Aviva Executing, But The Stock Continues To Test Patience

There are many types of value traps, but one of the most frustrating is when a company executes on its self-improvement plans but can't get much love from the market. Such is the case with Aviva (OTCPK:AVVIY), which has continued to underwhelm in the market since my last update, particularly when compared to the likes of Prudential plc (NYSE:PUK), AXA (OTCQX:AXAHY), and Legal & General (OTCPK:LGGNY). 

The company has done well with its acquisition of Friends Life and subsequent restructuring efforts that have seen it sell down stakes in non-core areas and boost performance in areas like asset management. Nevertheless, the market still seems skeptical about the company's ability to generate meaningful growth and translate excess capital into liquid capital that can be returned to shareholders. Although I don't expect Aviva to be any sort of growth champion, I do believe the company can grow at a mid-single-digit rate, supporting a fair value about 20% higher than today's price.

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Aviva Executing, But The Stock Continues To Test Patience

Euronet's Fee-Based Businesses Continue To Support A Healthy Growth Outlook

Euronet (NASDAQ:EEFT) has been a consummate second-chance stock for me over the years. While this leading operator of ATMs, digital payment, and money transfer systems has maintained a strong record of revenue and EBITDA growth, that performance hasn't always been as consistent as the Street would like. Add in periodic fears about competitors like Western Union (NYSE:WU) and MoneyGram (NYSE:MGI), new money transfer options, and pricing pressure from major partners like Wal-Mart (NYSE:WMT), and the shares have reliably given investors a roughly 15%-20% pullback opportunity at least once a year for a few years. 

These shares have been strong since the bottom of the last pullback, rising about a third since early February (and about 25% since my last update). Both the underlying EFT and money transfer businesses remain strong, and the epay operation is arguably better than it looks as the company transitioning away from mobile top-up and toward newer offerings like iTunes and Google Play, but the shares are not exactly bargain-priced today. 

Given the strong underlying trends in the business and the history of meaningful pullbacks, I'd give this stock a prominent spot on a watchlist in anticipation of another pullback opportunity at some point in the next year or so.

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Euronet's Fee-Based Businesses Continue To Support A Healthy Growth Outlook

Recovering Loan Growth And Long-Term Prospects Argue For Credicorp

Even though lending growth in Peru has slowed dramatically in the past year, as has GDP growth, I can't really complain about the performance at the country's largest bank, Credicorp (NYSE:BAP). The shares are up more than a third since my last update on the company, which most of that move occurring in the last four months as the economic and political situations in Peru seem to be improving. 

I still believe that high-teens long-term ROE can support double-digit earnings growth at Credicorp, but I've become incrementally more bullish on Credicorp's ability to hold on to its strong ROEs as the Peruvian market matures. Credicorp remains a strong player across the board, and management seems committed to sustainable growth and good capital management. Although the shares only seem to be slightly undervalued today, I still believe that they can generate double-digit returns from here with an increasing dividend payout.

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Recovering Loan Growth And Long-Term Prospects Argue For Credicorp

Astellas Changing Its Approach, But Investors Are Skeptical

Astellas (OTCPK:ALPMY) still has quite a bit of work to do. While Astellas is still among the largest of the Japanese drug companies (behind Takeda (OTCPK:TKPYY)) and one of the most profitable (in terms of CROCI), the company has a well-earned reputation for a weak internal R&D effort and a heavy reliance upon partnerships and M&A to drive its pipelines. Making matters worse, the company has had a number of setbacks, including stopping the development of Xtandi in breast cancer and halting its once-promising EGFR inhibitor for lung cancer.

Even with that sour backdrop, Astellas shares could be worth a look. There are credible reasons to believe that Xtandi sales growth could re-accelerate and late-stage pipeline assets like roxadustat, gilteritinib, and claudiximab should help offset the loss of patent coverage for Vesicare (a major sales contributor). Moreover, Astellas seems to have accepted that its internal R&D efforts are not up to snuff, and instead of throwing good money after bad, has chosen to refocus around partnering and external development. It's a risky move, but it arguably does play to Astellas's relative strength as a marketing operation (versus an R&D innovator). With the shares potentially undervalued by more than 10%, Astellas is worth consideration from investors looking to add some OUS pharmaceutical exposure.

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Astellas Changing Its Approach, But Investors Are Skeptical

Fidelity National Information Services Looks Ready To Grow Again

I can't say that FIS (NYSE:FIS) (also known as Fidelity National Information Services) hasn't felt more love this year. While some growth concerns have stalled out the stock a few times in the last three years, the shares have risen more than 20% year to date, outperforming peers like Fiserv (NASDAQ:FISV) and Jack Henry (NASDAQ:JKHY) and more or less keeping pace with First Data (NYSE:FDC). 

While FIS certainly isn't as cheap as it was, the shares still hold some appeal as the company looks toward improving underlying conditions. Not only is management executing very well with its integration of Sungard, it's leveraged to expanding interest margins among its bank customers, aging IT infrastructure, and growth overseas. With the potential to drive FCF growth in the high single digits to low double-digits, FIS's share price could approach $100.

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Fidelity National Information Services Looks Ready To Grow Again

Fulton Financial Looking To Fulfill Its Potential

Sentiment towards a sector has an under-appreciated influence in individual stock performance, and I think Fulton Financial (NASDAQ:FULT) is a case in point. The last year has been pretty mixed for this Pennsylvania-based bank, but its performance has been pretty close to that of Provident (NYSE:PFS) and Valley (NYSE:VLY), with the wider group of Northeast/Mid-Atlantic comparables largely bracketed by S&T Bancorp (NASDAQ:STBA) and F.N.B. (NYSE:FNB). All told, these banks have been benefiting from improving loan demand, improving spreads, and a healthy credit environment, even though they operate in a region with less population and household income growth potential than perennial favorites like Texas, Florida, and the Southeast. 

In the specific case of Fulton, this is an interesting time for the bank, as I feel it is teetering on the edge of some significant developments. These aren't make-or-break in the sense of “will this company still be here in five years?”, but rather will have a lot to do with whether the company can reverse a recent multiyear trend of lackluster profitability relative to its peer group. Getting out from under a consent decree, driving additional consolidation (internal and external), and reaping the benefits of its asset sensitivity and expanding lending capacity could all support meaningfully higher returns, but reversals on these drivers could shrink the multiple and drive underperformance.

