Critical Therapeutics Worth $1
Critical Therapeutics, Inc. (CRTX) is a biopharmaceutical company focused on the discovery, development and commercialization of products for respiratory, inflammatory and critical care diseases. The company has two products, Zyflo and Zyflo CR for asthma, on the market. With the completion of the restructuring and the signing of co-promotion agreement with Dey LP, we believe both top-line and bottom-line will improve in the coming quarters.
However, sales of Zyflo/Zyflo CR fell short of our expectation. The strategic shift announced in late 2007 also put the company in an uncertain state. Therefore, we maintain a Hold rating for CRTX shares.
We note than sales of Zyflo CR/Zyflo did improve in 1Q08, though they fell short of our expectations. We are pleased to see the increase of prescription volume in the last three quarters due to the combined efforts of both Dey and Critical Therapeutics. We think the strategic shift and management change have a negative impact on the performance of Zyflo/Zyflo CR. Our price target is $1, which represents a market cap of $43 million.
Embraer Air Enters Turbulence
We are keeping our Sell recommendation on Embraer Air (ERJ). In our view, Embraer 170/190 line of 70-110 seat jets should continue to be well-received by aviation customers. But this will be partially offset by the growing concern regarding the low-cost carriers plan to add too much capacity too quickly to the global air transport system.
The company's first quarter 2008 results were positive; however, gross margin continues to decline. We remain concerned over the strength of the Brazilian real and its effect on the company's competitiveness. Continuous increase in oil prices and the difficult economic environment in the U.S. remains a threat to the whole airline industry.
ERJ currently trades at 16.1x our estimate earnings for 2008, which is above the industry mean and median. We anticipate that over the near-term, Embraer will underperform the broader emerging market indices. Accordingly, we are keeping our current Sell recommendation on ERJ, with a six-month target price of $34.50, around 13.5x our estimate of 2008 earnings per ADR, in line with the industry mean and close to the S&P average.
Chinese JOBS Still Impressive
On May 13, 51job (JOBS) announced first quarter results. Its net profit margin declined due to higher sales & marketing expenses and a higher tax rate. Its EPS missed the market consensus, while revenue exceeded expectations.
51job continues to have the highest brand recognition both in the online and offline recruiting market in China. Moreover, China's prosperous economy will continue to boost the recruiting market. Overall, we believe 51job is well positioned to leverage this market opportunity in China. Therefore, we are maintaining the Buy rating for the stock.
Moreover, China's prosperous economy will boost the recruiting market. Based on our estimate for fiscal year 2008 earnings per ADS, the stock is trading at 33.4x, which is lower than the industry mean. Based on our estimate for fiscal year 2009 earnings per ADS, the stock is trading at 20.0x, which is much lower than the industry mean.
