Earning Release

ASM International N.V.’s (NASDAQ:ASMI) 1Q 09 net sales and operating performance fell short of our expectations while bottom-line outperformed. With global equipment demand showing no signs of improvement in the near term, Management has not provided any guidance. However, the company has initiated a new program to further accelerate its cost-reduction efforts and better manage its working capital requirements in the near term. In view of this, we maintain our current HOLD rating until we revalue the stock in our next update report, despite our reservations regarding the weak macroeconomic outlook and current price not supporting a HOLD rating. We will reassess the common stock rating and target price for ASMI in our next update report. We maintain our current SELL rating for the NASDAQ stock as we anticipate a significant negative currency impact over our investment horizon. We will reassess the NASDAQ stock rating and target price for ASMI in our next update report.

China Eastern Airlines Corporation Ltd. (NYSE:CEA) reported a significant decline in its 1Q 09 earnings. Although the target price no longer supports a SELL we are reiterating the rating, given the company’s poor performance and anticipated sluggish demand for air travel in light of current economic conditions, augmented by the possible negative impact of the swine flu outbreak. We will reassess our target price and rating in our next update report. Although our target price no longer supports our SELL rating, given our fundamental outlook for the company, we do not anticipate a change to our ADR (1 ADR = 100 common shares) rating and will reassess the rating in our next update report. The Hong Kong dollar is pegged to the US dollar.

ACE Group’s (NYSE:ACE) 1Q 09 adjusted total revenues exceeded our estimate, reflecting higher-thanexpected net premiums earned and net investment income. Bottom-line also exceeded our forecast in 1Q 09 as the impact of higher-than-expected top-line and lower-than-expected income tax expense was only partially limited by higher-than-expected total claims and underwriting expenses. Management has highlighted an improvement in the quality of its portfolio as rates have firmed and new clients have come to ACE, but believes revenue growth will remain under pressure due to global recessionary conditions and reduced client exposures as budgets decline. Although we are unlikely to adjust our premium estimates significantly, we expect to revise our investment income estimate upwards given the 1Q 09 performance. At current levels we maintain our HOLD rating for the NYSE common stock. We will reassess the NYSE common stock rating for ACE in our next update report. As we anticipate a significant positive currency impact on the European stock over our 6-12 month investment horizon, we maintain our BUY rating for the European stock. We will reassess the rating for ACE in in our next update report.

Grupo Aeroportuario del Centro Norte, S.A.B. de C.V.’s (NASDAQ:OMAB) 1Q 09 performance exceeded our expectations reflecting higher than anticipated revenues coupled with income tax benefits. We downgraded the common stock to a SELL in our company news alert, dated 27 April 2009, reflecting the risks associated with the swine flu outbreak in Mexico. We upgrade the common stock from a SELL to a HOLD, despite the target price not supporting a HOLD rating at current price levels, as the 1Q 09 results were better than we expected however we remain concerned by the company’s exposure to the swine flu virus. We will fully reassess the common stock target price and rating in our 1Q 09 update report in the coming weeks. Given the risks associated with the swine flu outbreak, and our fundamental outlook for the company and as we expect a negative currency impact on the ADR over our 6-12 month investment horizon, we maintain our SELL rating for the ADR (1 ADR = 8 common shares), even though the target price does not support a SELL at current price levels. We will reassess the ADR (1 ADR = 8 common shares) in our 1Q 09 update report in the coming weeks.

Arch Capital Group Ltd.’s (NASDAQ:ACGL), adjusted total revenues as well as bottom-line were in line with our expectations in 1Q 09. Going forward, although we continue to expect a decline in premiums in FY 2009, we remain encouraged by the company’s well diversified portfolio of insurance and reinsurance services which we believe establishes a strong risk profile in the event of downturn in any one segment. Overall, with the company continuing to demonstrate sound fundamentals, we view Arch Capital as an attractive investment opportunity at the current price level and maintain our BUY rating for the NASDAQ common stock. We will reassess the NASDAQ common stock rating for Arch Capital in our next update report. Based on our fundamental outlook and as we anticipate a significant positive currency impact on the European stock over our 6-12 month investment horizon, we maintain our BUY rating for the European stock. We will reassess the rating for Arch Capital in our next update report.