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Fulton Financial Looking To Fulfill Its Potential

Turbulent Markets And Imperfect Execution May Mean An Opportunity With Benefitfocus

It's great when a stock that you own is supported by a company posting ongoing beat-and-raise quarters with strong revenue growth and impressive margin leverage, but those stories rarely trade cheap for long and especially not in the software sector. On the other hand, if you find an opportunity to get into a story that has double-digit revenue growth potential at a decent price, it's a fair bet that something is not altogether right in the short term.

And so it is with Benefitfocus (NASDAQ:BNFT). I like the basic story here - a company that offers a cloud-based platform of tools that help carriers and employers manage increasing complex healthcare benefit programs. The “but” is that the company has not handled a sales strategy shift very well and it has also seen meaningful turbulence in its market from the uncertainties surrounding healthcare policy in the U.S. I believe both issues are fixable, and I think the stock offers decent upside albeit at the cost of elevated risk.

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Turbulent Markets And Imperfect Execution May Mean An Opportunity With Benefitfocus

Harder And Harder To Find A Spark With Accuray

I tend not to like to write frequently about companies, as I believe investing is best approached as a long-term endeavor and not many short-term moves prove to be all that meaningful. I'm making an exception in this case, though, as Accuray (ARAY) continues to offer a lackluster outlook that suggests only modest progress at best.

With fiscal fourth quarter earnings in hand and guidance for the next year in place, it's tough to find much to get excited about. Management has done a good job of handling the balance sheet, and particularly in managing debt in such a way as to avoid large potential dilution, but the basic trends in the business just aren't improving fast enough to give me much incremental new confidence. While there's still upside even on lowered expectation, it will be hard to see how there's much enthusiasm around this name unless and until order growth meaningfully improves.

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Harder And Harder To Find A Spark With Accuray

Emerson Looking Forward To Improving Process Markets

About a year ago, I was not that keen on Emerson Electric (NYSE:EMR) given what I saw as ongoing challenges in the core business and a management track record that left something to be desired. With the shares up less than 10% in that time versus 11% for the S&P 500, over 15% for Honeywell (NYSE:HON) and more than 35% for Rockwell (NYSE:ROK), at least some of that skepticism was valid. Then again, I also liked ABB (NYSE:ABB) better than Emerson, and ABB has barely squeaked out any gain, so I'm not exactly running a victory lap here.

Emerson looks priced for mid-to-high single-digit returns, which isn't bad given overall industrial valuations, and there is some potential that the recovery in end markets like oil/gas and chemicals could be stronger and that the non-residential HVAC cycle could last longer. The acquisition of Pentair's (NYSE:PNR) valve business was a logical if somewhat risky move and it should give the company a lot of opportunities to improve margins in the coming years. I'd be more excited about Emerson if it were cheaper, but then that's true of a lot of companies, and I think the company's long-term underperformance versus other automation companies like Honeywell, Rockwell, Siemens (OTCPK:SIEGY), and even ABB shouldn't be completely dismissed.

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Emerson Looking Forward To Improving Process Markets

DBS Offers Leverage To Higher Rates And A Recovery In China, But Credit Remains A Concern

Buying good companies that are down on momentary hiccups is a time-tested strategy, and the nearly 40% move in the ADRs of DBS Group (OTCPK:DBSDY) since late October certainly backs that up. As provisioning seems to be tapering off and coming in well below the worst-case scenarios that sell-side analysts were batting around last summer/fall, investors have once again come back to core long-term drivers like DBS Group's strong market share in Singapore, China-driven growth potential, and leverage to higher rates and growing fee-generating businesses. 

I have long liked DBS Group, and I'm generally slow to move away from the stocks of companies I like. That said, the share price now seems to factor in high single-digit long-term earnings growth and low double-digit ROEs, so I really can't say that the shares are dramatically undervalued. There are some concerns again now, though, about credit trends, and investors interested in adding Asian banking exposure should keep an eye on these shares in case the nearly 10% pullback from the recent high stretches out a bit further.

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DBS Offers Leverage To Higher Rates And A Recovery In China, But Credit Remains A Concern

The Pieces Are In Place For Ongoing Success At Broadcom

It's hard to complain about Broadcom's (AVGO) performance, as this top-tier semiconductor company has seen its shares rise almost 45% since my last update in late 2016. While a few stocks have done better (NVIDIA (NVDA) certainly springs to mind), Avago has by and large doubled the returns of peers like Analog Devices (ADI), Cavium (CAVM), Texas Instruments (TXN), and Xilinx (XLNX). Better still, this is not just a multiple inflation story, as Avago has continued to deliver beat-and-raise performances that support confidence in the ongoing growth potential in areas like handsets and routing/switching.

I don't believe Broadcom is strikingly cheap, but then I wouldn't expect such a large, well-known, well-followed, and well-liked company to be trading at a substantial discount. I do believe ongoing content growth at Apple (AAPL), growth of products like Tomahawk and Jericho in the datacenter, and less appreciated opportunities like its custom ASIC business can continue to support story, and it's not a bad candidate if you find yourself in a “gotta buy something” frame of mind. After all, how often do you find a company that generates more than 60% of its revenue from products where it has 60% or better market share, growth rates above the underlying end-markets, and excellent margins?

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The Pieces Are In Place For Ongoing Success At Broadcom

A Marked Improvement At Turkcell Restores Some Confidence

Shareholders of Turkcell's (NYSE:TKC) ADRs might understandably feel as though they've been cursed. Even when the company is executing very well on its strategy and seeing an exceptional improvement in results, the adverse move in the Turkish lira chews up most of the benefit. Since my last piece on Turkcell around a year ago, revenue expectations for FY 2017 have risen around 13%, and the local shares are up better 20% … and the ADRs are up less than 10%. Strong dividend payments this year sweeten the pot a bit, but Turkcell remains the sort of stock where you feel like you have to cover your eyes and peek between your fingers whenever there's news.

While I'm admittedly being a little flippant about this situation, I do believe Turkcell's strong execution over the past year deserves respect. Likewise, I think the recent trend in performance lends a great deal more credibility to management's long-term strategic view of the company. There is still a lingering shareholder dispute to resolve and ample uncertainty about Turkcell's M&A plays (not to mention plenty of uncertainty about Turkey itself), but the shares look around 20% undervalued today, and that's enough to keep me interested.

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A Marked Improvement At Turkcell Restores Some Confidence

PRA Group Has Cyclical Rebound Potential, But Execution Must Improve

When I last wrote about PRA Group (NASDAQ:PRAA), I thought the shares of this leading debt collector where undervalued on an intrinsic/fundamental basis, but that the company had a lot of work to do to rebuild confidence and convince the Street that its issues where primarily cyclical and not structural. 

