However, UBB's estimated future growth rate is above average.

Our $150 target price represents a 10X P/E multiple of our 2009 earnings per GDS estimate of US$15.00, providing a PEG ratio (P/E divided by estimated future growth rate) of 0.8X, roughly in line with the industry median for 2009.

Keep Citizens Comm a Hold

We maintain our Hold recommendation for Citizens Communications Co. (CZN), which provides telecommunications services primarily to rural and suburban customers. Although the company continues to exhibit growth in its broadband business, losses in voice access lines remains an area of concern. Another matter of concern is the decrease in funding by the Federal Universal Service Fund (subsidies for lower income and rural consumers).

The acquisition of Commonwealth Telephone Enterprises Inc. in 2007 provided CZN with further access to high margin rural markets and cash synergy of $40 million. The combined entity became the seventh largest local telephone exchange company in the U.S., having the necessary scale to protect their merged service markets. The Global Valley acquisition was completed on October 31, 2007.  This acquisition is accretive to CZN's free cash flow and is expected to offer opportunities for revenue growth and cost savings synergies.

CZN continues to focus on cost reduction through consolidation in billing systems and other initiatives. Furthermore, free cash flow levels support the company's share repurchase program and attractive dividend of $1.00 per share, which is at the high-end in the industry equating to approximately 60% of net income payout.

CZN is trading at 18.4x our estimated earnings for 2008 estimates, which represents a premium to both the S&P 500 and the forward P/E ratio for the industry average. On the basis of enterprise value (EV) to EBITDA, a more appropriate valuation metric for highly leveraged securities, CZN is trading at approximately 6.5x estimated 2008 EBITDA, which is above the industry average of 5.0.

While we recognize that the company's strong and stable cash flow and high dividend yield are attractive, we believe such a premium valuation is usually considered stretched, given the company's limited growth prospects. Our $12.00 target price, therefore, is based on a P/E multiple of 19.5x estimated EPS for 2008.

Power Integrations Finds Its Way

Power Integrations, Inc. (POWI) is an original equipment manufacturer (OEM) of semiconductor power conversion ICs. The California Energy Commission recently (CEC) pushed out an industry mandate that should create an earnings catalyst for the company in 2008. A solid product portfolio, new patents and product launches, along with the recently adopted worldwide energy standards should drive growth.

The timing and magnitude of the revenue growth, along with ongoing legal expenses are over hangs on the stock. We remain cautious and rate shares of POWI a Hold. We are setting a target price of $33.00, which corresponds to a P/E multiple of 22.0x.

Design wins for the TOPSwitch included a UPS power supply for APC, a rear projection TV for Sharp and a home security system. The TinySwitch will be designed into a diverse range of products for Dell (DELL), IBM (IBM), Hewlett-Packard (HPQ), etc. Cell phone companies will also be using the TinySwitch in a number of models.

The largest win for the LinkSwitch was a design for a Motorola (MOT) charger, for which POWI is expected to see high-volume production. Another significant design win was for V Tech's cordless phones. The DPA switch also recorded an important win for Cisco's (CSCO) highest-volume IP phone model. With worldwide energy standards becoming more stringent, we are optimistic about POWI's EcoSmart technology.

The primary end products within the communications segment are external handset chargers. The company lost part of the Samsung business to a competing product, which management asserts, is infringing on POWI patents. The management's decision to litigate the dispute will increase patent litigation costs approximately $5.0 million or $0.16 per share. New products are yet to make a significant impact on the top line.