Extract fm OCBC dated 28-Jun,
Last night, Creative issued a profit warning stating that it now expects to incur an operating loss in the June quarter due to softer than expected overall demand for MP3 players and lower than expected average selling prices. Creative now expects sales to come in at approximately US$300m as compared to its previous guidance of between US$330m to US$360m. Furthermore, gross margin is now expected to come in below 20%, much lower than the group's original guidance of between 22% to 24%. Since our last report when we warned about escalating competition in the MP3 player market, Creative's share price has dropped 24.2% to close at S$12.50. Following the profit warning, its ADR dropped a further 11% last night, to the equivalent of S$11.00. We have reduced our numbers and now expect Creative to report losses of US$4.0m in 4Q05 and US$19.4m in FY06. We value Creative at S$10.0 (from US$14.0) or about 0.8x FY06F P/NTA. Our below book valuation reflects our view of a distinct possibility of future inventory write-offs as a result of the much lower than expected sales and gloomy outlook going forward. We maintain our Sell recommendation.
Maintain Sell. Since our last report, Creative's share price has dropped 24.2% to close at S$12.50. Following the profit warning, its ADR dropped a further 11% last night, to the equivalent of S$11.00. With the revision in our forecasts, we now value Creative at S$10.00 (from S$14.00), or about 0.8x FY06F P/NTA on our lowered book value to take into account the potential of inventory write offs. The share price also needs to factor in the possibility of much lower than expected sales and a gloomy profit outlook going forward. As such, we maintain our SELL recommendation.
Report fm OCBC dated 28-Jun here
They recommend, Maintain SELL with Fair Value of $10.00
Report fm Kim Eng dated 28-Jun here
They recommend, Maintain SELL with 6-mth target of $9.00
Report fm UOB-KayHian dated 30-Jun also recommended SELL, with fair price at $9.48; email me if u need this report (ppl i know only). Summary here
Previous Post: Creative
Comment : Creative will need at least a couple of quarters to get out of this mess. Better wait and see what they plan to do after they announce their actual losses for this quarter. If you are holding this counter, good luck to you. It may be better to sell now on any technical rebound and buy back later when all the bad news are out and prices has stabilised.
Disclaimer : Do not rely on our comments. Make your own decision at your own risk.
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SINGAPORE (Dow Jones)--Singapore's Creative Technology Ltd. (C76.SG) intends to maintain its business focus, even as it faces increasing competition in the MP3 player segment from industry giant Apple Computer Inc. (AAPL), a senior company official said Friday.
Creative will "stay focused" on its business and intends to "fight this war we are facing now", Chief Executive Sim Wong Hoo said at an industry conference, adding that he is "optimistic" the company will survive the "MP3 war."
"If you can survive ... you will one day hit the jackpot," he said, without elaborating.
The company's shares Friday closed 0.9% lower at S$11. It has fallen by about 55% so far this year.
The consumer-electronics maker late Monday said it expects revenue for the fiscal fourth quarter ending June 30 to rise 50% on year to about US$300 million. It earlier projected a 65%-80% increase to US$330 million - US$360 million.
The gross margin for the fourth quarter is expected to be below 20%, down from its April guidance of 22%-24%.
Based on the lower revenue and gross margin guidance, the company projects swinging to an operating loss for the period.
The cut in guidance confirmed market fears that the company's recent MP3 player price cuts would force Creative into the red during the quarter.
The Singapore company's MP3 players, sold under the MuVo and Zen brands, are a distant No. 2 to Apple Computer Inc.'s (AAPL) iPod players.
Creative is currently facing considerable pressure on prices. A spate of price cuts by Apple prompted Creative to reduce the price of its five-gigabyte Zen Micro MP3 player to S$398 from S$448 last year.
Late last year, armed with a US$100-million advertising budget, Creative seemed reasonably optimistic it could duplicate Apple's success in the digital music player market, even though few analysts at the time shared that optimism.
Creative has already spent between US$20 million and US$25 million of its budget, according to estimates by two brokerages, but it is still trailing behind Apple.
At present, Apple holds 54% of the global MP3 player market, while Creative has around 10%. In the fiscal third quarter, the MP3 player business accounted for 68% of Creative's revenue.