Although the shares are up more than 10% in the year since, it has not been a smooth ride – the company has seen a few sharp sell-offs after quarterly earnings reports, including the roughly 25% drop that has followed the latest second quarter report. Key metrics remain under pressure, and while there are several positive drivers that argue for better results in the future, the now-consistent inconsistency of results argues for a healthy “margin of safety” discount. PRA Group shares continue to look undervalued to me, but the company badly needs to start showing improvements where it really counts.

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PRA Group Has Cyclical Rebound Potential, But Execution Must Improve

BRF Has A Lot Of Work Ahead To Rebuild Credibility

The nearly 25% drop in BRF's (BRFS) share price over the past year is hardly the worst part of the story; I think you could argue that the market has been relatively merciful all things considered. While I've often noted (and lamented) BRF's above-average cyclicality, I thought management had a strategy in place that would see ongoing global growth in processed/packaged food lead to more sustainable results. I was wrong on many accounts, as the company's strategy is still unclear and inconsistently managed.

I do still believe BRF has a lot of potential, but “potential” is a word that has brought many investors to sorrow. Results should improve in the second half of the year, but management has a lot left on the “to do” list – including showing that they can manage the Brazilian business to generate growth and margins and that they can make the international operations less dependent upon commodity products. There is still upside into the high teens, but BRF management has a lot of work to do to rebuild the trust that would justify such a fair value today.

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BRF Has A Lot Of Work Ahead To Rebuild Credibility

Shifting Perceptions Around Allison Transmission

When I last wrote about Allison Transmission (NYSE:ALSN) in September of 2016, I thought the shares had decent appeal as a buy-and-hold ahead of a recovery in commercial trucks, an eventual recovery in energy, and ongoing growth in commercial automatic transmission penetration rates outside of North America. The shares have exceeded my expectations since then, up about 35%, as companies like Allison and Cummins (NYSE:CMI) have benefited from improving build rates in commercial vehicles.

At today's valuation, I'm more nervous about making a “buy” call. Allison has been logging nice beat-and-raise quarters, and I think Allison's management is quite good. What's more, energy and defense are still barely contributing to results right now and should offer more in the next few years, while OUS adoption of automatic transmissions remains a long-term driver. The “but” is the prospect of accelerating timelines for the adoption of electric vehicles in the commercial space – attention on this market has increased to a point where Cummins, Daimler, Volvo, Navistar (NYSE:NAV), and even typically-conservative PACCAR (NASDAQ:PCAR) have all come out with commentary on their plans/roadmaps for future EV's. Actual adoption of EVs in commercial applications like refuse hauling, metro transit, and straight Class 8's is likely to take many years, but I'd be careful paying up for a cyclical company that could be facing meaningful market erosion within the next decade.

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Shifting Perceptions Around Allison Transmission

Management Unreliability Has Soured The GEA Group Story, But Value Remains

Eighteen months or so ago, I thought GEA Group (OTCPK:GEAGY) (G1AG.DE) looked fully valued despite the long-term attractiveness of a leading company in the food/beverage automation and equipment market. Since then, confidence in management has soured due to an extended period of underperformance and questionable moves like a substantial guidance reduction only a couple of weeks after the 2016 Capital Markets Day. 

GEA Group's dairy processing end-market, which is responsible for around 20% of sales, is likely to struggle for another year or so, but farming, food/beverage, brewing, pharmaceuticals, and industrial markets (including oil/gas) are looking better. What's more, an activist investor is now involved in the shares, which may put a little more pressure on management to up its game. 

I do have some worries about recent cost overruns on new projects and self-inflicted inefficiencies, but I believe the food and beverage markets are attractive long term and I believe GEA Group can get back to double-digit returns on capital. Even with lower assumptions regarding revenue and margins (versus my last article) and a higher discount rate, these shares now look a little undervalued and worth a look from patient investors. 

Investors should note that GEA Group's ADRs don't offer optimal liquidity, so those investors willing and able to trade on foreign exchanges may want to consider buying GEA Group shares on its home exchange.

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Management Unreliability Has Soured The GEA Group Story, But Value Remains

How Much Better Can Lundbeck Get?

One of my core investment principles is to be slow to sell the shares of companies that have proven themselves to be well-run. Not only do the shares of well-run companies tend to garner higher multiples than might otherwise seem fair, these companies also have a knack for outperforming expectations over the long haul. 

All of that said, I am trying to find that boundary between patience, enlightened self-interest, and greed when it comes to H. Lundbeck A/S (OTCPK:HLUYY) (LUN.CO). The management of this Danish drug company has executed a masterful turnaround, and the shares are up around 37% over the past year despite multiple clinical disappointments and a very thin late-stage pipeline. There are still drivers that can support a higher price, and I am reluctant to part company with a well-run business, but at some point, even the best stocks can get expensive.

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How Much Better Can Lundbeck Get?

Another Quarterly Wobble At Multi-Color Ahead Of A Transformative Deal

Some industries make it very difficult to deliver consistent results every quarter, but I don't think that really explains the consistently inconsistent results at Multi-Color (LABL), as wobbles in quarterly growth rates have been blamed on acquisition-related hiccups (even though growth through acquisition has been a core driver for a long time), plant inefficiencies, contract changes, mix shifts, and so on. Multi-Color has likewise had a tough time showing consistent margin leverage, though the choppy trend has still been upward. 

Since my July 7 update, the company has announced the acquisition of Constantia Labels, a transformative deal, and announced another iffy quarter. Management's up-and-down execution increases the integration risks for such a large deal (not to mention the mix shift), but it is worth noting that it will be Constantia's CEO leading the company relatively soon. 

I've more or less made my peace with Multi-Color's inconsistencies, but Constantia doesn't add tremendous incremental value relative to the risk. That said, the shares do look 10% to 15% undervalued now and the company is an under-followed consolidator in a large, fragmented, and relatively recession-resistant industry.

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Another Quarterly Wobble At Multi-Color Ahead Of A Transformative Deal

Real Recoveries Are Flowing Into Parker-Hannifin's Numbers

Despite its reputation as a high-quality short-cycle play, not to mention one with significant self-help potential through business simplification and the integration of CLARCOR, Parker-Hannifin (NYSE:PH) has cooled off a bit since my last update. Although these shares have outperformed Eaton (NYSE:ETN), a fellow player in hydraulics, they've lagged other industrial stocks like Honeywell (NYSE:HON), Emerson (NYSE:EMR), and Illinois Tool Works (NYSE:ITW), as well as the S&P 500.

