Creative Tech shares jump $5.90 to $36.50
Rise reflects Wall Street rally, Goldman call; analysts expect price to taper off
By Jennifer Lien
[SINGAPORE]
Creative Technology shares soared by S$5.90 to S$36.50 yesterday, mirroring a stunning overnight Wall Street rally on Thursday, but analysts are hard-pressed to come up with a good reason for the sudden jump.
The stock was the top gainer on the local bourse in dollar terms yesterday, and the fourth gainer in percentage terms, rising 19.3 per cent. On Nasdaq on Thursday, Creative gained US$4-1/8 to close at US$22 9/16, with 4.3 million shares traded.
"I don't think fundamentally there's any reason for the price to go up so fast," said Soc-Gen Crosby research manager Pearly Yap. "I think it's very speculative."
But other analysts offered a variety of theories for the jump, some more convincing than others. Top of the list was that Creative had been highly recommended by fund managers at a Goldman Sachs technology conference in the US on Thursday.
Others attributed the sharp rise to news that Creative would ship its latest Voodoo2 graphics card by end-February, earlier than expected, and that the product would pack in more features than expected.
Then there was recurring speculation that Creative might be considering another possible acquisition, as well as rumours that the Singapore authorities would soon allow share buybacks.
Creative, with its huge cash hoard and a pro-buyback management, is a strong candidate for a share buyback should it be allowed.
Others said the share price could have been pushed up by short-sellers rushing to cover their positions.
Most analysts expect Creative's share price to taper down in the next few days. "The price will correct itself, unless there are more fundamental changes, such as Creative acquiring somebody," said Kay Hian associate director Stephen Chan.
The stock is now valued at around 11 times, higher than the seven or eight times most analysts BT spoke to were willing to pay. But analyst Russell Tan from DBS Securities had a more positive view, saying the counter could trade up to 12 times' prospective earnings, or about $50 to $51.
"I think the stock is still undervalued," said Mr Tan. "It's not a very well-understood company, and that's why when a big US brokerage such as Goldman Sachs recommends it, its strength becomes magnified."
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