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Technology Stocks : John, Mike & Tom's Wild World of Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (2687)	3/19/2002 12:56:44 PM
From: John Pitera	Respond to of 2850

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To: Jorj X Mckie who wrote (2687)	3/22/2002 11:14:48 AM
From: John Pitera	Respond to of 2850

Institutional Equity Strategy The Recent Utilities Sector Surge March 22, 2002 SUMMARY * Industrial production generally drives electric power Tobias M. Levkovich demand * Utilities still appear attractively valued on a P/E and dividend yield basis * Integrated electric utilities' balance sheets are pretty strong but got tainted by Enron * Maintaining our slight overweight posture on Utilities OPINION One of the surprisingly stronger sectors in the equity market recently has been the S&P Utilities sector, which has climbed 14.2% since February 19th, 2002 (helped along by gas utilities' stocks price performance) vs. a 6.5% gain in the S&P 500, a 6.8% rise in the Nasdaq Composite and the 7.5% appreciation in the Dow Jones Industrial Average. Hence, this sector, which we have assigned a slight overweight posture, has been a key market leader alongside the 10.4% in the Financials sector and most Industrial names. Yet, many have questioned why we would be so positive on a generally perceived defensive sector like Utilities. While we have designated Utilities as "cyclicals in disguise," we think that some needed explanation might make this view more understandable. Utility stocks have benefited from four key factors, in our opinion: * Utility demand, specifically for electricity is very much affected by industrial activity since the industrial sector accounts for one-third of electric power usage and should be starting to rise along with industrial production recovery. Electric power demand had softened considerably in the past 18 months as industrial production collapsed in the now successful effort to reduce inventories; * Valuation, which has been a key hurdle for many investors recently, appears very reasonable in the Utilities arena, in our view, with the sector trading at only 11.3x fiscal 2002 consensus EPS estimates, a roughly 50% discount to the market -- indeed, this sector carries the lowest P/E multiple of the 10 S&P GICS sectors, and trades at a P/E that is less than 25% of the Information Technology sector's multiple; Figure 1 (Figures can be seen in PDF format) Source: FactSet and Salomon Smith Barney * Utilities were the worst performing sector in 2001, due to the collapse of Enron and the sharp drops in names such as Dynegy, Calpine and AES Corporation, and, in some respects, all Utilities were besmirched by the taint even though many utility companies were not involved in trading operations or meaningful new power plant construction activity that stretched balance sheets -- thus, the strong integrated utility companies have been able to purchase generating assets from distressed sellers at very attractive prices, creating the likelihood for some profitable growth; and, * In an environment where income is becoming a greater factor in stock price selection than it has been in years (due to the realization that stock price appreciation is not the only way to make money), attractive dividend yields in the Utilities sector is also playing a role, in our opinion. Figure 2 (Figures can be seen in PDF format) Source: FactSet As a side note, we have heard that many power plants that had been on drawing boards have been deferred indefinitely as independent power producers cannot raise the funds to build them anymore. In fact, we have even heard (from engineering contractors) that some recently started plants (in terms of construction activity) will not even be completed due to developer cash flow deficiencies, such that it is plausible that the electric power reserve margins will not achieve previously assumed targets. In addition, the "spark spread" has improved of late. In this context, we see no particular reason to adjust our positive view of Utilities and think that names such as Duke Power, Dominion Resources, Exelon and Public Services Enterprise Group are interesting as is American Electric Power, which remains on the Salomon Smith Barney Recommended List. Figure 3 (Figures can be seen in PDF format) Source: FactSet and Salomon Smith Barney Companies Mentioned American Electric Power Co.# (AEP-$45.30; 2M) Calpine Corporation# (CPN-$13.04; 3H) DUKE ENERGY# (DUK-$36.46; 1M) Dominion Resources Inc.# (D-$62.40; 2M) Dynegy Inc.# (DYN-$32.00; 1H) Exelon Corporation# (EXC-$51.80; 2H) Public Service Enterprise Group Inc.# (PEG-$44.86; 2H) The AES Corporation# (AES-$9.10; 3H)

To: Jorj X Mckie who wrote (2687)	3/27/2002 5:49:15 PM
From: John Pitera	Respond to of 2850

CHU and CHL -- China Unicom's Profit Jumped 38% in 2001 By KARBY LEGGETT Staff Reporter of THE WALL STREET JOURNAL BEIJING -- China's No. 2 mobile-phone company, China Unicom Ltd., said net profit leapt 38% last year to $538.6 million as it signed up record numbers of new users in the world's biggest mobile-telecommunications market. Unicom said 2001 revenue rose 24% from a year earlier to $3.55 billion, slightly ahead of analysts' expectations, after it more than doubled its core GSM, or global system for mobile communications, subscriber base to 27 million users. In a prepared statement, Unicom called the results "remarkable." Its shares, listed in both New York and Hong Kong, rose 4.8% to 7.60 Hong Kong dollars ($0.97), up 35 Hong Kong cents each in Hong Kong. The results reflect another year of strong growth in China's mobile-phone market, where hand-held sets have become almost ubiquitous in many parts of the country. Though China is now the world's leading mobile-phone market, with a total of 155.9 million subscribers at the end of February, some analysts say growth could remain strong for years to come as the technology reaches into China's less-developed cities and provinces. But as that happens, there are concerns that Unicom might not be able to post such stunning profit growth year after year. Though Unicom now commands a 28.5% share of China's mobile-phone market, up from 22% last year, it still trails far behind China Mobile (HK) Ltd.(CHL), the dominant mobile carrier with 73 million subscribers. As the two companies battle for new subscribers, prices have fallen. Unicom typically offers its mobile services at a 10% discount to China Mobile in an attempt to boost market share. Though falling prices have persuaded more Chinese to buy mobile phones, the trend also has cut deeply into Unicom's margins, and to a lesser extent into those of China Mobile. Unicom said on Wednesday that its average revenue per user -- a key financial measure for mobile-phone companies -- dropped 31% to $10.42 per month. That compares with $15.01 per month in 2000 and $20.02 in 1999. There are other concerns. Beijing is expected to issue at least two new mobile-phone licenses in the next year or two, a move that would likely further undercut prices, as the new companies scramble to build market share. Meanwhile, subscriber response to Unicom's new $2.9 billion CDMA, or code division multiple access, mobile network, which operates on a U.S. standard, has been tepid since the 12-province network was rolled out earlier this year. And Unicom's paging operations also have contracted sharply as more Chinese switch to mobile phones. Write to Karby Leggett at karby.leggett@wsj.com Updated March 28, 2002 online.wsj.com