With fiscal 2017 in the books and improving trends across a large swath of its end-markets, Parker-Hannifin may be worth another look now. I'm worried about the overall health/valuation of the market, and I don't think Parker-Hannifin would be immune to a wide correction, but mid-single-digit revenue growth and mid-to-high FCF growth can support a fair value around $160, suggesting a high single-digit annual return even from these levels.

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Real Recoveries Are Flowing Into Parker-Hannifin's Numbers

Commercial Vehicle Skids On Surprisingly Weak Margins

The North American commercial truck market continues to improve and Commercial Vehicle Group (CVGI) had been having a great 2017 compared to other commercial truck suppliers like Cummins (CMI) and Allison (ALSN). Unfortunately, the company's efforts to restructure its operations (and reduce costs) and the recovery in off-road vehicle markets like construction have combined in an unexpectedly bad way, leading to meaningfully lower margins, a disappointing second quarter report, and a sharp drop in the stock.

The company's issues with its non-truck wire harness business aren't going to go away, and the company's 2017 margins are going to suffer for it. The bad news is that the company is going to miss out on some of the benefits of this recovery, and they're not going to get that money back. The better news is that the truck market is doing better than expected, the company is doing well in construction on a revenue basis, and the company has made good progress with operating cost reductions.

Commercial Vehicle's margin trouble does reduce the short-term fair value and likely will have the stock in the penalty box for a little while, but the decline does make the valuation more interesting again for investors with a longer-term orientation.

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Commercial Vehicle Skids On Surprisingly Weak Margins

Eaton Offers An Interesting Valuation, But A Lot Of Uncertainties

Despite a good overall run in the industrial space, Eaton (NYSE:ETN) hasn't really kept pace, as the shares have actually lagged the S&P 500 over the past year, not to mention peers like Parker-Hannifin (NYSE:PH), Honeywell (NYSE:HON), and Schneider (OTCPK:SBGSY) (Emerson (NYSE:EMR) has more or less traveled in step with Eaton). Eaton management has been relatively less upbeat than some in its peer group, and the company's organic growth has trailed its peer group for a while now. 

Eaton's above average cyclicality is an “is what it is” sort of thing, and I don't believe management is likely to undertake a major restructuring that would see it sell or spin off an entire vertical. Likewise, I don't like large-scale M&A is especially likely. Although the company should be in place to benefit from several improving end-markets, weakness in commercial construction and passenger vehicles is a concern, as well as uncertainty regarding U.S. tax and trade policy. Eaton shares look like a rare undervalued option in the industrial space (assuming 6% long-term FCF growth), but the lagging revenue growth could be a headwind for a while longer.

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Eaton Offers An Interesting Valuation, But A Lot Of Uncertainties

Accuray Looks Undervalued, But A Lack Of Execution Is A Longstanding Problem

Despite a growing database on the benefits of stereotactic radiosurgery (or SRS) with its CyberKnife system and significant improvements to its mainline Tomo platform, the unfortunate reality is that Accuray (NASDAQ:ARAY) has maintained its reputation as a company that comes up short of its guidance. Although management will hit its 5% gross order growth target for this year, fiscal 2017 will go down as another year where the company underperformed relative to management's initial expectations for the year. 

That's a sour way to begin an article, but the reality is that Accuray shares are down about 10% or so from the time of my last update, and the company continues to struggle to execute and to drive wider adoption of its core radiation oncology platforms. I do believe fair value is close to $6, and that there is considerable upside potential if management can leverage the advantages of its platforms into real sales, but I have been involved in this story for a long time, and it is getting harder to believe that “if” will become a “when”.

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Accuray Looks Undervalued, But A Lack Of Execution Is A Longstanding Problem

FirstCash Management Has Several Opportunities To Execute And Drive Value

When I last wrote about First Cash (FCFS) in October of 2016, I thought the shares offered good value despite some elevated risks. The shares have since risen around 25%, helped in no small part by a stronger Mexican peso and a solid recent trend in consumer health in Mexico.

Looking ahead, there are multiple areas where management could add value, but the move in the share price makes execution on these items much more critical for ongoing outperformance. Organic expansion into Colombia is likely to be measured at first (though management would like to acquire if possible), and the process of wringing synergies from the Cash America deal is not likely going to show much until 2018 at the earliest. First Cash shares should still be able to generate double-digit total annual returns from here (provided the company hits my high single-digit FCF growth target), but this remains a riskier-than-average name with significant exposure to Mexico's economy and currency.

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FirstCash Management Has Several Opportunities To Execute And Drive Value

Manitex Still On Its Bumpy Road To Recovery

Maybe comparisons to Icarus are a little unfair to Manitex (NASDAQ:MNTX) management, but the company has definitely paid a price for its former reliance on the oil/gas sector and using debt to fund a significant M&A expansion program during the U.S. onshore energy boom. Now, though, the company is largely through a stark restructuring effort that has seen management refocus around its core boom truck and knuckle-boom crane product lines.

The shares are about 10% since my last update, boosted by a strong positive reaction to second quarter earnings, but the shares have been pretty volatile in the meantime, with the stock price heading up above $9 earlier this year on optimism around restructuring and market recoveries. While Manitex's core markets remain skittish and volatile, it looks as though older used equipment has been largely absorbed, and the table is set for a return to growth. I don't expect a V-shaped recovery (even if a comprehensive federal infrastructure bill is passed and signed), but I do think Manitex can grow at a long-term rate in the mid-single digits and the shares can still perform as the recovery story unfolds and matures.

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Manitex Still On Its Bumpy Road To Recovery

Neurocrine Biosciences Off To A Good Start With Ingrezza

As I've said before, quarterly earnings reports from pre-revenue biotechs are of only limited value, though they can provide some worthwhile insights and detail. Neurocrine (NBIX) is technically no longer pre-revenue, though, and the company's first commercial sales of Ingrezza suggest a good start to this important new drug. What's more, Neurocrine management laid out a credible path for ongoing development of Ingrezza for pediatric Tourette's after a disappointing Phase II result earlier this year, not to mention updates on other early-stage clinical programs. While I suppose I'm a little more comfortable with the Ingrezza launch now, I'm not changing any of my basic modeling assumptions, and my fair value remains in the mid-$60s.