On 29 April 2009, Arcelor Mittal (NYSE:MT) reported a steep y-o-y decline in revenues and profitability for 1Q 09, reflecting lower prices and sales volumes. We expect already-announced production cuts to remain in effect over the near term in reflection of weak global demand in 1H 09, as the automotive and construction industries have been among the hardest hit by the global economic downturn. Considering this, we maintain our 6-12 month SELL rating, even though the target price derived in our last update report does not support a SELL. We will reassess our ADR (1 ADR = 1 European share) rating in our next update report. We continue to anticipate a significant positive currency impact on the European stock over our investment horizon. However, based on our fundamental outlook, we maintain our HOLD rating. We will reassess our European stock rating in our next update report.

Sterlite Industries (India) Ltd. (NYSE:SLT) announced its 4Q 09 and FY 2009 results on 28 April 2009, with higher-than-expected total revenues. However, profitability fell short of our expectations. Going forward, we expect commodity prices to rebound in FY 2010, supporting the top-line. In addition, we remain optimistic about the company’s growth projects. Therefore, we expect to raise our estimates and target price in our next update report. However, we anticipate stock price volatility while the acquisition of Asarco LLC is pending. Therefore, we temporarily maintain our 6-12 month SELL rating, and will reassess it in our next update report. We continue to anticipate a significant negative currency impact on the ADR over the coming 6-12 months. Therefore, we maintain our SELL rating. We will reassess our ADR (1 ADR = 1 common share) rating in our next update report.

Advanced Semiconductor Engineering, Inc (NYSE:ASX)Despite reporting significant deterioration, Advanced Semiconductor Engineering, Inc.’s (ASE) 1Q 09 operating income and adjusted net income outperformed our expectations. Going forward, it is likely that we will improve our margin estimates to reflect better-than-expected cost efficiency in 1Q 09. Hence, at current price levels, we moderate our rating for the common stock from a SELL to a HOLD. We will reassess the common stock target price and rating for ASE in our next update report. We maintain our ADR rating in line with our fundamental outlook and anticipated negative currency impact over our 6-12 month investment horizon. We will reassess the ADR (1 ADR=5 common shares) rating for ASE in our next update report.

In 1Q 09, China Unicom Ltd.’s (NYSE:CHU) revenues, operating margin and net margin were in line with our estimates while EBITDA margin was below our estimate. As the company’s 1Q 09 results were in broadly line with our estimates, and the current price supports a HOLD rating we do not anticipate change in our current rating. We will reassess the common stock rating for China Unicom in the coming weeks. As the current ADR price supports a HOLD rating we maintain our rating for the ADR. The Hong Kong dollar is pegged to the US dollar. We have taken a 6-24 month investment horizon for the ADR. We will reassess the ADR rating for China Unicom in the coming weeks.

France Telecom’s (NYSE:FTE) preliminary results for 1Q 09 were in line with our estimates. As the company’s 1Q 09 results were in line with our estimates, and the current price supports a BUY rating we do not anticipate a change in our common stock rating. We will reassess the common stock rating for FT in the coming weeks. Although we expect a negative currency impact on the ADR over the next 6-12 months as the current price supports a HOLD we reiterate our HOLD rating for the ADR. We will reassess the ADR rating for FT in the coming weeks.

Net Serviços de Comunicação S.A. (NASDAQ:NETC) announced its 1Q 09 results on 28 April 2009. In 1Q 09, revenues were in line with our estimate while EBITDA was below our estimate. Conversely, operating income and adjusted1 net income were significantly above our estimates due to lower-than-expected Depreciation & Amortization (D&A) expenses and higher-than-expected financial income in 1Q 09 respectively. Going forward, we expect robust expansion in subscriber-base to drive revenues from the subscriptions segment. Furthermore, we expect impressive performance by the Sign-on & Hook-up and Other segments to support overall revenue growth. In light of this, although the current price does not support a BUY rating, we maintain our rating based on our positive outlook for the company and impressive operating level performance as compared to our estimates. We will reassess the Brazilian preferred stock rating for NETC in our next update report. As the current price supports a SELL rating and considering our anticipated negative currency impact, we reiterate our SELL rating for the ADR. We will reassess the ADR stock rating for NETC in our next update report.

