News

Yanzhou Coal Mining Company Limited (NYSE:YZC) has received approval from the Australian Federal court in relation to the A$3.5 bn acquisition bid on Felix Resources Ltd (Felix). This approval finalizes the deal, after a series of regulatory approvals from both countries. We continue to believe the deal is positive for the company and expect it to create additional value for shareholders given Felix's high quality assets. Therefore we maintain our HOLD rating for the company despite current price levels not supporting our rating. The Hong Kong dollar is currently pegged to the US dollar. Therefore, no currency impact is expected on the ADR over our 6-12 month investment horizon. Given our fundamental outlook, we maintain our HOLD rating for the ADR.

New Valuations

Philippine Long Distance Telephone Company (NYSE:PHI)In 3Q 09 there was a consistent decline in the blended ARPU, higher than our anticipation, reflecting the impact of intensifying competition in a market nearing maturity. Moreover, as we believe that further growth in subscriber-base will come from non-urban low ARPU areas, we expect cellular ARPU to continue its declining trend, going forward. Nonetheless, we anticipate data to drive revenue growth, going forward, reflecting increasing demand for broadband connections amid low broadband penetration in the region. In addition, impressive cellular net additions in the months of October and November 2009 will help PLDT to maintain growth momentum in 4Q 09. However, we have revised downward our FY 2009 and 2010 revenue estimates, considering weaker GDP growth in 3Q 09 (0.8% y-o-y) and our cautious inflationary outlook. Therefore our outlook for the common stock remains cautious.

Novartis'(NYSE:NVS) new products are expected to ramp up Pharmaceutical business revenues, going forward. New products such as Lucentis, Exforge and others contributed 16% of revenues in 3Q 09 compared to 9% in 3Q 08. Moreover, positive clinical trial results for Tasigna indicate higher possibility of launching the product to treat patients who have been newly diagnosed with a form of chronic myeloid leukemia in early 2010. We believe the successful launch of Tasigna as a first line treatment early next year will recover some of the expected revenue loss from the launch of Gleevec generics in 2012. Currently, Gleevac, which caters to the oncology market is expected to continue achieving double digit growth, benefiting from its leadership position in treating chronic myeloid leukemia (CML) and gastrointestinal stromal tumors (GIST), as well as post-surgery therapy for GIST in Europe. We maintain our positive outlook for Novartis' developmental pipeline and expect the US Food and Drug Administration (FDA) to approve FTY720; a treatment for Multiple Sclerosis in FY 2010 and believe the company's strong product pipeline will benefit revenue growth in the long term. Moreover, recent approval of Onbrez Breezehaler (QAB149); a treatment for Chronic Obstructive Pulmonary Disease (COPD) in Europe will benefit the Pharmaceutical business going forward. We also maintain our positive outlook for the company's expanding presence in emerging markets and Japan and expect this to be the thrust behind high growth rates over the long term. Moreover, compatible acquisitions such as EBEWE Pharma by Sandoz have strengthened the company's oncology portfolio and enhanced the scope of the generics business in future. We continue to expect expansion in margins due to further cost savings in FY 2009 and FY 2010 as a result of Project Forward, a cost cutting restructuring project by Novartis. However, net margin is expected to be under pressure due to increased interest payment commitments in lieu of debt raised to aid the Alcon acquisition in FY 2009. Considering our favourable top-line and bottom-line expectations over the medium term, we maintain our positive outlook for the ADR.

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