I think you are right; without the casino and theme park, the hotel is nothing.

Incidentally, just wondering why the delay in issuing casino licence.

DBS Vickers - Benefiting from a rejuvenated Orchard Road Buy S$4.06 Upgrade from Hold Price Target : 12-Month S$ 5.03 (Prev S$ 5.03)

Story: HPL released 3Q07 results with topline increasing 44% to S$110m and net profit turning in at S$15.2, up 40%. However, despite the growth in earnings, it is slightly below our estimates as we have envisioned a stronger hotel showing.

Point: We have adjusted down our forecast to factor in lower hotel earnings that led to a 27% and 48% reduction in revenues for FY07 and FY08. We believe that HPL will be able to benefit from Governments plan to revitalise Orchard Road through enjoying higher capital values. With a structural increase in planning parameters based on a 6.5m population, we look forward for an upcoming revised master plan in FY08 that will draw an indication of potential plot ratio increases that provides an impetus to our Orchard Redevelopment Scenario.

Relevance: We believe that the value is emerging after the recent share price pull back. Our RNAV estimates, including our Orchard Redevelopment Scenario, is maintained at S$5.03 that gives the HPL a 23% upside.

Hotel Properties Ltd (HPL) ? Net profit for HPL jumped to $15.2 million for the third quarter ended September, from $10.8 million for the corresponding period last year. Q3 revenues increased 45 per cent from $76.3 million to $110.4 million. 'The increase was mainly attributable to the group's hotels and resorts in Maldives, Bali and Singapore,' said HPL. 'The group's two Four Seasons Resort in Maldives commenced business in the last quarter of 2006 and the hotels and resorts in Bali and Singapore experienced strong growth in both occupancy and room rates.' HPL incurred higher borrowings and finance costs during Q3 because of various acquisitions by way of investments in associates and a joint-venture company. These include its participation in en bloc purchases of Gillman Heights and Farrer Court sites in Singapore.

KIM ENG - Business as Usual

♦ Healthy quarterly results

HPL recorded a strong third quarter: net profit jumped 40% Y/Y and 61.3% Q/Q to $15.2m. This brought YTD net profit to $36.3m, up 82.4% Y/Y. This isinclusive of a $7.1m non-operating income comprising the insurance payment from the 2004 tsunami. This is opposed to $10.9m in 3Q06 comprising an interim insurance payment and exchange gains. However, excluding the gains, PBT only grew 2.2% Q/Q. Revenue for 3Q07 grew 44.7% Y/Y to of $110.4m. The good results were due to the strong performance of its hotels and resorts in Maldives, Bali and Singapore.

♦ Hotels swelling HPL?s coffers

HPL?s Hilton, Pan Pacific and Le Meridien hotels (1,087 rooms) continue to enjoy high occupancies and strong room rates, as Singapore?s tourist arrivals continue to reach record numbers. With the Government?s initiatives to revitalise Orchard Road in a S$40m makeover, and the buzz created by the upcoming Integrated Resorts and the Formula One races, we expect HPL?s Singapore hotels to continue to perform strongly.

♦ Uncertainty looms over Horizon Towers

Following the High Court?s decision to overturn the Strata Titles Board?s (STB) earlier decision that the application was invalid based on technical grounds, the STB is now presiding over the case again. The STB proceedings now involve the consenting and minority owners presenting their cases and cross-examining witnesses, mainly members of the original sales committee. While the current sales committee has extended the deadline for the completion of the deal to 11 December, there is uncertainty as to whether the STB will pass judgment by then. If the judgment is not passed by then, the deal could be effectively scuppered. We have opted to omit Horizon Towers from our valuation model until the case is resolved.

♦ Maintaining exposure to the residential market

Even without Horizon Towers, HPL maintains an exposure to the Singapore residential market with an attributable GFA of 1.2m sq ft. These compriseBeverly Mai, Gillman Heights and Farrer Court. HPL?s stake inFarrer Court?s development company, Morganite Pte Ltd, has been recently reduced from 25% to 22.5%, following a change in the company?s issued and paid-up capital. As sentiments in the property market remain soft in the wake of the subprime crisis and the withdrawal of the Deferred Payment Scheme, we now expect Beverly Mai to be launched in 2008 instead.

♦ Fundamentally sound and undervalued

Following the strong performance of the Singapore hotels, we have revalued HPL?s Singapore hotel portfolio, taking into account the higher room rates and occupancies.We have slightly raised our target price to $5.28, based on parity to RNAV that is not taking into account the redevelopment possibilities of its Orchard Road properties. Maintain BUY.