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Ford Motor (F)
Reiterates 3 STARS (hold)
Analyst: Efraim Levy, CFA
We are encouraged by the preliminary acceptance by 38,000 union employees of Ford’s buyout offer. Greater-than-expected employee count reduction should facilitate a faster reduction of overhead costs, including facility closings, as the automaker shrinks production capacity to reflect expected lower sales volume. Like its larger crosstown competitor General Motors (GM), the company must be careful that the elimination of more than 40% of its hourly workforce does not create costly production difficulties during the transition. Ford’s recently announced financing plans should help cover buyout costs.
Comcast Corp. (CMCSA)

Maintains 4 STARS (buy)

Analyst: Tuna Amobi, CPA and CFA

Comcast names Michael Angelakis, currently a managing director at private equity firm Providence Equity Partners, as CFO. The hire is billed first to replace retiring co-CFO Lawrence Smith effective 3/28/07, then to become sole CFO upon planned retirement of John Alchin at 2007 end. While unfamiliar with Angelakis’s background, we think Comcast’s move signals strategic shift from acquisitions (post Adelphia) to new a skill set encompassing expertise with building portfolio of new media investments. We are not surprised by the move to consolidate CFO functions to one executive.

Walt Disney Co. (DIS)

Maintains 5 STARS (strong buy)

Analyst: Tuna Amobi, CPA and CFA

Walt Disney hikes its annual payout by 15% to $0.31 a share, payable 1/12/07 to record 12/15/06. We think Disney alluded to the possible dividend hike at its early Nov. call. We see sustainable 0.9% yield on a strong balance sheet and free cash flow, despite higher fiscal year 2007 (Sep.) capex target and continued aggressive share buybacks to offset dilution from recent Pixar acquisition. We also see support for shares on the likely imminent spin or split of Citadel (CDL) in its ABC radio sale, expected to close in spring 2007, pending approvals. Our target price rises by $2 to $40.

Stats Chippac (STTS)

Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: David Kaplan

We see a broad commitment among test and package service providers to control capital spending, which we think will benefit cash flows and utilization rates and reduce price competition. We believe Stats Chippac has greater potential for margin expansion than peers, and we view its capital structure as more optimal than peers with a debt-to-capital ratio of 40%. Following rising peer valuations and emerging Merger & Acquisition activity in the test and packaging service space, we apply a price/sales ratio of 1.5 times our 2007 sales estimate, near historical averages, raising our target price to $12 from $9.

3Com (COMS)
Maintains 3 STARS (hold)
Analyst: Ari Bensinger
3Com agrees to buy Huawei Technologies’ 49% stake in the Huawei-3Com joint venture for $882 million. The agreement, which represents an implied equity value of $1.8 billion, would give 3Com full ownership of the venture. Given the continued struggles of 3Com’s legacy networking segment, we believe the venture, which sells into the attractive Chinese market, has become crucial to the company’s growth profile. With $916 million in cash and our forecast of near-term operating losses, we think 3Com will need to issue debt or equity to fund the deal. On a revised sum-of-parts analysis, our target price for 3Com stock drops by 50 cents to $4.00.
The9 Ltd. (NCTY)
Reiterates 4 STARS (buy) on American Depositary Shares
Analyst: Scott Kessler
After additional review and evaluation of The9’s third quarter results, we are taking a slightly more conservative stance on the company and its shares. We are trimming our per-share ADS estimates for 2006 to $1.48 from $1.52, and for 2007 to $1.98 from $2.15, reflecting our modestly less optimistic revenue outlook, which is based in part on uncertainties related to both the life-cycle of World of Warcraft and upcoming new offerings. Based on revised peer p-e and p-e-to-growth analyses, we are lowering our target price to $34 from $36, but we continue to see The9 as attractively valued.
Article Source: www.businessweek.com.