Amdocs Retains a Buy Rec

We maintain our Buy recommendation and the same valuation target for Amdocs Limited (DOX), a leading provider of CRM and billing software for telecom carriers, as the company will shortly declare third quarter (ended June 30) fiscal 2008 financial results. We believe the long-run fundamentals for the company remain strong as Amdocs continues to benefit from large transformation projects at many telephone carriers requiring converged and consolidated network solutions.

Amdocs maintains a healthy financial position and strong order backlog. The current valuation of the stock, near its 52-week low, is also considered to be more favorable. However, possible near-term business fluctuations and the announced reduction of subscribers at one of its major customers, Sprint-Nextel, may offset Amdocs revenue as it depends on the number of subscribers served. Also, the company marginally reduced its full fiscal 2008 financial outlook.

Amdocs is currently trading at 12.9x our estimate for fiscal year 2008 earnings. This is at a premium to the peer group average but a discount to the forward S&P 500 average. With respect to other selected valuation metrics, the stock is also trading at a premium over its peers.

However after adjusting $3.33 net cash/diluted share, Amdocs is trading at a modest 11.37x P/E to our fiscal 2008 earnings estimate. We set a six-month target price of $35 based on a net of cash forward P/E ratio of 14.27x to our estimate for fiscal 2008 earnings plus $3.33 net cash/diluted share.

Brazilian Unibanco Still a Buy

We are retaining our Buy rating on Unibanco Uniao de Bancos Brasileiros S.A. (UBB), the fourth largest private bank in Brazil. UBB represents a good value relative to its strong growth prospects and also vis-à-vis-Brazilian peers.

UBB will report second quarter results on August 8. We are raising our EPGDS estimates to $13.00 from $12.75 for 2008 and to $15.00 from $14.75 for 2009, due to a change in our foreign currency assumptions related to depreciation of the US$ against the Brazilian R$.

UBB posted first quarter earnings before nonrecurring items of R$741 million, up 28% year over year. Going forward, UBB should benefit from a good increase in net interest income on strong growth in the earning asset portfolio, although the shift to lower margin, higher quality assets should reduce the margin, but also help loan loss provisions. We believe the dividend is safe.

At its current price, Unibanco trades at 9.3X the consensus 2008 earnings estimate and 8.2X the 2009 consensus estimate. This is near the industry median 2008 and 2009 P/E ratios of 9.5X and 8.0X, respectively, also based on consensus estimates.