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. MRLN's PEG ratio is 0.58, a 40% discount to the 0.96 median for the peer group. We however do note that a slowing economy could call the growth rate into question. On a price-to-book basis, the 52% discount also looks somewhat attractive, given a ROE 47% below median.

We are setting our six-month target price to $8.00 per share, which equates to 13.8x our 2008 earnings estimate of $0.58 per share or 0.62x our estimated book value six months out. With no dividend to supplement the return, this equates to a 5.1% expected negative total return over the period. As a result, we are maintaining our Sell recommendation on the shares.

Mobile TeleSystems' Russia Risk

Mobile TeleSystems OJSC (MBT) provides communication services over an integrated network in Russia, Ukraine, Uzbekistan, Turkmenistan, Armenia, Kyrgyzstan and Belarus. Subscriber growth remained robust in the most recent quarter, contributing to improved revenue and earnings performance.

The management's outlook for 2008 is also encouraging, with a projected annual sales growth of 25% while margins are expected to remain healthy with a 50% target. The stock has also reacted favorably to the recent $450 million share repurchase plan. While we view the expansion of 3G services as a key driver, larger expenditures to support network expansion and promotional initiatives may potentially tighten margins for the remainder of 2008.

Additionally, increasing competition, ongoing political uncertainty, regulatory challenges and market risk in Russia warrant a more cautious view on the stock. Therefore, we maintain our Hold recommendation.

MBT's shares are trading at a discount to the S&P 500 and to its nearest rival Vimpel-Communications (VIP), on most valuation metrics, even though its projected earnings growth over the next five years is well above average. Part of the reason is the political/legal risk that is more conspicuous for Russian-based companies.

As a result, MBT's share price, historically, has been quite volatile and fluctuates with the overall Russian stock market conditions, sometimes uncorrelated to changes in the company's fundamentals. Also, MBT's valuation was recently impacted by geo-political risk in Russia due to unstable political/economic conditions caused by conflicts with Georgia.

However, the stock reacted favorably to the recently announced $450 million share repurchase program. We set a target price of $70 based on a 2008 multiple of 5.5x EV/EBITDA levels considering conservative growth levels.

Salix Pharma Hurt by Generics

Salix Pharmaceuticals, Ltd. (SLXP) suffered a major setback late last year when the FDA granted approval to three generic versions of its lead product, Colazal. This is devastating news for Salix as Colazal was a significant contributor to both the top and bottomline. As such, we expect 2008 to be an extremely challenging year for the company with a significant decline in both revenues and earnings.

In order to make up for lost revenues, Salix is investing significantly in both R&D and SG&A. New product launches and new indications for rifaximin should support a recovery in revenues from 2009 onwards. We believe Salix will also seek suitable in-licensing opportunities in order to grow revenues. However, we do not expect earnings growth to resume prior to 2010.

We expect the stock to remain under pressure given the possibility of a generic company initiating a patent challenge for Xifaxan. We maintain a Sell rating on the stock with a $5 target price. Our target price is based on 1.4x our 2008 sales estimate of $177 million.

POT with a High Profit Margin

Potash Corp. (POT) has benefited from higher fertilizer application rates, higher crop plantings, increasing demand for biofuels and rising crop prices. Rising fertilizers prices, especially potash, will expand POT's margin in the second half of 2008 and 2009.

The company is expanding potash production capacity by 2.7 million tons to cater to the growing fertilizer demand. The company's manufacturing plants are located in low-cost areas and its financials are solid. The management raised EPS guidance for 2008 from $9.5-$10.50 to $12-$13 expecting an EPS of $3.25-$3.75 in the third quarter of 2008. Hence, we rate the stock a Buy with a target price of $200.

In the second half of 2008, Potash Corporation plans to increase potash prices by $400 per ton in the North American markets. Substantial increase in potash prices coupled with rising nitrogen and phosphate prices due to rising input cost will result in higher realized prices. This in turn would drive revenue growth in the second half of 2008. The company has excellent free cash flow.

On September 8, Potash Corporation announced that on September 5 it purchased 500,000 of its outstanding common shares following a private agreement between itself and a third-party. The company stated that the purchase brings the total number of shares purchased under its 15.82 million share repurchase programme to 15.15 million shares.