News

AbitibiBowater Inc’s (NYSE:ABH) NYSE common stock price has declined significantly since our last update report as well as 12.9% in a single trading session on 17 September 2008 attributable to weakness in global equity markets. Although the company’s rising input costs have impacted margin expansion, we are optimistic about the company’s future performance given its dominant position in North America coupled with its cost reduction initiatives.

The Agnico-Eagle Mines Limited (NYSE:AEM) NYSE common stock increased significantly on 17 September 2008, reflecting an increase in the spot gold price on the same day. Nevertheless, the overall decline in the NYSE common stock price since our last 1Q 08 update report has been in line with our fundamental outlook, and as we continue to see further downside potential from current levels, we maintain our SELL rating for the common stock.

AirMedia Group Inc.’s (NASDAQ:AMCN) ADR price declined significantly in a single trading session on 17 September 2008 primarily due to weakness in global equity markets. However, given the company’s strong presence in the Chinese air travel advertising industry and given that it is the largest digital media network in China, we are optimistic about the company’s revenue growth in the future.

Angiotech Pharmaceuticals Inc.’s (NASDAQ:ANPI) NASDAQ common stock price increased significantly on 17 September 2008. Although the current price supports a BUY rating for the NASDAQ stock, we believe the fundamentals of the stock remain unchanged and hence we maintain our HOLD rating for the NASDAQ common stock.

The recent turmoil in the US financial markets have significantly impacted Babcock & Brown Air Limited’s (NYSE:FLY) ADR price, which declined 10.76% on 17 September 2008. However, we believe the fundamentals of the company remain intact. The recent decline in the ADR has left the stock significantly undervalued and hence we reiterate the ADR as a BUY.

The Governor and Company of the Bank of Ireland (ISE:BKIR) common stock price depreciated significantly on 17 September 2008 following a trading statement issued by the bank for the six months ending 30 September 2008. It outlines that trading conditions for 1H 09 were extremely difficult due to the slowing economy and financial markets dislocation. It also announced that its dividend payment for FY 2009 would be slashed by 50% from the previous year in order to shore up its capital base.

Barrick Gold Corporation’s (NYSE:ABX) NYSE common stock increased significantly on 17 September 2008 reflecting a strong increase in the spot gold price on the same day. Given the company’s ongoing efforts to expand its production volumes through projects in Tanzania and the Dominican Republic, we remain optimistic about Barrick’s growth prospects. Therefore, we reiterate our BUY rating.

On 17 September 2008, Biovail Corporation (NYSE:BVF) announced the acquisition of Prestwick Pharmaceutical Inc. (Prestwick), a privately held Pharmaceutical company which holds the licensing rights of Xenazine in the US and Canada. With this acquisition, Biovail will have access to Prestwick’s Xenazine, which is the first and only approved drug in the US for the treatment of Chorea, in addition to Prestwick’s R&D pipe-line, which has a few early development stage products aimed at the treatment of CNS (Central Nervous System) disorders.

China Digital TV Holding Co. Ltd.’s (NYSE:STV) board of directors announced the approval of a US$40 mn share repurchase program on 17 September 2008. The ADR price has plummeted since our previous update report, which we believe is a result of weak 3Q 08 revenue guidance as well as general global equity market weakness.

China Eastern Airlines’ (SEHK:670) common stock has declined significantly since our last update report reflecting investor concerns of falling passenger traffic during August. Although current levels support a HOLD, we maintain our SELL rating for the common stock as we are likely to revise our target price significantly downwards in line with the company’s poor growth outlook.

China Medical Technologies Inc.’s (NASDAQ:CMED) ADR experienced a significant decline of 17.7% in a single trading session due to general weakness in global equity markets. However, our fundamental outlook for the ADR remains broadly unchanged and we reiterate our BUY rating for the ADR at current levels.

CNinsure Inc.’s (NASDAQ:CISG) ADR price has declined significantly since our previous update report, reflecting global concerns stemming from the US financial crisis and particularly the impact of the Federal Reserve Bank rescue of American International Group (AIG) on the Chinese insurance industry. However, although the crisis could have an impact on insurance uptake, we remain optimistic about the company’s growth prospects considering its expansion plans through mergers, acquisitions and joint ventures.

Copa Holdings S.A.’s (NYSE:CPA) NYSE common stock declined 10.5% on 17 September 2008 reflecting general weakness in global financial markets compounded by a single day rise in crude oil prices. Given that current price levels support a BUY rating, we do not anticipate a change in our current NYSE common stock rating.