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Neurocrine Biosciences Off To A Good Start With Ingrezza

"On Target" Good Enough For Wright Medical Today

Buyout speculation can do good things for a stock's price in the short term, but investors can be fickle with that sort of speculation. Between off-and-on optimism regarding a buyout and a disappointing first quarter, Wright Medical (WMGI) hadn't had the easiest run since my last update. Today the shares are up nicely in the wake of second quarter earnings, though, as investors are apparently a little more comfortable that their worst-case scenarios for the year are less likely to materialize.

The upper $20's to low $30's have long been a tricky place for me with respect to Wright Medical shares. I have no disagreement that these shares could easily fetch more in a buyout, nor that the market will sometimes pay rich multiples for fast-growing med-tech stocks, but core fundamentals-driven valuation seems more comfortably in the high $20's. The second half of this year should see accelerated revenue growth and improving margins, though, so I wouldn't ignore the possibility that earnings momentum draws more positive attention to the shares.

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"On Target" Good Enough For Wright Medical Today

Lexicon Likely Stuck For A Little While

One of the realities of biotech investing is that share prices can linger in no man's land when there's not much news to fire up the imaginations of investors. In the case of Lexicon Pharmaceuticals (NASDAQ:LXRX), a seemingly good initial launch of its first drug Xermelo is being greeted with little more than a "oh, that's nice … what else ya got?" by the market. What's more, with clinical data on sotagliflozin ("sota") more or less in hand for the Type 1 indication and a long wait for Type 2 data and/or FDA action, there's not a lot to really get the excitement going.

Lexicon shares have gone basically nowhere since my last update even though the biotech sector has done pretty well. I don't really see much to blame Lexicon for, as the clinical data that have been presented have been pretty consistent (if not a little better than expected) and the launch of Xermelo has gone well. Even so, with not a lot of mind-changing data on the way soon, it may take some patience to hang on through these doldrums. I continue to believe that Lexicon shares ought to trade in the high $20s on the basis of the value of both Xermelo and sota, but this isn't a biotech with the sort of sizzle that biotech investors often crave.

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Lexicon Likely Stuck For A Little While

ABB Has To Be Better Than This

When you find yourself slipping into the role of an apologist for a company, that's a good time to revisit whether owning the shares still makes sense. Such is the case with ABB (NYSE:ABB), as this European industrial conglomerate has managed to deliver “not good enough” performance for longer than I'd care to acknowledge. ABB's five-year, three-year, and one-year performances have been better than Emerson (NYSE:EMR), but not up the standards set by Siemens (OTCPK:SIEGY) and Rockwell (NYSE:ROK), and Schneider (OTCPK:SBGSY), too, has seemed to have its house in better order of late. Granted, these are blunt comparisons of businesses, but it does support the idea that ABB has room (and need) for improvement.

There are still bullish arguments to support ABB. I believe the company is underway with plans to make its automation business(es) even more competitive, and I think the long-term potential for electric vehicle-related charging and infrastructure equipment is meaningful. Moreover, the company has the liquidity and flexibility to execute meaningful deals if management wishes to go that route. I still believe 3%-4% long-term revenue growth is plausible (although my 5% to 6% FCF growth rate is looking more tenuous), supporting a fair value around $25.

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ABB Has To Be Better Than This

JPMorgan Doing Well In A Still-Challenging Environment

The love affair between Wall Street and JPMorgan (NYSE:JPM) has cooled slightly since my last update on the company, but only slightly, as the shares have risen 7% since mid-January – a little less than the S&P 500 and worse than Citi (NYSE:C) and Morgan Stanley (NYSE:MS), but still better than regional banks like U.S. Bancorp (NYSE:USB) and Wells Fargo (NYSE:WFC), not to mention banking indices like the KBW Bank Index.

Not everything is going perfectly, as net interest margin leverage is still modest at best across the sector and JPMorgan saw rare underperformance from its trading and i-banking operations. But JPMorgan is posting excellent loan growth and good expense leverage, and still has room to grow across businesses like consumer and business banking, as well as asset/wealth management and other fee-generating services like treasury and payments. With good near-term performance and a credible ramp toward 15% returns on tangible common equity, a share price in the low $90s is not unreasonable and still leaves the door open for high single-digit to low double-digit annual returns.

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JPMorgan Doing Well In A Still-Challenging Environment

BB&T Enjoying A Little More Of What It's Arguably Due

It hasn't always been easy to be a patient shareholder of BB&T (NYSE:BBT) as market perception and some of management's own decisions have occasionally gotten in the way of the stock's performance. Over the last six months since my last update, though, BB&T has been outperforming many of its peers (PNC (NYSE:PNC) one of the notable exceptions) as the bank seems better-positioned for growth than before and investors come back to appreciate its quality. 

There aren't many bargains among the larger banks, and BB&T is not an exception. BB&T, U.S. Bancorp (NYSE:USB), and PNC all look to me like they are more or less in the same valuation bucket, with Wells Fargo (NYSE:WFC) looking a little undervalued but for good reasons. Should the current administration follow through and deliver on earlier hopes of reduced regulation and taxation for the sector, there could be more upside than I expect, but a fair bit of that already seems worked into the price. I think BB&T is more likely to outperform operationally than many of its peers, but I'd call it more of a high-quality hold with a total expected return in the high single digits.

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BB&T Enjoying A Little More Of What It's Arguably Due

A Year Later, It's Still 'Hurry Up And Wait' For Roche

I try not to spend too much of my writing time on well-known, well-covered names like Roche (OTCQX:RHHBY), but I do own the shares and it has been a year to the day since I've last written on this giant Swiss pharmaceutical company.

I thought the company was more or less in a holding pattern a year ago, and the shares have gone almost nowhere (on a net basis) since then, as positives like the launch and early acceptance of Ocrevus and the promising clinical data on emicizumab/ACE910 in hemophilia has been offset by progress with competitive biosimilars, mixed results from next-gen oncology compounds, and worries about lead immuno-oncology drug Tecentriq.

It's tempting to say, “Roche is Roche… and it'll all just work out in the end.” This is a well-regarded pharmaceutical company with a deep internal R&D effort that has not gone to the same excesses as some of its peers in attempting to cost-cut its way to prosperity. At the same time, we're all still learning as we go when it comes to immuno-oncology, and it is tough to say how Roche will stand against the likes of Merck (MRK), Bristol-Myers (BMY), and many others in the years to come.

I do still believe Roche is undervalued, but major upcoming updates (like Tecentriq in first-line non-small cell lung cancer) in the second half of 2017 and on into 2018 are key to the modeling assumptions that drive the fair value.

