Earning Release

Linktone Ltd.’s (NASDAQ:LTON) 3Q 08 revenues surpassed Management guidance as well as our estimates, reflecting strong y-o-y growth, led by both the Wireless Value Added Services (WVAS) and Advertising businesses. Profitability increased sequentially on account of lower impairment costs during the quarter. Although the target price suggests a BUY at current levels, in light of the uncertain operating environment and the company’s inability to diversify its revenue mix, we maintain our HOLD rating for the ADR. As we continue to anticipate a positive currency impact on the European stock, we do not anticipate any change in our current rating on the European stock. We are likely to change to a 6-12 month horizon to value the company in our next update report as we now anticipate a significant positive currency impact on the European stock over the next 6-12 months horizon.

News

On 02 December 2008, Advanced Semiconductor Engineering, Inc. (NYSE:ASX) lowered its total net revenue and gross margin guidance for 4Q 08, as consumer demand deteriorates in the context of weakening macroeconomic conditions. In view of further expected contraction in semiconductor end-market demand, we will revise downward our estimates and target price in our next full update report. Hence, we hold a conservative medium term outlook for ASE and maintain our HOLD rating, although the current price suggests a BUY. Although the current price suggest a BUY, we maintain our HOLD rating for the ADR based on our fundamental rating and an anticipated negative currency impact on the ADR in the medium term.

Brookfield Properties Corporation’s (NYSE:BPO) common stock price has declined significantly since our company news alert, dated 30 October 2008, reflecting ongoing weakness in global equity indices. Furthermore, the stock price fell 21.9% in a single trading session on 01 December 2008, following the announcement by the National Bureau of Economic Research that the US economy had entered a recession in December 2007. We remain cautious about the company’s business outlook, particularly as the National Association of Realtors expects commercial real estate activity to weaken over the next six to nine months. Hence, we maintain our HOLD rating for the NYSE common stock, even though the current target price supports a BUY. We continue to anticipate a significant positive currency impact on the Canadian stock over our investment horizon. However, given our fundamental outlook, we maintain our Canadian stock rating a HOLD.

China Digital TV Holding Co. Ltd.’s (NYSE:STV) ADR has declined significantly since our 3Q 08 update report, which we believe is on account of weak Management guidance for 4Q 08 and the worsening state of equity markets and economic downturn worldwide. However, our long term outlook for the company remains positive, based on its leading position in the Chinese Conditional Access systems market and we believe that this decline has left the company significantly undervalued. We therefore maintain our current BUY rating for the ADR. As we anticipate a significant positive currency impact on the European stock over the next 6-12 months, we do not anticipate a change in our current rating for the European stock.

The Doral Financial Corporation (NYSE:DRL) common stock price depreciated significantly on 01 December 2008, reflecting overall market movement on the day. In light of the bank’s announcement on 30 October 2008 that its exposure to Lehman Brothers Inc. had led to a reduction in its total assets and liabilities by approximately US$509 mn, and the recording of a net loss of US$10.1 mn in 3Q 08, our outlook for the stock has deteriorated from the last update report. We remain concerned regarding the bank’s near term performance owing to the global financial crisis and ongoing recession in Puerto Rico. Therefore, we maintain our current HOLD rating for the common stock. We expect to introduce a 6-12 month investment horizon to value the company in our next full update report. However, although we now anticipate a significant positive currency impact on the common stock over the medium term, based on our fundamental outlook, we maintain our HOLD rating for the European stock.

Grubb & Ellis Company’s (NYSE:GBE) NYSE common stock price depreciated significantly on 01 December 2008, reflecting broader weakness in equity indices, following the announcement by the National Bureau of Economic Research that the US economy had fallen into a recession in December 2007. We maintain our cautious outlook given the current downturn in the US real estate sector, and maintain our current HOLD rating for the NYSE common stock, even though the target price supports a BUY.

On 01 December 2008, PartnerRe (NYSE:PRE) announced an increase in its estimates for claims expenses from Hurricane Ike to approximately US$305 mn, with the impact expected to be partially limited by a higher level of catastrophe-exposed premiums earned in the second half of the year. However, the increase in claims estimate does not have a significant impact on our valuation as we had already factored in high further losses from Hurricane Ike, and we do not plan to reassess our estimates for FY 2008. Moreover, we believe that the company has sufficiently strong reserves to sustain losses arising from hurricanes. Consequently, we maintain our BUY rating for the NYSE common stock. We maintain our current BUY rating for the European stock based on our fundamental outlook and anticipated positive currency impact on the European stock over our investment horizon.

