Earning Release

Vimicro International Corporation's (NASDAQ:VIMC) 4Q 08 and FY 2008 net revenues were in line with our expectations but operating performance fell short. The downtrend in net revenues continued in 1Q 09 but losses were contained on a q-o-q basis. Looking ahead, Management has guided for a strong q-o-q increase in net revenue for 2Q 09. We maintain our current HOLD rating until we reassess the stock (1 ADR = 4 common shares)1 in our next full update report. Although the current target price does not support a HOLD rating we now expect a negative currency impact on the European stock over our investment horizon and downgrade the European stock from a BUY to a HOLD. We will reassess the stock in our next full update report.

News

On 06 July 2009, International Petroleum Investment Company (IPIC) completed acquisition of Nova Chemicals Corporation (NYSE:NCX) by acquiring Nova's all outstanding shares. Nova's shares will cease trading on NYSE on 07 July 2009. Hence, we are terminating our coverage of the company. Nova's shares will cease trading on the TSX on 07 July 2009. Hence, we are terminating our coverage of the company.

National Oilwell Varco, Inc.'s (NYSE:NOV) NYSE common stock has declined significantly since our last rating change on 29 May 2009. Although we expect a decline in Exploration and Production activity in the oil and gas industry will limit the number of new orders for the company, we expect the company's existing order backlog will support revenues for its Rig Technology segment during the year. Going forward, we expect a recovery in global economic conditions in FY 2010 will improve demand for NOV's products and services. Hence we believe the company's NYSE common stock price provides significant upside potential from current price levels and upgrade the NYSE common stock from a HOLD to a BUY. We will reassess the NYSE common stock after the company announces its 2Q 09 results on 28 July 2009. Although we continue to anticipate a negative currency impact2 on the European stock over our investment horizon of 6-12 months, at current price levels we upgrade the European stock rating from a HOLD to a BUY. We will reassess the European stock rating after the company announces its 2Q 09 results on 28 July 2009.

New Valuations

AngloGold Ashanti Limited (NYSE:AU) Although we expect spot gold prices to improve y-o-y in FY 2009, we have cut our forecasts from our last update report. However, we have raised our FY 2010 gold price forecast, and now anticipate a healthy improvement in gold prices during that year, reaching around US$1,100 per oz. On the negative side, we have lowered our FY 2009 gold production forecast to reflect underperformance from the Geita mine during 1Q 09 and low production expected from the Savuka mine in 2Q 09 (due to earthquake-related damage to its mine shaft infrastructure on 22 May 2009). During FY 2009, we expect appreciation of the South African rand against the US dollar to drive up cash costs per oz, negatively impacting margins. We have also cut our FY 2010 gold production estimate following a company announcement on 14 February 2009 that it is to sell the Tau Lekoa mine to Simmer & Jack Mines Ltd. on or after 01 January 2010. Despite this, we expect cutbacks in the company’s hedge book and y-o-y improvement in spot gold prices to drive y-o-y growth in the top-line during FY 2010.

Vale S.A. (NYSE:VALE) We expect the company to maintain its production cutbacks until 2H 09. Considering the volatile pricing environment in commodity markets at present, we expect low production volumes to keep revenues broadly flat q-o-q in 2Q 09. Furthermore, even though the company is set to revive idle capacity in 2H 09, the subdued 1H 09 performance and sharp cuts in 2009 iron ore and pellet contract rates are likely to yield a disappointing full-year top-line result, with the ensuing y-o-y fall in revenues outpacing a fall in operating expenses (reflecting lower raw materials prices and cost-cutting measures by the company); this is expected to erode margins during the period. Revenues are expected to pick up in FY 2010, driven by recovery in commodity prices and output levels. Vale is also likely to benefit from economic stimulus packages in Brazil and the US, which are focused mainly on infrastructure and construction and which, in turn, should lift demand for Vale’s products (including iron ore and coking coal). Meanwhile, during 1Q 09, Vale's net debt-to-EBITDA ratio improved to 1.0x (1.3x in 1Q 08), while its interest coverage ratio improved to 13.96x (11.58x in 1Q 08). We are encouraged by the company's financial position and feel that it is well-placed to capitalize on postcrisis economic growth potential. We now believe that the company is undervalued at current levels.

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