SAP AG (NYSE:SAP) reported a y-o-y decline in 1Q 09 top-line, led by a fall in Professional services and other services revenues and flat growth in its largest revenue generating segment, Software and software related services during the quarter. EBIT and net margins were higher than expected on account of lower-than-expected operating expenses. However on actual basis profitability in 1Q 09 contracted y-oy. Poor yearly performance during the quarter was mainly attributable to weak demand impacted by recessionary economic conditions across all geographies. However, SAP has a high level of recurring revenues and has a diversified revenue stream across geographies, industries and customer segments, which offer a level of visibility and cover from adverse conditions in a particular region or industry. Moreover, we expect the company’s restructuring measures to result in improved margins in the medium term. We therefore maintain our common stock BUY rating for SAP until we reassess the rating in our next update report in the coming weeks. As we continue to anticipate a significant negative currency impact on the ADR over the next 6-12 months, and the current level does not support a HOLD rating, we downgrade our rating for the ADR from a HOLD to a SELL.

América Móvil S.A. de C.V.’s (NYSE:AMX) 1Q 09 results reported strong y-o-y growth, aided by healthy wireless subscriber additions, primarily in Mexico, Brazil and Columbia. Services revenues also experienced strong growth, supported by healthy performance from the Data business. Post introduction of 3G services in early FY 2008 the share of Data revenues in AM’s total revenue mix has been constantly increasing. Considering AM’s strong hold in the Latin American wireless market and growing 3G acceptance in most of its operating regions, we believe there exists healthy potential for growth. Hence we reiterate the AM common stock a BUY until we reassess our estimates in our update report in the coming weeks. We expect to take a 6-12 month investment horizon to value the company in our next update report, as we now anticipate a negative currency impact on the ADR over the medium term. We therefore downgrade the ADR rating from a BUY to a HOLD. We will reassess our target price and ADR rating for AM in the following weeks.

ARM Holdings PLC (NASDAQ:ARMH) changed its accounting standard from US GAAP to IFRS for 1Q 09 results rendering our estimates incomparable. 1Q 09 results reflected a strong y-o-y improvement in the company’s top-and bottom-line performance based on favorable currency impact. Looking ahead, we expect ARM to face a declining top-line in FY 2009 in line with the industry. We maintain our HOLD rating for the ARM common stock until we revalue the company in our next full update report. Based on our fundamental outlook and an anticipated significant negative currency impact on the ADR over our 6-12 month investment horizon, we reiterate our SELL rating for the ADR. We will reassess the ADR (1 ADR = 3 common shares) target price and rating for ARM in our next update report.

Banco Santander Central Hispano S.A. (NYSE:STD) reported stronger-than-expected results in 1Q 09, with top-line growth benefiting from robust expansion in Net Interest Income (NII) and consolidation of recently-acquired businesses. However, we are concerned about a sharp rise in loan loss provisions, which reflect deterioration in asset quality and adversely impacted 1Q 09 earnings. Considering the weak macroeconomic outlook in Santander’s key markets and its effect on asset quality, we maintain our 6-12 month HOLD rating. We will reassess our common stock rating in our next update report. We continue to anticipate a significant negative currency impact on the ADR over the coming 6-12 months. Therefore, we maintain our SELL rating. We will reassess our ADR (1 ADR = 1 common share) rating in our next update report.

Cemex S.A.B. de C.V.’s (NYSE:CX) net sales and operating income fell below expectations in 1Q 09, although a large tax benefit led to higher-than-expected earnings. Although we expect Cemex to benefit from infrastructure development provisions in the US government’s recent stimulus package, the residential and commercial construction sectors remain hard-hit by the global economic downturn. Therefore, we maintain our 6-12 month HOLD rating for the ADR. We will reassess our ADR (1 ADR = 10 Mexican shares) target price and rating in our next update report. We continue to anticipate a significant positive currency impact on the Mexican stock over the coming 6-12 months. Therefore, we maintain our BUY rating. We will reassess our Mexican stock target price and rating in our next update report.