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A Year Later, It's Still 'Hurry Up And Wait' For Roche

3M Among The Crown Jewels With A Smudge

This has been an interesting earnings cycle. A lot was expected of the industrial sector, and although the companies largely came through with good reported organic revenue growth and EPS relative to expectations, more often than not the market reactions were negative. That was certainly true for 3M (MMM) which saw rare pricing weakness, minimal margin leverage, and comments from management indicating that price would be traded off for market share in the quarters to come.

3M wasn't undervalued going into earnings, and you could argue that it had been elevated to one of the “crown jewel” holdings in industrials (alongside names like Illinois Tool Works (NYSE:ITW) and Honeywell (HON), among other candidates). While none of what 3M revealed about the second quarter changes my long-term view, it's hard to argue this is a must-own given the implied total return and the option to go with (relatively) cheaper names like Danaher (DHR) or Fortive (FTV).

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3M Among The Crown Jewels With A Smudge

FEMSA Plugging Away With Its Empire-Building

FEMSA (FMX) has gotten tossed around a bit since my last update, as this large Mexican consumer products conglomerate has weathered a rattled Mexican stock market (and currency) as well as more company-specific concerns about volumes and margins. Still, the shares are up a bit over that period and still offer a little upside for patient long-term shareholders. As I said in that prior piece, the valuation isn't at a can't-miss level (or at least for investors with shorter investment horizons), but the long-term potential of this company makes it worth considering on the pullbacks.

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FEMSA Plugging Away With Its Empire-Building

Microsemi Delivering On Its Execution Promises

In my opinion, Microsemi (MSCC) is doing a good job of laying to rest whatever lingering arguments there were from bears that this company is/was “just” a serial acquisition story. Since the large PMCS deal, Microsemi has been executing on its synergy/cost-cutting targets, and the company continues to march toward its long-standing 65/35 gross margin and operating margin goals. What's more, the company is doing a decent job on revenue as well, with new products and market share gains helping to solidify the bull case.

Microsemi shares haven't done very well since my last update (down about 7% and meaningfully underperforming SOX), but then, I did think the share price was demanding back in January and that buyout expectations were a big part of the story. While a buyout of Microsemi is still a possibility (and perhaps even likely depending on your time frame), the quarter-by-quarter execution story isn't going to be so exciting, and particularly so when the company isn't leveraged to buzzy areas of the chip sector today like autos and IoT. With the shares now offering a little upside relative to my fair value estimate, they could be worth a look and particularly so, if the market/shares were to sell off again.

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Microsemi Delivering On Its Execution Promises

Danaher In Some Doldrums

I closed my last piece on Danaher (DHR) by saying that I expected the shares to remain in “buy-side purgatory” for a little while, and so they have. The shares are down about 1% over the last almost-three months, and this latest quarterly update was once again not everything that investors wanted or have come to expect from this conglomerate.

I have lingering concerns that Danaher's “zig when others zag” strategy will have some near-term consequences; Danaher is much more of a life sciences/health care company than in the past, and there really isn't the underlying market recovery “oomph” here that there is in some parts of the “grease and gears” industrial world. That doesn't make Danaher a bad company, though its lagging performance in diagnostics and dental is becoming a little more concerning. Danaher is one of the very few companies in its comp group that seems undervalued (assuming I'm not overestimating future growth), and while the short-term momentum is lacking, the valuation makes it worth another look.

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Danaher In Some Doldrums

Illinois Tool Works Finding It Harder To Clear A Rising Bar

The great post-election melt-up has continued, but the pace seems to be slowing and expectations have risen to a level that many companies are finding more challenging to satisfy. Illinois Tool Works (ITW) has seen its share price rise about 3% since my last update, lagging the S&P 500 only slightly, and keeping pace with most of its large peers (Honeywell (HON), Stanley Black & Decker (SWK), and 3M (MMM)) apart from Dover (DOV).

As I see it, the story on Illinois Tool Works remains more or less the same. The company is unquestionably a high-quality industry conglomerate, but it's not heavily leveraged to recovering markets like oil/gas and important end-markets like autos are slowing. A very strong operator already, I think Illinois Tool Works will be hard-pressed to drive substantial additional restructuring benefits, but management isn't going to stop trying. In a “gotta buy something” market, I suppose Illinois Tool Works isn't the worst idea, but it's hard for me to like the share price outside of a relative value approach.

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Illinois Tool Works Finding It Harder To Clear A Rising Bar

Will Turbulence In Mexico Mean A Bumpy Ride For OMA?

The last year or so has had its ups and downs for Grupo Aeroportuario del Centro Norte (OMAB), also known as “OMA”. The prospect, and then reality, of Donald Trump's victory in the U.S. Presidential election took away almost a third of the stock's value in late 2016 despite healthy traffic numbers, as investors worried that this Mexico-centric airport operator would suffer disproportionately from a change in U.S.-Mexico relations.

Since then, a lot of optimism toward Mexico and Mexican equities has returned, lifting the shares back to within 10% of their all-time high. Still, while I do believe OMA is a well-run airport operator, I don't think an “all clear” is entirely reasonable at this point. Mexico's economy is doing pretty well, true, but rates are rising, there is still political/trade risk with the new U.S. administration, Mexican airlines have been adding quite a bit of capacity, and next year will see a new election cycle in Mexico.

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Will Turbulence In Mexico Mean A Bumpy Ride For OMA?

Nordic Semiconductor's Renewed Growth Has Melted Some Of The Skepticism

It has been an interesting twelve months for Nordic Semiconductor (OTCPK:NDCVF) (NOD.OL), a small Norway-based fabless semiconductor company focused on low-power wireless chip solutions.

During 2016, Nordic Semi had a poor run of quarterly results and saw a peak-to-trough run from the spring of 2016 to the spring of this year that took about 40% off the share price as investors worried about market share losses to rivals like Texas Instruments (TXN) and concerns about whether this small company with a relatively limited line-up could continue to compete effectively with larger players like TI, Dialog (OTC:DLGNF), Qualcomm (QCOM), Microchip (MCHP), Silicon Labs (SLAB), and the many other plays in low-power wireless.

The last two quarters have been stronger, though, and the shares have regained a fair bit of the ground lost in 2016 and early 2017. While wearables and consumer electronics remain tough markets, the company is seeing strong growth in its building/retail business and will be sampling its new low-power cellular IoT chips before the end of the year.

