Earnings Releases

Cosan Limited (SAO:CZLT11) recorded net sales below our estimate in 1Q 09 due to lower-than-expected sugar and ethanol volumes. Furthermore, the company reported an operating loss and net loss during the quarter, due to high Cost of Goods Sold (COGS) and Selling, General and Administrative (SG&A) expenses.

News

The Bancolombia S.A. (NYSE:CIB) preferred common stock reached our target price on 11 September 2008, driven by improvement in investor confidence in the Colombian economy, as well as strong company fundamentals. However, at current levels, we believe that Bancolombia’s fundamental upside potential has been exhausted. Therefore, we therefore downgrade the preferred stock from a BUY to a HOLD. We continue to anticipate a significant positive currency impact on the ADR over our investment horizon. Therefore, we maintain our BUY rating.

Cemex S.A.B. de C.V. (NYSE:CX) released 3Q 08 and FY 2008 guidance on 11 September 2008. 3Q 08 guidance was short of our expectations across the board. Accordingly, we will lower our estimates and target price when we revalue the company in our next full update report. However, as the stock is currently trading near its 3-year low, we continue to see upside potential over our investment horizon from current levels.

Taiwan Semiconductor Manufacturing Company Ltd.’s (TAI:2330) common stock price has depreciated over 20% since our 1Q 08 update report undermined by the current weakness in financial markets and a weak near term outlook for the semiconductor industry. Although we are likely to revise our estimates and target price in our next update report, our medium term outlook for TSMC remains positive in view of its leadership position and diversified customer base. Subsequently, we maintain our BUY rating for the common stock.

New Valuations

AngloGold Ashanti Limited (NYSE:AU) reported strong revenue growth in 2Q 08, driven mainly by a significant increase in the average realized gold prices, which was above the company’s expectation for 2Q 08 and FY 2008, However, the growth in revenues was partially offset by a y-o-y decline in gold production volumes. The group3 also incurred significant losses on its derivatives and other commodity contracts, reflecting the impact of higher spot gold prices during 2Q 08. As a result, the group reported an operating loss for the quarter. Going forward, we expect the group to realize higher gold prices (compared to earlier expectations) in FY 2008, in light of the group’s reduced hedge book, which is likely to increase the group’s exposure to the spot market. The reduced hedge size is also expected to narrow the group’s hedging losses from FY 2008 onwards. Hence, we expect strong revenue growth in FY 2008. Although, we expect current inflationary pressures to raise costs in the near term, the company’s increased exposure to spot gold market, reduced hedge book and robust pipeline projects are encouraging, long term positives. Furthermore, given the recent decline in the ADR, we view the AngloGold ADR as an attractive investment at current levels.

Companhia Paranaense de Energia – COPEL (NYSE:ELP) reported healthy 1H 08 results with revenues in line with our estimate for the period. Margins which improved on a y-o-y basis, exceeded our estimate for 1H 08. Going forward, we believe the company will witness healthy growth in electricity sales volumes as higher levels of electricity consumption benefit from robust economic growth in Brazil. Therefore, a marginal tariff cut announced by ANEEL, the electricity regulatory body in Brazil, will only have a marginal impact on the company’s top-line, going forward. As a result, we continue to hold a positive outlook for COPEL and view the preferred stock as an attractive investment opportunity at current levels.

CPFL Energia S.A.’s (NYSE:CPL) 2Q 08 revenues were below our estimate due to lower than expected volume growth and average tariffs. Margins were also below our expectations given higher than anticipated operating expenses as a percentage of revenues. However, we believe the company will be benefit from higher electricity consumption in Brazil given strong economic growth from increased industrial and commercial activities in the region. In view of this, we expect CPFL will witness healthy growth in electricity sales volumes, supporting top-line growth. Nevertheless, given the company’s performance in 2Q 08, we have revised our estimates and thereby our target price downwards. However at current price levels, we believe CPFL’s common stock is undervalued view it as an attractive investment opportunity.

Empresas ICA, S.A.B. de C.V (NYSE:ICA) reported 2Q 08 results with revenues and earnings below our expectations. Operating margin declined during the quarter, mainly due to an increase in raw material prices and revised profitability estimates for Chicontepec project. Management has reiterated revenue growth in the range of 15.0% to 20.0% for FY 2008. Although revenue growth looks encouraging, declining margins are expected to limit bottom-line, going forward. We have revised our estimates slightly downwards and have consequently revised our target price downwards to take into account the company’s recent performance, a slight slowdown in Mexico and Management guidance. Despite this, we believe the common stock trades at an attractive discount to its fundamental value and view it as a robust investment opportunity at current levels.