Chunghwa Telecom Ltd (NYSE:CHT) reported its 1Q 09 results today. While revenues were in line with our estimate, EBITDA, operating income and adjusted net income were below our estimates. The y-o-y decline in revenues was due to a decline in Fixed Line, Wireless and Internet & Data revenues, while margins were under pressure due to increased cost of services and general & administrative expenses. In light of unimpressive 1Q 09 results we are likely to revise our target price and estimates downwards. Although the current price supports a SELL rating, considering the continued impressive performance by value added services we reiterate the common stock a HOLD. We will reassess the common stock rating for Chunghwa in the coming weeks. Although we anticipate a significant negative currency impact on the ADR over a 6-12 month horizon considering the current price levels, we maintain our HOLD rating for the ADR. We will reassess the ADR (1 ADR = 10 common shares) rating for Chunghwa in the coming weeks.

Rogers Communications Inc (NYSE:RCI) While revenues, EBITDA and operating income were in line with our estimates, adjusted net margin was below our estimate, primarily due to a higher-than-expected income tax rate during the quarter. Going forward, we anticipate robust growth in the Wireless segment to drive total revenues and as the results were broadly in-line with our estimates we maintain our current BUY rating for the common stock. We will reassess our target price and rating in our 1Q 09 update report. Although we expect a negative currency impact on the ADR over the next 6-12 months, considering current price levels and our positive fundamental outlook we reiterate our HOLD rating. We will reassess our target price and rating in our 1Q 09 update report.

Methanex Corporation’s (NASDAQ:MEOH) 1Q 09 revenues were above our estimate and earnings were in line with our estimate. We are likely to lower our earnings and target price estimates in our next update report to reflect the ongoing downward trend in methanol prices. However, we remain encouraged by the company’s strong financial position. Hence, we maintain our HOLD rating until we can fully reassess our NASDAQ common stock rating for Methanex in our next update report, in the coming weeks. We continue to anticipate a significant positive currency impact on the Canadian common stock over our 6-12 months investment horizon. Hence, we maintain our BUY rating for the Canadian stock until we can fully reassess our target price and Canadian stock rating for Methanex in our next full update report, in the coming weeks.

Chicago Bridge & Iron Co. N.V. (NYSE:CBI) reported a y-o-y decline in its 1Q 09 top-line, in-line with our estimate, reflecting a decline in revenues across all of its businesses. However, overall margins improved y-o-y due to lower cost of revenues. We are likely to revise our earnings estimates upwards in view of the better-than-expected operating performance in 1Q 09. Hence, although the target price does not support a HOLD at current price levels, we upgrade the NYSE common stock rating from a SELL to a HOLD over our investment horizon of 6-12 months. We will reassess the NYSE common stock rating in the coming weeks. Although the target price does not support a BUY rating at current price levels, as we continue to anticipate a significant positive currency impact on the European stock over the near term, and given our fundamental outlook, we upgrade our rating for the European stock from a HOLD to a BUY. We will reassess our target price and rating for the European stock in the coming weeks.

Desarrolladora Homex S.A.B. de C.V.’s (NYSE:HXM) 1Q 09 total revenues, margins and earnings beat our expectations. Management has reiterated its previous guidance for FY 2009. In view of better-thanexpected 1Q 09 results and reaffirmation of robust revenue growth and EBITDA guidance, we maintain our BUY rating for the Homex common stock. We will reassess the Homex common stock rating in our next update report. Although we continue to anticipate a negative currency impact on the ADR (1 ADR = 6 common shares) over the next 6-12 months, given our strong fundamental outlook and current price levels, we upgrade the ADR from a HOLD to a BUY. We will reassess the Homex ADR rating in our next update report.

In 4Q 09, Mahanagar Telephone Nigam Limited’s (NYSE:MTE) revenues were broadly in line with our estimates. However, profitability declined substantially and the company reported significant losses at EBITDA and operating level, primarily due to higher-than-expected employee remuneration & benefits (staff costs). Going forward, in the absence of any growth driver, declining wireless market share, coupled with weak 4Q 09 and FY 2009 results, we downgrade our common stock rating from a HOLD to a SELL. We will reassess the common stock rating for MTNL in the coming weeks. As we continue to expect negative currency impact, coupled with our suppressed fundamental outlook we maintain our SELL rating for the ADR. We will reassess the ADR rating for MTNL in our next update report.