Nordic Semi doesn't look especially cheap on the fundamentals, but that's often the case with growth tech stocks; if Nordic can deliver high-teens growth for a few years and keep its margins up, the shares should continue to rise. That said, investors should note that the U.S.-listed ADRs are not very liquid; investors who can trade on foreign exchanges will find better liquidity on Nordic Semi's home market.

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Nordic Semiconductor's Renewed Growth Has Melted Some Of The Skepticism

Harsco Reaping The Benefits Of Restructuring, Even As Energy Markets Remain Tough

Credit where due – Harsco's (HSC) management continues to deliver on its turnaround plans and this multi-armed industrial company is now looking toward growth again in a few of its businesses. I underestimated the upside that was still left in these shares a year ago; while I thought a fair value in the mid-to-high teens was possible if the company executed well, I didn't think shareholders would get a 50% return in such a relatively short time. Granted, some of that upside has come from the overall market melt-up, but I do believe Harsco has outperformed its targets.

What comes next has a lot to do with macro factors that are outside of management's control. I still believe that traditional steel mills in North America and Western Europe don't have a bright long-term future, but conditions have improved in the near term and Harsco has been turning its attention to other markets like China. What's more, there are opportunities to expand this business, as well as expand and diversify the Industrial segment and drive better margins from the Rail operations. I wouldn't expect another 50% move over the next twelve months, but so far Harsco is proving the point that well-constructed turnaround plans can exceed initial expectations, and particularly so when improving end-markets help the cause.

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Harsco Reaping The Benefits Of Restructuring, Even As Energy Markets Remain Tough

The Growing Pains At HollySys Are Real, But The Potential Is Worthwhile

Growth is seldom as smooth or easy as investors want it to be, and that has certainly been true with Chinese automation and control systems company HollySys (NASDAQ:HOLI). Competing with the likes of ABB (NYSE:ABB), Honeywell (NYSE:HON), and Siemens (OTCPK:SIEGY) is hard enough all on its own, but HollySys has to overcome the added burden that even other Chinese companies don't really trust domestic suppliers in industrial automation. Making matters worse, HollySys's train control business is largely tied to the unpredictable and inconsistent ordering habits of China Railways Corporation (or CRC).

HollySys shares have fallen about 15% since I last wrote about the company, as HollySys did in fact see the prolonged slowdown in automation and train controls that concerned me then. Although the market took that development badly, my long-term outlook really hasn't changed that much. I continue to believe that as HollySys matures it will deliver revenue growth around 6%-7% and double-digit FCF growth sufficient to support a fair value in the low $20s.

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The Growing Pains At HollySys Are Real, But The Potential Is Worthwhile

Kirby Will See A Challenging 2017, But Better Days May Be Coming

Say what you will about Kirby (NYSE:KEX) and its historically robust valuation metrics, but the shares have at least held up despite operating conditions getting even worse and estimates heading down. Since my last update, the shares are more or less flat despite ongoing industry-wide weakness in barge utilization and pricing, and there may be some tentative signs of bottoming out in two of its key markets.

The Street has historically rewarded Kirby's significant scale and respectable operating history with rich multiples, but there could still be some upside here if 2017-2018 does indeed mark a low point in the cycle. Although Kirby doesn't have as much leverage to potential chemical capex expansion as you might hope, the company should nevertheless benefit from volume growth, while an expanded DES business seems poised to benefit from a recovery in U.S. onshore oil/gas activity.

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Kirby Will See A Challenging 2017, But Better Days May Be Coming

Chart Industries Getting Back On Track

Although it is much too soon that the LNG market opportunity is really coming back, Chart Industries (NASDAQ:GTLS) has been strong over the past year (up almost 40% from the time of my last article). Attributing performance always involves some guesswork, but I believe Chart has done well due in part to optimism over the new administration (as it pertains to tax reform and supporting U.S. energy exports), growing confidence in an industrial recovery, optimism that LNG activity is bottoming out, and at least some recognition of self-help efforts at the company.

Chart Industries appears priced to generate a long-term return in the 9% to 10% range, which isn't bad considering that that leaves some upside from a more bullish “strong LNG” scenario that could potentially add many hundreds of millions of dollars to the long-term revenue outlook. Although management has been sounding more upbeat of late, I'd caution readers that these shares are have been more volatile than average in the past, as the market has swung wildly from optimism to pessimism over the outlook for expanded LNG-related business.

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Chart Industries Getting Back On Track

A Better Story Taking Shape At FormFactor

Leading probe card company FormFactor (NASDAQ:FORM) has had a mixed run since I last wrote about the company in August of 2016. While most companies tied into the equipment side of the semiconductor sector have done well (Applied Materials (NASDAQ:AMAT) is up almost 60% and KLA-Tencor (NASDAQ:KLAC) is up more than 35%), FormFactor's 16%-plus move is less inspiring and particularly so after a 20% decline since early June.

Looking ahead, though, I believe there are some reasons to consider this name. Although I would have preferred to see Cascade's management running this company, the combination of FormFactor and Cascade is still a “stronger together” situation, and I expect the company to log mid single-digit revenue growth on the back of expanding use of advanced packaging and greater demand for chips in mobile and auto applications. FormFactor's ability to execute and generate sustained growth has yet to be proven, but mid-teens operating margins could support a fair value in the low-to-mid teens.

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A Better Story Taking Shape At FormFactor

Multi-Color Needs To Get Back On Offense

Multi-Color (NASDAQ:LABL) has done pretty well since my last update on the company. The shares are about 25% since August of 2016, trailing industry leader CCL Industries [CCL.TO] (OTC:CCDBF) by a few points, but still outperforming indices like the NASDAQ and Russell 3000 in a generally strong tape for smaller companies.

Not all of this performance has been entirely merited by recent performance. While the last quarter (the company's fiscal fourth quarter) was surprisingly strong, that was a welcome relief after several quarters of lackluster performance related in part to difficulties managing growth. What's more, the company has noticeably slowed its growth-by-acquisition strategy to address some of those issues.

Wall Street is forward-looking, and I believe there are credible arguments supporting better results in the future for Multi-Color. Management seems willing (if not eager) to get back to M&A, and it seems as though external compliance and legal costs will no longer be as significant of an issue. What's more, management has been attending to operating efficiency issues, and I believe there is room to take operating margins into the mid-teens over the next 10 years.

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Multi-Color Needs To Get Back On Offense

With Stryker, One Of The Best Always Seems To Get Better

Med-tech giant Stryker (SYK) isn't going to lead the pack every quarter or every year, but it's hard to argue with the long-term performance of this company. Better still, the company has never been one to rest on its laurels, with management always looking for ways to improve its existing businesses and branch out into adjacent markets.