EnCana Corporation (NYSE:ECA) witnessed a strong y-o-y increase in its 2Q 08 revenues given higher production levels and an increase in realized hydrocarbon prices during the quarter. However, margins declined y-o-y due to an increase in input costs within its Integrated Oil segment. Going forward we expect the company to generate stable revenue growth given new production output coming from its acquired acreage at Horn River and Haynesville. In addition, we expect margins to improve from FY 2009 onwards as feedstock costs decline with crude oil prices. Furthermore, we expect a proposed business split expected to be completed by early FY 2009 to enable the company to focus on its gas and oil business, adding value to each business. Therefore, we view the EnCana NYSE common stock as an attractive investment opportunity at current levels.

Garmin Ltd. (NASDAQ:GRMN) reported lower than expected 2Q 08 results. Margins were impacted significantly due to higher Cost of Goods Sold (COGS) and operating expenses during the quarter. The company has revised its revenues and earnings estimates for FY 2008 downwards, reflecting the current macroeconomic downturn leading to slowing growth in the Portable Navigation Device (PND) market. We now remain cautious over the softening end markets for the company which are expected to hinder financial performance going forward. Factoring in the downward trends in PND markets and the company’s guidance, we have revised our estimates downwards and now hold a muted outlook for Garmin. However, the recent significant decline in the NASDAQ common stock makes it an attractive investment opportunity at current price levels.

Gildan Activewear Inc.’s (NYSE:GIL) revenues were above our estimate while adjusted EBITDA, EBIT and adjusted net profit were in line with our expectations. Revenue growth was aided by continued strong performance from Activewear & Sportswear and Socks products, coupled with increase in Average Selling Prices (ASP) during the quarter. Management reiterated its EPS guidance of US$1.45 to US$1.50 for FY 2008 on account of improved production capacity in the Dominican Republic textile facility, coupled with significant increase in the socks products volume growth (associated with sock product-mix program) and increasing production capacity in Honduras. However, our EPS estimate of US$ 1.44 is marginally lower than Management guidance, primarily due to higher depreciation and Selling, General and Administrative expenses (SG&A) expected in FY 2008.

In 2Q 08 Mobile TeleSystems OJSC’s (NYSE:MBT) reported impressive y-o-y growth in revenues, in line with our estimates, driven by strong subscriber additions further supported by an increase in Average Revenue Per User (ARPU) from Russia. EBITDA margin declined due to an increase in cost of services and sales & marketing expenses, as a percentage of revenues. Going forward, we expect revenues to register impressive growth driven by an increase in Russian ARPU. Conversely, we expect competition in the Russian telecom market to intensify and as a result we expect advertisement and promotional expenses to increase. In addition, we expect maintenance cost and rent expenses to increase due to inflationary pressure. In light of this, we expect EBITDA margin to remain under pressure, going forward.

Technip(OTC:TFPPY) reported a y-o-y decline in its 2Q 08 revenues given a weak performance from its Subsea and Offshore segments. However, its margins improved significantly with a decline in the company’s cost of sales and effective tax rate. Going forward, despite a decline in hydrocarbon prices in line with our forecasts, we expect global Exploration & Production (E&P) activities to be sustained in the future, creating new project opportunities for oilfield construction and service providers such as Technip. We also expect the company’s margins to further improve during FY 2008 and FY 2009 with increasing revenue contribution from its high margin Subsea business. Therefore, based on current price levels, we find Technip’s common stock an attractive investment opportunity.

Our near term outlook for United Microelectronics Corporation (UMC) is cautious in view of reduced product demand reflecting weakness in its end-markets. Net sales declined 15.1% y-o-y in July 2008 and a further 21.7% y-o-y in August 2008. Despite focusing on safeguarding profitability by increasing operating efficiency, margins are expected to decline y-o-y in FY 2008 as a result of lower capacity utilization and a weak top-line. However, we continue to forecast a recovery in net sales and margins in FY 2009 in anticipation of an improved market environment particularly in 2H 09. Although we have lowered our 6-12 month target price to factor in the downward revision of our estimates, we believe there is a fundamental upside in the UMC common stock from the current level in the coming 6-12 months. However, persistent negative investor sentiment and lack of consumer confidence due to ongoing uncertainty in the market present a significant downside risk to our rating.

Although Unilever N.V.(NYSE:UN) recorded healthy revenue growth from Asia-Africa, this was significantly offset by poor performance from the Americas and Europe, leading to a 1.4% y-o-y decline in revenues in 2Q 08. Following this decline in revenues, we expect a challenging economic scenario for the company, going forward. The company is expected to soften its price increases in order to remain competitive in the market, which is expected to result in a decline in revenue growth, as the company effectively concentrated on pricing rather than volumes from the past 4 quarters to boost revenue growth. In addition, considering the challenging market conditions and rising commodity costs; we believe Unilever’s margins will be negatively impacted, going forward.