Empresas ICA, S.A.B. de C.V (NYSE:ICA) reported a robust y-o-y increase in 1Q 09 revenues, above our expectations, while earnings fell short of our expectations. However, as we continue to believe the company’s healthy construction backlog to drive growth, going forward, we maintain our current BUY rating for Empresas ICA’s common stock. We will reassess our target price and rating in our next update report. Given our fundamental outlook and the anticipated negative currency impact over our investment horizon, we do not anticipate a change in our current HOLD rating for the ADR (1 ADR = 4 common shares). We will reassess our target price and rating in our next update report.

Sanofi-Aventis S.A. (NYSE:SNY) reported modest growth in 1Q 09 revenues, higher than our estimate. Furthermore, operating and net performance also exceeded our expectations in 1Q 09. We believe the company will be able to support its top-line growth over the next 2 years as the company has approximately 25 drugs in advanced stages of development. We maintain our neutral outlook for the company due to our concerns over the impact of severe generic competition faced by the company’s top 15 drugs. However we, maintain our BUY rating for common stock as we believe at current price levels, Sanofi-Aventis’ common stock is undervalued. We will reassess our target price and rating in our 1Q 09 update report. We maintain our HOLD rating for the ADR based our expectation of a significant negative currency impact on the ADR over the medium term. We will reassess our target price and rating in our 1Q 09 update report.

Siliconware Precision Industries Ltd. (NASDAQ:SPIL) posted mixed 1Q 09 results; while revenues were broadly in-line with our estimate, earnings outperformed our expectations. Going forward, we believe the demand for consumer electronics in China will support near term growth of the company. Therefore, although the common stock target price does not support a HOLD rating at current price levels, we maintain our HOLD rating and will reassess our target price and rating in our 1Q 09 update report. We maintain our SELL rating for the ADR, (1 ADR=5 common shares), in line with our fundamental outlook and anticipated negative currency impact on the ADR over our 6-12 month investment horizon. We will reassess our target price and rating in our 1Q 09 update report.

Tyco Electronics Ltd. (NYSE:TEL) reported weak 2Q 09 results. While revenues were in line with our estimate, adjusted1 operating income was significantly below our estimate. Furthermore, Management expects 3Q 09 revenues and earnings to decline significantly y-o-y due to a weak economic outlook. In light of this, we do not anticipate a change in our current SELL rating for the NYSE common stock. We will reassess our target price and rating in our 2Q 09 update report. Although we expect a positive currency impact on the European stock over the next 6-12 months, we do not anticipate a change in our current SELL rating for the European stock based on current price levels. We will reassess our target price and rating in our 2Q 09 update report.

Siemens AG (NYSE:SI) reported strong 2Q 09 results, in line with our estimates. Management has, however, lowered its forecast for FY 2009 operating profit. In light of this, we maintain our HOLD rating for the common stock, given the near term challenges arising from weak markets and declining consumer spending. We will reassess our target price and rating in our 2Q 09 update report. As we anticipate a negative currency impact on the ADR over our investment horizon, we do not anticipate a change in our SELL rating for the ADR. We will reassess our target price and rating in our 2Q 09 update report.

United Microelectronics Corporation (NYSE:UMC) reported a sharp y-o-y fall in revenues and greater-thanexpected operating and net losses during 1Q 09, reflecting weak consumer demand and dire economic conditions around the world. However, Management is optimistic that demand and gross margins will pick up in the near term. In view of this, we maintain our 6-12 month HOLD rating. We will reassess our common stock target price and rating in our next update report. We continue to anticipate a significant negative currency impact on the ADR over the coming 6-12 months. Therefore, we maintain our SELL rating. We will reassess our ADR (1 ADR = 5 common shares) target price and rating in our next full update report.

Lan Airlines S.A.’s (NYSE:LFL) 1Q 09 revenues declined y-o-y, driven by falling yields in the wake of lower fuel surcharges. However, adjusted profitability improved in 1Q 09, as a result of the lower fuel prices and efficient cost controls. The common stock price has fallen recently in response to fears that the swine flu outbreak could negatively impact the company, which is exposed to Mexico, and the broader travel industry. However, at current price levels, given improved profitability in 1Q 09, and the company’s primary focus on domestic operations in Chile, Peru and Argentina, we maintain our BUY rating for the ADR. We will fully reassess the ADR rating in our next update report. Given our fundamental outlook, and continued expectation of a positive currency impact on the Chilean stock over our 6-12 month investment horizon, we do not anticipate a change in our Chilean stock (1 Chilean share = 1 ADR) rating. We will fully reassess the Chilean stock rating in our next update report.