Ctrip.com International Ltd.’s (NASDAQ:CTRP) NASDAQ ADR price has declined by 30.4% since our last update report reflecting recent global equity market performance and concerns that the slowing Chinese economy will negatively impact corporate activities and hence corporate travel, affecting Ctrip’s business operations.

DRDGOLD Limited’s (NASDAQ:DROOY) common stock increased significantly on 17 September 2008 reflecting a strong increase in the spot gold price on the same day. We expect DRD’s ongoing projects at the Blyvoor mines and its Top star project will add to its overall production of gold in 2Q 09, and we remain optimistic about the company’s growth.

Elan Corporation PLC’s (NYSE:ELN) stock price declined on 17 September 2008 due to weakening investor sentiments in light of an anticipated recession in the US economy and the current uncertainty in US financial markets. We continue to expect Tysabri to support top-line growth, going forward. We believe Tysabri will continue to gain market share, albeit at a slower pace, after the recent news of side effects associated with the use of Tysabri.

Fording Canadian Coal Trust’s (TSX:FDG_u) common trust unit price declined significantly on 17 September 2008, following mounting investor concern that the Fording-Teck Cominco deal will not go ahead in the face of the deepening credit crunch. Although our current price target price supports a BUY rating, we maintain our HOLD rating for the common trust unit in light of the significant doubt over the deal with Teck Cominco.

Gold Fields Limited’s (JSE:GFIJ) common stock increased significantly on 17 September 2008 reflecting a strong increase in the spot gold price on the same day. We remain optimistic about Gold Fields’ ongoing expansion projects, which will add to production volumes, going forward. Therefore, we feel the common stock has further upside potential and we maintain our BUY rating.

Harmony Gold Mining Company Limited’s (JSE:HARJ) common stock increased significantly on 17 September 2008, reflecting a strong increase in the spot gold price on the same day. We expect the company’s Papua New Guinea operations to come on line in 2Q 09, supporting total gold production volumes, and we foresee its South African operations recovering y-o-y in 1Q 09.

Lihir Gold Limited’s (NASDAQ:LIHR) ADR price increased significantly on 17 September 2008, reflecting a strong increase in the spot gold price on the same day. Given the company’s acquisition of Equigold NL and its commissioning of the Ballarat project in 4Q 08, we remain optimistic about the company’s future growth prospects.

Millicom International Cellular S.A.’s (NASDAQ:MICC) common stock has declined significantly since our last update report dated 01 August 2008, which we believe reflects general weakness in global equity markets. However, as we do not expect further downside from these levels given our fundamental outlook, we reiterate the NASDAQ common stock a BUY.

On 17 September 2008, the Nortel Networks Corporation’s (NYSE:NT) NYSE common stock plunged after it announced a disappointing 3Q 08 and FY 2008 outlook, as well as plans that it is looking to sell its Metro Ethernet Networks business. Although we hold a cautious outlook for the company in current economic conditions and are likely to revise our estimate downwards in our next update report.

Nova Chemicals Corporation’s (NYSE:NCX) NYSE common stock price declined significantly on 17 September 2008 reflecting the decline in the US stock market on the same day. Nevertheless, we continue to hold a positive outlook for the company on the back of continuing high polyethylene prices. Furthermore, given the recent decline in common stock price we see upside potential from current price levels.

Petro-Canada’s(TSX:PCA) common stock price has declined significantly since our 2Q 08 update report, which we believe reflects a decline in crude oil prices over the same period as well as the company’s announcement of an appreciation in costs at its Fort Hills project. Although a decline in oil prices will likely impact revenues from the company’s Upstream segment, this will likely improve margins in its downstream segment.

Research In Motion Ltd.’s (NASDAQ:RIMM) NASDAQ common stock price declined significantly in a single trading session on 17 September 2008 primarily reflecting weakness in global equity markets. However, as we continue to believe the company’s strong presence in the smartphone industry and expected launch of premium class products will assist its revenue growth going forward, we maintain our current rating for the common stock until we fully revalue the company after it announces its 2Q 09 results.

Semiconductor Manufacturing International Corporation’s (NYSE:SMI) ADR has experienced significant downward pressure since our 2Q 08 update report, in line with overall weakness in stock markets across the world following turbulence in the financial sector. Although the current ADR price suggests a BUY rating, we continue to hold a cautious outlook in view of the deteriorating outlook for the global economy and profitability concerns for the company.