The Primus Guaranty Ltd. (NYSE:PRS) NYSE common stock price declined significantly on 01 December 2008, reflecting the decline in the benchmark NYSE composite index. On the basis of Primus’ liquidity position and business model we maintain our BUY rating from current levels. We maintain our current BUY rating for the European stock based on the company’s fundamental outlook and anticipated significant positive currency impact on the European stock in the medium term.

Qimonda AG’s (NYSE:QI) ADR price declined significantly on 01 December 2008, reflecting both the impact of a broader market sell off, and following the company’s announcement that it is postponing 3Q 08 results while it pursues discussions with investors to stave off potential bankruptcy as a result of its deteriorating cash position in the context of DRAM industry downturn. In view of stock price instability and the company’s weak financial position, we maintain our HOLD rating for the Qimonda ADR, although the current target price supports a BUY rating. We maintain our current HOLD rating for the European stock based on our fundamental outlook for the company despite an anticipated positive currency impact in the medium term.

On 01 December 2008, Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) lowered its net sales and margin guidance for 4Q 08, blaming continued weakness in the global economy. Although we reiterate our confidence in TSMC’s fundamentals and believe that it offers greater resilience in the current slowdown than its peers, in view of continued tightening in semiconductor demand we moderate the common stock rating from a BUY to a HOLD although the current price supports a BUY rating, until we revalue the company in our next full update report. Although the current price supports a BUY rating, we maintain our ADR rating in line with our fundamental outlook and an anticipated negative currency impact in the coming 6-12 months.

XL Capital Ltd(NYSE:XL) common stock price declined significantly on 01 December 2008, reflecting a general depression in financial markets on the day. Considering global financial market conditions and XL Capital’s apparently weak fundamentals, we maintain our current HOLD rating for the NYSE common stock although the current target price suggests a BUY. Although we now anticipate a significant positive currency impact on the European stock over our investment horizon, we maintain our current HOLD rating for the European stock based on the company’s fundamental outlook.

Anglo American PLC’s (NASDAQ:AAUK) ADR price declined significantly on 01 December 2008 following news that the company, along with its joint venture (JV) partner Royal Dutch Shell PLC (Royal Dutch), has delayed plans to develop the US$3.2 bn Monash Energy Holdings Ltd. venture (Monash Energy) in Australia. Although we are cautious of the effect of a decline in commodity prices on the company’s future performance, given the recent decline in the ADR price, we believe the ADR offers an attractive investment opportunity at current levels and therefore maintain our rating. We continue to anticipate a positive currency impact on the UK stock over our investment horizon; and as a result we maintain our BUY rating.

Frontline Ltd’s (NYSE:FRO) common stock price has declined significantly since we downgraded the common stock rating from a BUY to a HOLD in our company news alert dated 28 November 2008, reflecting ongoing volatility in global equity markets as well as an announcement that the company had slashed its dividend on 28 November 2008. As we are likely to revise our estimates and target price downwards when we come to revalue the stock in our next update report, we maintain our HOLD rating for the common stock although current price levels suggest a BUY rating. As we continue to anticipate a significant positive currency impact over our investment horizon, we maintain our current BUY rating for the Norwegian stock.

Genco Shipping & Trading Ltd.’s (NYSE:GNK) common stock price declined significantly in a single trading session on 01 December 2008, which we believe reflects ongoing volatility in global equity markets, industry wide concerns of slowing demand for dry bulk commodities as well as news that it has cancelled a deal to acquire six vessels and that it will incur a charge of US$54 mn as a result. However, as the company primarily operates on time charter contracts, we believe that its future revenues are partially shielded from the impact of a drop in spot rates. Therefore, as we believe the common stock is undervalued at current price levels, we maintain our BUY rating. Given current price levels and our anticipation of a significant positive currency impact on the European stock over our investment horizon, we maintain our BUY rating for the European stock.

Mechel OAO’s (NYSE:MTL) ADR price declined significantly on 01 December 2008, reflecting a fall in the NYSE Composite index over the same period. As we remain concerned of ongoing volatility in commodity prices as well as political and economic conditions in Russia, we maintain our HOLD rating for the ADR although our target price support a BUY at current levels. As the Russian stock trades in US dollars, we do not anticipate any currency impact on the Russian stock over our investment horizon. Therefore, based on our fundamental outlook, we maintain our HOLD rating.

