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Strategies & Market Trends : Value Investing

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To: Spekulatius who wrote (19314)	6/19/2004 10:15:18 AM
From: fmikehugo	Read Replies (1) of 78594

AUO is very interesting because I look for stocks with good fundamentals to sell covered calls. A premium of .55 on the July 17.5s is pretty good with the pps about 1.5 out of the money. S&P rates AUO a hold. You might be interested in the S&P valuation, which it must be noted was made when the price was 17.78. Valuation - 27-MAY-04 We recommend that existing shareholders hold positions, as we view AUO as fairly priced. We believe the shares appropriately discount the cyclicality of the company’s business. Risks to our target price include the fact that the company is subject to the high volatility of an emerging market (the application of displays in LCD TVs, and the possibility of sustained losses as it is subject to a cyclical industry with heavy capital investment requirements. In addition, planned additions in industry capacity for 2004 and 2005 could cause the industry to suffer from excess capacity, which could negatively impact earnings. Our 12-month target price of $25 is based on our price to sales analysis. We believe the shares can trade at a multiple of roughly 2X our 2004 revenue estimate, in line with AUO’s peers, and the company’s historical range.

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