The decline in Telkom SA Ltd’s (JSE:TKGJ) common stock price is primarily attributable to the financial crisis in US. Furthermore, ongoing conflict between Management and the labor union, in relation to outsourcing its core network operations to an experienced operator, are creating investor concern. However, we continue to expect strong revenue growth from the Mobile segment due to subscriberbase growth.

Turkcell Iletisim Hizmetleri A.S.’s (NYSE:TKC) ADR has depreciated significantly since our last update report, due to weakness in the global markets. However, going forward we believe the launch of iPhone 3G in Turkey is likely to drive subscriber-base and ARPU. Furthermore, the acquisition of the Belarusian Telecommunication Network (BeST) provides an attractive opportunity to gain access to a market with high growth potential.

Lloyds TSB Group PLC (LSE:LLOY) reported that it will acquire HBOS PLC (HBOS) for a consideration of GBP12.2 bn on 17 September 2008, agreeing on an exchange ratio of 0.83 Lloyds’ shares for every one share of HBOS. In the long term, we believe that the takeover will be positive for the bank, which should become established as a major player, resulting in synergic benefits owing to cost-cutting initiatives and earnings growth.

The Aracruz Celulose S.A. (NYSE:ARA) ADR price has declined by 24.4% since our last update report reflecting fresh concerns over an expected fall in pulp prices due to surplus inventories in Europe and adverse market reaction to the merger with Votorantim Celulose e Papel S.A. (VCP). A single day decline of 9.9% in the ADR price on 17 September 2008 predominantly reflects the general performance of global markets.

New Valuations

Herbalife Ltd. (NYSE:HLF) reported a 20.7% y-o-y increase in its 2Q 08 revenues. Revenue growth and EPS in 2Q 08 exceeded company guidance and were above our estimate. This strong performance was attributable to double-digit growth in several of the company’s top operating regions, including North America, China and South America. Going forward, sales growth in Herbalife’s largest market; the US, is expected to be fueled by the continued expansion of the Nutrition Club concept and Weight Loss challenge. Furthermore, most of the Mexican business was converted to the club model, hence, the company is expecting a turnaround and register positive growth, going forward. With strong momentum in place, Herbalife continues to expand in China. With 5 additional direct selling licenses in China, we anticipate the company to register robust business growth in the Asia Pacific region.

Koninklijke Ahold N.V’s (OTC:AHONY) reported revenues were in line with consensus estimate while adjusted operating profit and adjusted2 net profit declined significantly on a y-o-y basis. The European retail market continued its strong performance, which was limited by poor performance from the US retail market due to difficult trading conditions and slowdown in the US economy during the quarter. Management reiterated its operating margin guidance of 4.8%-5.3% for FY 2008 on account of a pricing promotion mix coupled with cost saving measures. However, as the company does not intend to pass on rising input costs to its customers, we believe Management’s guidance is not likely to be achieved (our operating margin estimates stands at 4.2% for FY 2008). Furthermore, the launch of the Value Improvement Program (VIP) program failed to address concerns of diminishing revenue growth in 1H 08.

Tata Communications (NYSE:TCL) recorded disappointing performance in 1Q 09 due to intense competition in the Wholesale Voice segment, leading to a decline in realizations per minute. However, operating margin was above our estimate due to lower than expected network cost resulting from lower Access Deficit Charge (ADC) and network efficiencies experienced by the company during the quarter. Competition in India has intensified with the issuance of new licenses in the National Long Distance (NLD) and International Long Distance (ILD) segment. This is expected to reduce the addressable market and is expected to affect the Wholesale Voice segment adversely.

Compton Petroleum Corporation (NYSE:CMZ) reported strong top-line growth in 2Q 08, above our expectation, given higher than expected production levels of natural gas and higher than anticipated realized prices for natural gas and liquids (natural gas liquids and light crude oil) during the quarter. Going forward, although the sale of its non-core assets in line with a strategy to focus on its natural gas business will result in lower production from its crude oil and liquids segment, we expect this to be offset by higher production from its natural gas segment given its exploration activities. Moreover, an increase in the hydrocarbon price in line with our forecast is likely to further support strong top-line growth and margin improvement over the same period. Therefore, at current price levels, we view the Compton common stock as an attractive investment opportunity.

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