Current relative pricing continues to look attractive on a P/E-to-growth (PEG) basis, using the consensus forward estimate and the consensus long-term growth rate. TCBI's PEG ratio on this basis is 1.09, 33.9% discount to the 1.65 median for the peer group (versus a 36% discount previously). Our six-month target of $17.50 per share equates to 1.5x our projected book value six-months out. This target price also equates to 13.4x of our 2008 projected earnings per share. With no dividend to supplement the return, this equates to a 4.2% expected return over that period. We continue to view the shares of TCBI as a Hold. 

Competition Weighs on Linktone

Linktone, Ltd.'s (LTON) revenue has increased sequentially for two consecutive quarters and exceeded market expectations, which indicates the operating environment for wireless value-added service has been improved. The Chinese wireless value-added services market has seen increasingly intense competition, and the policy changes and regulation changes have great effects on Linktone's business.

However, Linktone could capture market opportunities arising from the anticipated launch of 3G and eventually mobile television and flash media products. Therefore, we are maintaining our Hold recommendation on Linktone's stock.

On March 27, 2008, Linktone announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2007. For the fourth quarter, the company recorded revenue of $16 million, compared with $13.3 million in the third quarter of 2007 and $14 million in the fourth quarter of 2006. GAAP net loss was $7 million, compared with a net loss of $2.8 million in the third quarter of 2007 and net income of $0.4 million in the fourth quarter of 2006. GAAP net loss per fully diluted American Depositary Share (ADS) was $0.29, compared with a net loss of $0.12 for the third quarter of 2007 and net income of $0.02 for the fourth quarter of 2006.

For fiscal year 2007, its gross revenue decreased 31% to $55.1 million from $79.8 million in fiscal 2006. Net income decreased to a net loss of $16.4 million from a net income of $6.8 million in fiscal 2006. GAAP net loss per fully diluted ADS was $0.68, a decrease from GAAP net income per fully diluted ADS of $0.26 in fiscal 2006.

Currently, we don't use a P/E ratio to value Linktone due to its negative earnings. Its other multiples, including P/B and P/S, are lower than the industry mean. Our target price of $3 is mainly based on the news that PT Media Nusantara Citra has agreed to purchase more than 50% of Linktone's stake at $3.80, which we believe reflects the company's prospects.