Put Dollars into Dollar Financial

Dollar Financial's (DLLR) 3Q08 (ended March 31, 2008) diluted earnings of $0.56 per share, were two cents short of our estimates as well as the consensus. Consolidated revenues were up 26.4% and net income increased by 18.3%, based on strong growth in Canada and the U.K. markets. The bottom-line results were partly offset by higher store and regional expenses, reflecting continued expansion and integration of recent acquisitions.

The company acquired 15 stores and opened 14 de novo stores during the quarter. After reviewing the results, we have adjusted our FY08 and FY09 estimates. Relative valuation looks quite attractive at present and therefore, we maintain our Buy recommendation on the shares of DLLR.

Currently, DLLR trades at 7.8x the consensus forward estimate (versus 9.0x at the time of our last report), a 26% discount to the peer group median (versus a 3% premium at that time). On a price-to-book basis, the shares now trade at 18% premium to the peer median, versus a 92% premium in March. Relative pricing looks attractive on a P/E-to-growth (PEG) basis, using the consensus forward estimate and the consensus long-term growth rate.

Further, as DLLR derives a significant share of its earnings from outside the U.S., we expect the company to benefit in the coming quarters from the stronger economic trends in those countries, coupled with continuous weakness in the US dollar. We also see better growth prospects in Canada with improving visibility in the regulatory environment there.

Cleveland BioLabs Priced Nicely

We advise investors to accumulate shares of Cleveland BioLabs, Inc. ( CBLI) as the specialized company has a rich pipeline of clinical candidates, unique positioning, lack of competition for any product and looks attractive at current levels.

The company uses the unique approach of apoptosis (a form of programmed cell death in multicellular organisms) for treating cancer, tissue protection and radiation protection that targets niche markets. Protectan CBLB502, for the treatment of gastrointestinal effects of acute radiation syndrome, has a market potential of over $300 million in the U.S. alone.

The stock plummeted in January 2008 on news of the U.S. Department of Defense rejecting Cleveland's bid for a contract. Despite the setback, we continue to believe that CBLB502's ability to prolong survival and treat GI radiation syndrome coupled with its portability, lack of refrigeration and usability in battlefields point to an enormous market potential for the compound.

We expect the company to launch one of its Protectan or Curaxin series of compounds in 2010. We maintain our Buy rating and target price of $6 on CBLI on our conviction in the significant long-term prospects of the company.

The Sweet Smell of Methanex

Methanex (MEOH) is the world's largest producer and marketer of methanol.