O2Micro International Limited’s (NASDAQ:OIIM) 1Q 09 results exceeded our expectations. Going forward, it is likely that we will revise our estimates upwards in view of the 1Q 09 results and Management guidance. We are maintaining our current HOLD rating for the stock until we revalue the O2Micro ADR in our next full update report. We will reassess the ADR rating and target price for O2Micro in the coming weeks. We maintain our current BUY rating for the Hong Kong stock (1 ADR = 50 Hong Kong shares) based on our fundamental outlook and current price levels. The currency impact on the Hong Kong stock is neutral as the Hong Kong dollar is pegged to the US dollar. We will reassess the Hong Kong stock rating for O2Micro in our next full update in coming weeks.

Royal Dutch Shell PLC (NYSE:RDSa) reported a significant decline in its revenues and earnings in 1Q 09. Going forward, we expect the company’s sales volumes will remain low due to the global economic slowdown. The top-line will be depressed by lower international oil prices, however these low prices will benefit the company’s margins in FY 2009. We are likely to revise our earnings estimates and target price downwards in view of the company’s 1Q 09 results. Hence, although the target price does not support a HOLD rating at current price levels, we maintain our HOLD rating for RDS’s ADR (1 ADR = 2 European shares) until we can fully reassess the stock in our 1Q 09 update report, in the coming weeks. As we expect a positive currency impact on the European stock over our 6-12 months investment horizon, we do not anticipate a change in our current European stock rating. We will reassess the European stock rating for RDS in our 1Q09 update report, in the coming weeks.

Royal Dutch Shell PLC1 (NYSE:RDSb) reported a significant decline in its revenues and earnings in 1Q 09. Going forward, we expect the company’s sales volumes will remain low due to the global economic slowdown. The top-line will be depressed by lower international oil prices, however these low prices will benefit the company’s margins in FY 2009. We are likely to revise our earnings estimates and target price downwards in view of the company’s 1Q 09 results. Hence, although the target price does not support a HOLD rating at current price levels, we downgrade the ADR (1 ADR = 2 UK shares) from a BUY to a HOLD rating until we can fully reassess the stock in our 1Q 09 update report, in the coming weeks. As we expect a positive currency impact on the UK stock over our 6-12 months investment horizon, we do not anticipate a change in our current UK stock rating. We will reassess the UK stock rating for RDS in our 1Q09 update report, in the coming weeks.

Although Talisman Energy Inc. (NYSE:TLM) registered a y-o-y decline in its 1Q 09 top-line, revenues remained above our estimate due to higher-than-expected hydrocarbon production during the quarter. The operating and net performance was below our expectations due to higher-than-expected operating expenses and dry hole costs during the quarter. We expect hydrocarbon demand and prices to remain suppressed during FY 2008 due to the global economic slowdown, which will impact Talisman’s performance during the period. Hence, we maintain our HOLD rating for Talisman’s common stock; until we can fully reassess the company in our 1Q 09 update report in the coming weeks. As we continue to anticipate a negative currency impact on the NYSE stock over our 6-12 months investment horizon and given our fundamental outlook, we maintain our SELL rating for the NYSE stock. We will reassess the NYSE common stock rating for Talisman in our 1Q 09 update report in the coming weeks.

News

China Petroleum and Chemical Corporation (NYSE:SNP) reported a robust increase in its 1Q 09 net profit backed up by higher gasoline and diesel selling prices and lower input costs. Going forward, we expect the company’s sales volumes to remain flat in FY 2009, depressing its top-line during the year. However, lower average oil prices will benefit the company’s bottom-line over our 6-12 investment horizon. Therefore, we maintain our common stock rating a HOLD for Sinopec until we can reassess the company in our next update report, after the company releases its 1H 09 results in September 2009. In line with our fundamental outlook, we reiterate the ADR a HOLD. The Hong Kong dollar is currently pegged to the US dollar. We will reassess our rating and target price for the ADR (1 ADR = 100 common shares) after the company releases its 1H 09 results in September 2009.