Stryker doesn't look especially cheap right now, but that's about as surprising as Wednesday following Tuesday given the company's almost four-year run of mid single-digit organic revenue growth, its solid free cash flow generation, and the prospects to improve margins and drive better results from areas like robotics, imaging, neurovascular, and spine. I'm not an enthusiastic buyer at this price, but Stryker's quality gives it a near-permanent spot on my watch list, as the shares do occasionally sell off and come back down into a buyable price range.

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With Stryker, One Of The Best Always Seems To Get Better

New Opportunities Can Continue To Drive The Old Dominion Story

Old Dominion (NASDAQ:ODFL) is a good example of why it pays to keep an eye on good companies even when their share prices/valuations get a little steep. I thought Old Dominion looked interesting last August amid a marked slowdown in the industry (including the company's first year-over-year declines in tonnage in seven years), but the nearly 40% gain in the share price since then was even more than I had expected. While that is a strong performance next to ArcBest (NASDAQ:ARCB) (not to mention truckload carriers Heartland (NASDAQ:HTLD) and Knight (NYSE:KNX)), I will note that both Saia (NASDAQ:SAIA) and XPO (NYSEMKT:XPO) have done better (though XPO isn't a pure LTL trucking company).

Old Dominion is back to what I would call its more typical valuation situation – relatively expensive compared to its likely medium/long-term earnings and cash flow prospects unless you are willing to give a relatively generous premium for its superior quality. In the “gotta own something” world of institutional investing, though, I can appreciate why Old Dominion is popular now, as the company's performance and the stronger underlying recovery are supporting upward estimate revisions. What's more, Old Dominion's established strategic advantages should enable the company to continue gaining share in the competitive trucking space.

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New Opportunities Can Continue To Drive The Old Dominion Story

Air Transport Services Group Seems To Have Found A New Cruising Altitude

“It's different this time” is probably one of the most expensive phrases in the history of investing (although “what could possibly go wrong?” might be a close second), as it often represents a period of peak optimism that lures in investors right before the company/industry snaps back to reality. On the other hand, failing to notice and accept a new fundamental reality can also be pretty expensive, as it means you may stand forever on the sidelines watching a great story go by.

That brings me to Air Transport Services Group (ATSG) – a company and stock that I have liked for some time that may actually be seeing a fundamental transformation in its business. While I liked the shares a year ago, I didn't really expect another 50%-plus move in the shares. The company's bull case has materialized, though, as demand for its freight aircraft has picked up and the company continues to build out its fleet.

And now? Historically, this company has had a hard time earning attractive free cash flow and its EBITDA performance has been erratic. I'm nervous about assuming that the next 10 years will be a radical departure from this, but the company's relationship with Amazon (AMZN) is a major driver of change, and the company's e-commerce venture in China could prove very lucrative. I still consider this a high-risk investment (this type of business tends to have a lot of competition, a lot of debt, and relatively low returns), but a fair value in the low $20's does not seem crazy to me today.

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Air Transport Services Group Seems To Have Found A New Cruising Altitude

As Company's Rebuild Their Supply Channels, Universal Stainless & Alloy Products Is Coming Back To Life

I thought Universal Stainless & Alloy Products (USAP) looked undervalued back in the fall, but little did I suspect (or expect) that the shares would shoot up more than 80% in only about nine months. While I did expect service centers to look to replenish their inventories in order to be better-positioned for growing aerospace deliveries and recoveries in markets like oil/gas and heavy industry, the market seems to be much more inclined now to believe in a sharper recovery trajectory.

I have shifted my recovery expectations ahead by more than a full year, lifting my fair value estimates, but I'm hesitant to go too far too fast. Expectations for aerospace deliveries aren't exactly swelling right now, and sell-side analysts have been trimming back their expectations for the steepness of the oil/gas recovery. Universal Stainless still has places where it could outperform (better expense control, better mix of higher-value alloys), but these shares have pretty much trounced peers and comparables like Allegheny (ATI), Carpenter (CRS), and Haynes (HAYN) over the last year and its going to take a significant improvement in financial results just to support this level of valuation.

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As Company's Rebuild Their Supply Channels, Universal Stainless & Alloy Products Is Coming Back To Life

Globus Medical Has Wobbled A Bit, But Still On Good Footing

Since I last wrote on Globus Medical (GMED) in March of 2016, “second tier” spine names have enjoyed a good run. K2M (KTWO), which I've liked more than Globus, is up a strong 85% and NuVasive (NUVA) is up more than 60%, but Globus too has rewarded my belief that it was undervalued with a roughly 46% upward move in the shares. What's more, given that Globus didn't exactly cover itself in glory in 2016 with respect to its organic revenue growth performance, I believe at least some of this move is a sector-wide shift toward a more positive view on the spine market and share-takers within that market.

Looking ahead, I don't see Globus as particularly cheap, but that's an increasingly common issue. I think Globus is back on track with respect to performing in line with its guidance, but I do worry that management could be stretching itself a little thin between its core spine business, its foray into robotics, and its new trauma business. I do still see opportunities for Globus to grow and gain share and it's not a bad hold at these levels, but I'd be tempted to wait in the hope of a pullback before building a substantial new position.

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Globus Medical Has Wobbled A Bit, But Still On Good Footing

Global Logistic Properties Could Be Gone Soon

As e-commerce grows, particularly in China, it is leading to significant changes in logistics. This includes demand for warehouses, where only about 20% of the installed base in China is sufficient to serve the needs of modern logistics systems. Global Logistic Properties (or "GLP") (OTCPK:GBTZY) is among the largest developers and operators of warehouses in the world, with a very strong leading presence in China, as well as the #1 and #2 positions in Japan and the U.S., respectively (and a leading, albeit small, portfolio in Brazil).

Once a relatively popular name, GLP shares lost close to half their value from mid-2014 to early 2016 as the Chinese weakened on softer consumer demand and growing supply. The share price started to really recover in late 2016 on news that the company was undertaking a strategic review and now is near a "put up or shut up" point for potential strategic bidders. I would be surprised if management accepted a bid below S$3.10/share, or about $23.65 per ADR - offering the prospect of a decent near-term return. While there is definitely a risk that this review process will not lead to a bid and that investor worries about still-weak conditions in China will lead to another sell-off, I believe the fundamentals can support a longer-term fair value of (or above) S$3.25/$24.50.

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Global Logistic Properties Could Be Gone Soon