Yingli Green Energy Holding Co. Ltd.’s (NYSE:YGE) ADR price has declined significantly since our last update report reflecting volatility in global equity markets and concerns that a decline in crude oil prices will impact demand for solar equipment. Although, the company reported 3Q 08 results which exceeded our expectations and has reaffirmed its FY 2008 outlook, given our cautious outlook for the company’s future performance in deteriorating economic conditions, we maintain our HOLD rating until we reassess the stock in our next full update report. As we anticipate a positive currency impact on the European stock over the medium term, we maintain our BUY rating. We expect to revert to a 6-12 month horizon in our next update report as we now anticipate a significant currency impact in the medium term.

AerCap Holdings N.V.’s (NYSE:AER)stock price declined significantly in a single trading session on 01 December 2008, reflecting volatility in global equity markets. Although we expect to revise our estimates and target price downwards in our next update report, reflecting increasing concerns of the aircraft leasing industry, we maintain our positive outlook for Aercap’s fundamentals. Furthermore, the recent decline in stock price has left the NYSE stock significantly undervalued. We maintain the Aercap NYSE stock a BUY. We continue to anticipate a significant positive currency impact on the European stock over the medium term. Furthermore, given our fundamental outlook for the company and current price levels, we do not anticipate a change in our BUY rating for the European stock.

Cooper Industries Limited (NYSE:CBE) has revised its 4Q 08 earning estimates downwards, reflecting the ongoing slowdown in its key end markets of the US and Western Europe. However, we have incorporated the revised company outlook in our previous update report and, hence, we maintain our fundamental outlook for the company. Therefore, we do not anticipate a change in our current BUY rating and believe the NYSE common stock represents an attractive investment opportunity at current levels. As we maintain out positive fundamental outlook and we continue to anticipate a significant positive currency impact on the European stock over the medium term, we do not anticipate a change in our current BUY rating.

New Valuations

During 1Q 09, Gold Fields Limited’s (NYSE:GFI) revenues were below our estimate due to lower-than-expected gold price realizations. Furthermore, operating and net income were disappointing, falling short of our estimates due to higher-than-expected energy and labor costs. Going forward, we expect ongoing restructuring at South African operations to improve long term mine production. However, although we expect realized gold prices to improve during FY 2009, higher electricity and labor costs are expected to hit margins.

Telecom Corporation of New Zealand Limited ( NYSE:NZT) registered 2.3% y-o-y growth in revenues in 1Q 09, above our estimate. The y-o-y growth in revenues was driven by impressive performance from the Chorus, Wholesale & International and Gen-I segments, partially offset by a decline in revenues from the Retail and AAPT segments. Furthermore, EBITDA was above our estimates due to lower than expected other operating expenses, partially offset by higher than expected labor and inter-carrier cost. Going forward, we expect the Wholesale & International segment to drive top-line growth due to an expected increase in revenues from Broadband & Internet. Conversely, we expect margins to be under pressure due to an expected increase in labor costs (due to increased headcount) and other operating costs (due to increased marketing and selling spend).

An acute drop in semiconductor demand was apparent in UMC’s(NYSE:UMC) 3Q 08 performance, with the company breaking its previous growth trends in the quarter. Led by the lackluster sales performance, margins also experienced significant decline y-o-y. Overall performance is expected to deteriorate further in 4Q 08 as economic uncertainty stifles semiconductor demand during the Christmas season, while 1Q 09 is a seasonally weak quarter. A significant drop in capacity utilization rate is expected to have a bearing on the company’s margins which are forecasted to decline y-o-y in FY 2008 and FY 2009. UMC is now expected to incur lower capex than previously expected in FY 2008, with no capex increase expected in FY 2009. In view of current trends, we have revised our estimates significantly downwards and we now expect a full year recovery in the semiconductor industry in FY 2010 only.

PLDT’s (NYSE:PHI) 9M 08 results were broadly in line with our estimates. The y-o-y growth in service revenues was primarily attributable to strong performance from the Wireless segment, further supported by growth in the Fixed Line and Information Communication Technology (ICT) segments. Our top line estimates have been revised downwards in the wake of increased competition, declining Average Revenue per User (ARPU) and a decline in consumer spending attributable to a slowdown in the Philippine economy. However, our margins estimates have been revised upwards due to an anticipated decline in cost of sales, depreciation expenses and lower corporate tax rates in the Philippines effective from FY 2009.

While Fomento Economico Mexicano, S.A.B de C.V’s (NYSE:FMX) 3Q 08 revenues and operating income were in line with our estimates, adjusted net income was significantly above our expectation, reflecting lower-than-expected net interest expenses and lower-than-anticipated minority interest during the year. The company continued to open new stores under its Oxxo brand and is expected to open more than 750 new stores in FY 2009. Going forward, we expect Coca Cola FEMSA and Femsa Comercio (Oxxo) to contribute towards revenue growth, driven by an increase in sales volume and Average Selling Price (ASP). We expect increased selling expenses, given the efforts to establish brand image through distribution channels and promotional activities.