On 28 April 2009, Companhia Vale do Rio Doce (NYSE:RIO) reported a significant y-o-y decline in production during 1Q 09, reflecting weak demand for its products. We remain concerned about the prolonged downtrend in the commodity market, as well as the condition of the global economy, which are expected to weigh on the company’s performance through the near-to-medium term. Therefore, at current levels, we maintain our 6-12 month HOLD rating for the preferred ADR. We will reassess our preferred ADR (1 preferred ADR = 1 Brazilian preferred share) rating after the company issues its full 1Q 09 results. We continue to anticipate a significant positive currency impact on the Brazilian preferred stock over our investment horizon. Therefore, we maintain our BUY rating. We will reassess our Brazilian preferred stock rating after the company issues its full 1Q 09 results.

CNOOC Limited’s (NYSE:CEO) 1Q 09 revenues declined y-o-y primarily due to lower oil prices, partially offset by higher production volumes. Although we remain optimistic about the company’s development projects, we believe lower average realized hydrocarbon prices will more than offset the benefits of higher hydrocarbon production volumes over our investment horizon. Hence, we maintain our current rating for CNOOC’s common stock over our 6-12 month investment horizon until we can fully reassess the company in our next update report. We will reassess CNOOC’s common stock rating after the company announces its 1H 09 results on 27 August 2009. The Hong Kong dollar is currently pegged to the US dollar, therefore we do not anticipate a significant currency impact on the ADR. We will reassess the ADR (1 ADR = 100 common shares) rating for CNOOC after it announces its 1H 09 results on 27 August 2009.

New Valuations

Patni Computer Systems Limited (NYSE:PTI) The weak demand environment and prevailing economic uncertainty have again led Patni to guide to mute top-line growth in 2Q 09. We expect organizations to continue to rationalize IT budgets as part of wider cost cutting measures, which will result in lower volume growth. This, coupled with the downward pressure on pricing is expected to result in mute overall growth over the medium term. Pricing declines are expected to be partially offset by modest increases in the utilization rate due to mute hiring and higher involuntary attrition, coupled with reduced pressure on salary increases. Gartner, Inc (an information technology research and advisory firm) in April 2009 again cut its global IT spending forecast for 2009 and now expects this to decline by 3.8% y-o-y. In February 2009, Gartner had forecasted a 0.5% y-o-y increase in IT spending to US$2.7 trillion. Forrester (a market research firm) has also trimmed its forecast and expects a decline in all sectors except outsourcing. Gartner and Forrester’s forecasts suggest that the impact on the IT sector will be more severe than the 2001 dotcom collapse when it fell by 2.1% y-o-y worldwide. We anticipate an 11.1% y-o-y decline in Patni’s FY 2009 revenues. However; we believe that outsourcing revenues will be relatively cushioned by the economic downturn, as companies will continue to explore low cost opportunities to reduce operational costs. Profitability and consequently earnings are expected to receive a healthy boost in FY 2009 on account of the depreciating Indian rupee against the US dollar, which translates into reduced costs and operating expenses as Patni earns revenues in US dollars and incurs the majority of costs and expenses in Indian rupees. We are expecting a recovery in the demand environment towards the second half of 2010. We continue to expect a bleak environment for the IT services sector in the coming quarters as the economic slowdown, coupled with the fluctuating currency exchange rates have negatively affected the IT spend of multiple countries and industries around the world. Based on these operating conditions as well as Management’s mute guidance, we maintain a cautious outlook on the Wipro common stock.

