to High Risk per our Quant Risk rating system.

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