Good info . . .
CREAF (Creative Technology Ltd)
<- Previous Next -> Message 537 of 588Reply Subj: Undervalued CREAF
By: TechVestor
Date: Dec 23 1997 8:32 A.M PST
Reply To: Msg. 533 by Nice1a
I agree that with a year-forward PE of 7.8 (compared to the peripheral industry average of 32), CREAF is definitely undervalued. Being undervalued doesn't imply that the stock has limited downside, as you can see in case of INVX, INTC, GNT, and many others. But undervaluation of this magnitude implies that there is a larger upside potential than downside. When does it begin to move up, I don't know; depends almost entirely on when Wall Street recognizes the undervaluation.
Now you have to explore reasons why CREAF is undervalued. Does it have products that are not selling well or are undercut by
competitors? I don't think so. A small visit to a local Circuit City or Best Buy will tell you how hot DVD is this Christmas. True that
their Soundblaster product has come under some heavy competition, but I'm sure that being an industry leader, CREAF is working on
next-generation products (multimedia cards, etc.) that will maintain its industry leadership via innovation (just like INTC does). Ching
Lee, can you comment on this?
The primary reason for undervaluation seems to me that this is a foreign company and the Asian currency crisis. Many
excellent Israeli and other foerign companies (e.g., CHKPF) sufferred extended periods of undervaluation because Wall Street did not
have adequate information to estimate their true potential. In order to remedy this problem, I think the investor relations
department at CREAF should actively try to keep the Street informed (via press releases) about new products, updated earnings
expectations, and so forth. Companies who do that (e.g., INTC) have greater shareholder TRUST, and maintain shareholder value better.
The second problem is about the Asia crisis. Look at it this way, CREAF is on the supply side of this crisis (since, I
believe all their product development is done at Singapore) and can actually benefit from the crisis unlike U.S. companies, like
Pier I Imports have. The crisis provides CREAF an opportunity to grab greater market share, by lowering prices without affecting
their bottomline. Besides, the Singapore currency has been quite stable, unlike Hong Kong, Indonesia, Korea, and Japan, and much
of the effect is due to sympathy for regional markets.
Given these circumstances, I believe that CREAF's earnings for the Dec 97 quarter will exceed Wall Street expectations. But some savvy marketing on the part of the company is required if it expects to achieve valuations comparable to its peers. Merry Christmas. |