QLT Inc (NASDAQ:QLTI) We expect Eligard sales will continue to offset declining sales of Visudyne, going forward, resulting in limited revenue growth. Although QLT is focused on developing a combination therapy for Visudyne, aimed at reviving its revenues, we do not expect the combination therapy to support QLT over the medium term. We believe the potential of Visudyne sales is almost exhausted, unless the company develops an innovative use for the drug. Moreover, we believe QLT will continue to seek potential opportunities to divest Eligard in the future. However, we have included Eligard in our valuation model until QLT provides more clarity on the future of Eligard. QLT’s R&D program is focused on developing a punctal plug for eye care, however, clinical trails are currently in phase 2. Consequently, we do not expect the punctual plug to have any significant impact on the company’s top-line over our investment horizon. However, over the medium term, we expect Eligard to support top-line growth. QLT’s R&D expenses have decline to US$29.5 mn in FY2008 from US$46.4 mn in FY 2007. If the declining trend in R&D spending continues over the next 2 years, we believe QLT’s top-line will decline at a faster rate, as the company will not be able to introduce new products, going forward. As QLT is a specialty pharmaceutical company, we believe QLT should continue to invest in R&D activities to support the company’s revenue prospects over the longer term. Considering the company’s strong cash reserve and debt free nature, we believe QLT is in a strong position to seek strategic investments and out licensing to compensate for the company’s weakening product offerings. We expect QLT to experience significant decline in operating expenses over the next 2 years, led by cost efficiencies arises from restructuring initiative taken by company in 1Q 08. We believe the cost benefit will have a significant positive impact on margins over next 2 years. We believe QLT’s current cash position (US$130.1 mn) will be sufficient to meet its commitment over the next 2 years considering its debt free nature.

Home Inns and Hotel Management Inc(NASDAQ:HMIN) We believe 2009 will be a challenging year for the global travel and tourism industry. Home Inns has already stated that FY 2008 Revenue Per Available Room (RevPAR) was significantly below that of FY 2007, primarily because of lower occupancy levels as pricing did not see a significant decline. We believe that Home Inns will register lower occupancy levels in FY 2009 compared to FY 2008, reflecting the global slowdown and cutbacks in business and leisure travel. Going forward we also expect the company will experience a decline in its Average Daily Rates (ADR), in line with the company’s strategy to expand into lower tier cities, which command lower occupancy levels and daily rates. However, Home Inns’ expansion across China is going well and it is now the leading budget hotel chain in China, in terms of number of hotels. Home Inns is targeting to open between 130 – 150 hotels in FY 2009 and currently has 82 hotels under development. This robust expansion will ensure the company’s top-line will continue to grow, albeit not at the levels witnessed in previous years. The Home Inns hotel chain is becoming very popular throughout China and the increase in the number of its franchised hotels is evidence of this. 50% of the hotels that Home Inns plans to open in FY 2009 will come under its franchise operations. The focus on its franchise segment will help improve earnings for the company, as this will result in lower rent costs, utility expenses and selling & marketing expenses. The company has also indicated that its capex requirement is set to decline as the company expects to open fewer leased and managed hotels in FY 2009, which will facilitate greater free cash flow than previously expected. Moreover, we believe the economy hotel industry has long term growth potential in China and Home Inns is well positioned to benefit from this growth going forward.

Read the full reports free of charge with free to view access to institutional-quality research on 400 companies and over 700 stocks at www.researchoracle.com

Disclaimer
Independent International Investment Research PLC supplies this research via Pronet Analytics.com Ltd. (’Pronet’). Pronet is Regulated and Authorized by the Financial Services Authority (FSA) and registered with the Securities Exchange Commission (SEC). You are reminded that investment advice provided by Pronet is for your general information and use and is not intended to address your particular requirements. Any advice or recommendations contained in this report may not be suitable for you and are not intended to be relied upon by you in the making (or refraining from making) any specific investment or other decision. Such decisions should only be made on the basis of independent advice from an appropriately qualified adviser. Pronet Analytics.com Ltd. and Independent Financial Markets Research Ltd. are subsidiaries of Independent International Investment Research PLC (the ‘Group’). Research analysts working for the Group are subject to stringent confidentiality and security policies and are located in secure-access premises which may be in the proximity of professionals conducting similar work for other firms. The Group is not nor has been nor will be engaged in investment banking and does not make markets in any of the securities covered in this report or have any investment banking relationship with the firm whose security is covered in this report. No employee or contractor of the Group is permitted to personally buy or sell stock in the company covered in this report, and neither the analysts responsible for this report nor any related household members are officers, directors, or advisory board members of any covered company. No one at a covered company is on the Board of Directors of the Group or any of its affiliates. This report is not a solicitation to buy or sell any security and past performance is no guarantee of future results.
Copyright © 2009 Independent International Investment Research PLC. All rights reserved.