Although Unilever PLC(NYSE:UL) recorded healthy revenue growth from Asia-Africa, this was significantly offset by poor performance from the Americas and Europe, leading to a 1.4% y-o-y decline in revenues in 2Q 08. Following this decline in revenues, we expect a challenging economic scenario for the company, going forward. The company is expected to soften its price increases in order to remain competitive in the market, which is expected to result in a decline in revenue growth, as the company effectively concentrated on pricing rather than volumes from the past 4 quarters to boost revenue growth. In addition, considering the challenging market conditions and rising commodity costs; we believe Unilever’s margins will be negatively impacted, going forward.

Warner Chilcott Ltd. (NASDAQ:WCRX), reported moderate growth in 2Q 08 revenues supported by Oral Contraceptive (OC) and Dermatology products. Operating and net margin experienced strong growth, primarily due to lower operating expenses, as a percentage of sales, compared to 2Q 07. Going forward, we remain optimistic for the company’s performance driven by sales of promoted products such as Leostrin 24 FE, Femcon FE, Taclonex, Doryx and other new launches in FY 2008. Furthermore, we expect the marketing approvals for 150 mg dose of Dorxy delayed release tablets and Taclonex Scalp in the US in 1Q 08 to positively impact revenue growth in FY 2008. However, the expected marketing of Sarafem generics (the patent of which expired on May 2008) and Ovcon generics, currently in the market, is expected to negatively impact revenue growth, going forward. However, we believe the company’s focus on improving its product pipeline and strategic agreements for manufacturing and marketing products will complement the company’s future goals. Consequently, we maintain our positive outlook for the company and believe it offers an attractive investment opportunity at current levels.

Sony Corporation’s (NYSE:SNE) 1Q 09 revenues were stable and in line with expectations. However, Sony’s operating performance deteriorated and was below our expectation, primarily due to weaker-thananticipated Electronics and Pictures segment performances. We expect the continuing introduction of innovative and competitive products, particularly in the Electronics and Game segments, to fuel revenue growth in FY 2009. We also anticipate sales of its key products, Playstation 3 (PS3) and Bluray Digital Video Disc (DVD) players, to grow significantly. Going forward, we expect the company’s margins to benefit from an improvement in operating performance in the company’s Game segment, due to constant cost reduction initiatives. We remain concerned by high raw material prices, the ongoing slowdown in the US economy and its repercussions for the global economy. However, we believe Sony will experience a gradual recovery in sales growth from FY 2010 onwards due to an anticipated improvement in global economic conditions.

Lloyds TSB Group PLC (NYSE:LYG) reported healthy growth in Net interest Income (NII) in 1H 08, but this was more than offset by other top-line losses (negative other income). Consequently, the bank reported a decline in its total operating income, net of insurance claims in 1H 08. Furthermore, the bank’s operating expenses increased y-o-y, due to rising staff costs and impairment charges in the Wholesale and International Banking segment. Therefore, despite a fall in the UK corporate tax rate from 30% to 28.5%, the company’s bottom-line declined significantly, reflecting trading losses and impairment charges. Going forward, we expect the Bank of England (BoE) to hike its benchmark rate in response to growing inflationary pressures, adversely impacting credit growth. Furthermore, we remain cautious about ongoing displacement in financial markets and its impact on trading revenues. Therefore, we see limited upside potential from current levels over our investment horizon.

XL Capital Ltd. (NYSE:XL) reported a significant y-o-y deterioration in top-line in 2Q 08 reflecting a decline in net premiums earned and net investment income, further augmented by a loss from investing affiliates. Going forward, we expect softening premium pricing in the reinsurance market to continue to impact the company and remain concerned that the prospect of above average hurricane activity in 2008 could lead to further deterioration in combined ratio. XL Capital’s ratings were downgraded and placed on negative watch by several rating agencies in 1Q 08 leading certain ceding companies to fail to renew existing contracts and limiting new business. However, on 05 August 2008, Fitch and A.M. Best removed XL Capital from negative watch, confirming ratings as stable at “A”. Going forward, we expect stabilizing ratings and the closure of the Security Capital Assurance (SCA) transactions to restore customer confidence, enabling the company to generate stronger premiums. Furthermore, as the company’s revenues exceeded our expectations in 2Q 08 we have revised our estimate upwards for FY 2008. The company’s NYSE common stock is currently trading near its lowest price since the mid-1990s and we believe the stock is undervalued.

PartnerRe Limited (NYSE:PRE) continued to report top-line growth in 2Q 08, reflecting growth in all the Non-Life sub-segments, which led overall gross premiums written to increase 6.7% y-o-y. Net investment income increased 11.2% y-o-y in 2Q 08 reflecting an increase in invested assets as well as higher reinvestment rates on fixed maturities and forex. Although the company reported a net loss in 2Q 08 due to net realized and unrealized investment losses, excluding this and other items, adjusted3 net income attributable to shareholders increased y-o-y in 2Q 08. Going forward, we expect softening rates in P&C products across geographies to adversely impact the company’s top-line growth and above average hurricane activity in 2008 to increase the company’s combined ratio. However, we believe that the negatives have been factored in the current NYSE common stock price and the common stock price offers an attractive investment opportunity.

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