They are not the only broker who have slashed their tp. Report of Lian Beng from KE.

A clear surge in prices of building materials. Based on our understanding, basic raw materials used in construction actually accounts for a small portion of the total contract value. Steel alone, for example, accounts for only about 5% of the total contract value on the average. Assuming a further 30% inflation in steel prices, we expect LBG’s construction margins to be eroded by 1.5 pts. In addition, contractors would lock in their prices with suppliers for periods ranging from 6 months to a year, hedging their price risk even if raw material prices increase along the way. LBG also has an added advantage with respect to controlling ready-mixed concrete prices, as it has its own batching.

We reiterate our stance that Lian Beng’s value proposition comes from its construction business. It has equity stakes in a handful of residential development projects and the resultant development profits serve as an added bonus. Reviewing the portfolio of projects and the expected breakeven prices, we believe that they will all be profitable when launched. Even assuming a 10% loss provision for Lincoln Lodge, a project which may have higher risks, the impact on the SOTP valuation is only 1 cent per share! Considering the residential property market’s weak sentiment, we have adjusted our ASP assumptions and profit recognition schedules.

We have revised our profit recognition schedules for the construction and property development businesses, and have conservatively trimmed our construction margin assumptions for new contracts from 17.5% to 15%, reducing FY08 and FY09 forecasts by 14.2% and 26.8% respectively. In line with market conditions leading to a sector de-rating, we have lowered our 12-month tp to $0.68 from $1.12, based on a sum-of theparts valuation with a 10x FY09 consensus PER on the construction profits. As the 42,000 planned residential units in the supply pipeline are progressively released into the market, as well as the development of the commercial hubs in Jurong, Kallang and Paya Lebar, the construction companies are expected to remain busy for the next 5 years at least. Maintain BUY.