Royal Dutch Shell PLC (NYSE:RDSa) reported strong growth in its top-line during 3Q 08, given higher realized crude oil and gas prices during the quarter. However, an increase in its cost of sales (COS) given rising hydrocarbon prices limited its margin improvement. Although near term revenue growth is expected to be impacted by a decline in oil prices, its long term growth potential is supported by its various developmental projects. In addition, declining oil prices will help the company to improve its overall margins in FY 2009.

Royal Dutch Shell PLC (NYSE:RDSb) reported strong growth in its top-line during 3Q 08, given higher realized crude oil and gas prices during the quarter. However, an increase in its cost of sales (COS) given rising hydrocarbon prices limited its margin improvement. Although near term revenue growth is expected to be impacted by a decline in oil prices, its long term growth potential is supported by its various developmental projects. In addition, declining oil prices will help the company to improve its overall margins in FY 2009.

Sadia S.A. (NYSE:SDA) recorded strong revenue growth in 3Q 08, higher than our estimate, reflecting greater-than-expected domestic and export market sales volume. However, Sadia reported an adjusted2 net loss for the quarter, primarily due to higher-than-anticipated net financial expenses. Although the company has taken short term loans at higher interest rates in order to cover significant derivative losses, Management is confident it will be able meet its short term debt obligations. We expect Sadia to incur higher net financial expenses, impacting the bottomline over the coming years.

Shanda Interactive Entertainment Ltd (NASDAQ:SNDA) Overall 3Q 08 performance surpassed our and Management expectations. Net revenues witnessed healthy growth, driven by strong growth from Active Paying Accounts (APA) due to the release of several expansion packs coupled with in-game promotions. We expect Shanda to be able to sustain its growth momentum led by the quality and variety of games released coupled with rising Internet penetration in China. As online games are often cheaper than traditional forms of entertainment we expect growth to continue, despite an economic downturn.

Tenaris S.A. (NYSE:TS) reported strong revenue growth during 3Q 08, which exceeded our estimates given higher than expected realized hydrocarbon prices. Margins exceeded our estimates with lower than expected Cost of Goods Sold (COGS). Going forward, we are cautious of the impact of declining steel prices on the company’s revenues during FY 2008. Furthermore, falling crude oil prices are likely to cause a decline in Exploration and Production (E&P) activity from 4Q 08 onwards, depressing its revenues on a qo- q basis. However, a decline in raw material prices will benefit margins in FY 2008. FY 2009 revenues and profitability are expected to be severely impacted by a decline in steel and oil prices and slowing demand for its products. However, steel prices are likely to stabilize in FY 2010, aiding margin recovery during the year.

Barrick Gold Corporation’s (NYSE:ABX) 3Q 08 revenues grew moderately, below our estimate, due to lower than anticipated gold volumes. Operating and net incomes were also significantly lower than our estimates, further compounded by higher-than-expected production costs. We anticipate gold prices to decline in FY 2009, which is expected to result in margin contraction. Subsequently, we expect gold prices to increase from FY 2010, resulting in margin improvement. However, rising input costs are expected to restrict margin growth.

Invesco (NYSE:IVZ) reported a y-o-y decline in its Assets Under Management (AUM) in 3Q 08, leading to deterioration in its top- and bottom-line results, which were in line with market expectations. We remain cautious about the company’s performance, given the anticipated impact of ongoing volatility in global financial markets on its AUM, in the near-to-medium term. However, we expect the impact to be partially mitigated by Invesco’s focus on promoting and maintaining the competiveness of its existing products, which are performing relatively strongly in comparison to peers in the weak current conditions. Therefore, we hold a neutral outlook for the NYSE common stock.

During 3Q 08, Qiagen N.V.’s (NASDAQ:QGEN) revenues experienced robust growth, in-line with our estimate. Revenues are expected to be driven by recurring sales of reagents, further augment by wider acceptance of new product launches from the Consumables segment, focusing on gene and protein function analysis and instruments, such as QIAsymphony and QIAexcel, going forward. However, we expect margins to o remain under pressure, primarily due to increase in Selling, General and Administrative (SG&A) expenses, as a result of advertising and promotion of new products.

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 © 2008 Independent International Investment Research PLC. All rights reserved.