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Technology Stocks : Creative Labs (CREAF) -- Ignore unavailable to you. Want to Upgrade?

To: Fred Fahmy who wrote (9744)	2/14/1998 8:29:00 AM
From: burn2learn	Read Replies (2) \| Respond to of 13925

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."

To: Fred Fahmy who wrote (9744)	2/14/1998 11:19:00 AM
From: Savoirman	Read Replies (2) \| Respond to of 13925

Hi Fred, I think Sim has been reported to say that the currency effect on margins was positive but small (this was in reference to 2Q98 earnings). On another note: The "margins" problem has been widely misinterpreted, from the reports I have seen from a few brokers. Some brokers were actually worried margins would come down as Creaf sold more DVD, graphics (non-audio). Strange to say the least, as the non-audio business does not cannibalize on the existing business, so every margin-dollar earned is more money to the bottom line, on top of whatever audio brings in. Sure PC-DVD may have lower margins, as all new products do if they're targeted at a broad market, but like audio the margins will broaden once volume goes up and component prices come down and manufacturing becomes better "oiled". In fact, all Creaf should care about now (since it's got tons of US$ in the kitty) is to FLOOD the market with quality products. Margins come second. If they do it right, Creaf can have another "Soundblaster"-type success where they become the de facto standard. This could lead to YEARS of milking this baby. Graphics may not be Creaf's core business yet, but they've been sure good at it of late (those who have not checked out the Voodoo2 raves/purchase intentions/Diamond-deriding on the Creaf site, should). In fact, this really is the amazing thing about Creaf of late - the ability to branch out and make the major players cringe. I bet Altec Lansing's pretty worried about its speaker sales as well.