Comments: With Creative intending to continue with the MP3 mkt share fight, I expect their share price will continue to come under pressure. Well, we know that Creative is very good at squeezing their suppliers to improve on their own margin, so, let's see if they are able to turn around to profitability next Q, if not, then Christmas Q.
Wednesday July 13, 8:24 AM
TECHNICAL TALK: Creative Stages Positive Reversal
By Andrew Torchia
A Dow Jones Newswires Column
SINGAPORE (Dow Jones)--Today's surge in shares of Creative Technology Ltd. (C76.SG), which have tumbled 60% from peak to trough this year, suggest the stock has finally bottomed and could make substantial further gains in the medium term.
There's no obvious news trigger for the rebound. Some traders and analysts are citing Microsoft chairman Bill Gates's statement that his company will help Creative in its struggle against Apple Computer for MP3 player market share, but the statement was made some days ago and should already have been digested by the market.
Others say Creative is merely catching up with other tech shares after lagging the sector for many months and becoming undervalued, even taking into account its projected operating loss for the quarter ended June 30. Apple Computer is due to announce quarterly earnings tonight, and some investors may be hoping for signs that the company's dominance of the MP3 market is slipping.
Creative itself is declining to respond immediately to queries about today's share price rise, which follows a 7% surge in its stock price in active volume on Nasdaq last night.
However, the charts show a strong likelihood that the stock has ended its six-month slide and has turned at least medium-term bullish.
Up 11.4% at S$12.70 on Wednesday afternoon, the stock is posting its largest single-day gain since January, while volume is on track to be the biggest this year.
This morning the stock broke above its downtrend line from February, which came in at S$11.50, while weekly stochastics have just staged a bullish crossover in oversold territory. Another positive reversal sign is a bullish harami on the weekly candlestick chart. All of these technical signals typically occur when a stock is ending a major bear trend.
Given the speed of today's rise, considerable profit-taking is likely before the stock breaks initial underlying resistance at S$13.20 (the May low).
However, the positive reversal suggests higher targets in the medium term. A reasonable minimum target for coming weeks or the next few months is S$15.00 (the edge of the April gap). Another possible target is S$17.06, the 38.2% retracement of the drop from January, although this is less certain to be hit.
The hourly chart shows immediate, minor underlying support at S$12.40, then S$11.40. Support at this month's low of S$10.90 should be the floor for at least some months, and quite possibly much longer.
Wednesday July 13, 9:33 PM
Singapore Creative Tech Up 13.2% On MP3 Mkt Outlook Hopes
SINGAPORE (Dow Jones)--Shares of Singapore's Creative Technology Ltd. (C76.SG) Wednesday surged 13.2% as investors bet quarterly earnings from rival Apple Computer Inc. (AAPL) will contain a positive outlook for the global MP3 player market.
Creative, which is also listed in the U.S., rose 7.0% overnight on the Nasdaq and closed Wednesday in Singapore up S$1.50 at S$12.90.
Some market participants attributed the rally to weekend news reports of comments from Microsoft Corp. founder Bill Gates. These comments suggested the software giant will work with vendors like Creative to produce better-designed MP3 players to counter the success of Apple's iPod.
Analysts, however, said the big jump in the share price was more likely due to short covering or expectations of a positive outlook for the MP3 player market when Apple's quarterly earnings are released in the U.S. Wednesday.
Creative last month issued a profit warning for its fourth-quarter earnings, confirming market fears that its recent MP3 player price cuts would drag the consumer electronics maker into the red for the quarter ended June 30.
Its stock dived to a 52-week low of S$10.80 following the earnings outlook downgrade.
The company's MP3 players, sold under the MuVo and Zen brands, are a distant No. 2 to Apple's iPod players.
Apple holds 54% of the global MP3 player market, while Creative has around 10%. In the fiscal third quarter, the MP3 player business accounted for 68% of Creative's revenue.
Creative couldn't be reached for comment.
-By Jessica Tan, Dow Jones Newswires; (65) 64154155 jessica.tan@dowjones.com
Comment
What a different a few weeks make, a few weeks ago when this post was posted, everyone is dumping Creative share or MP3 related stock because the margin is lower due to competition and price cutting. And when Bill speak, all the analysts change their tune in supporting vendors like Creative. Furthermore, all out of a sudden analysts feel that the MP3 market will have positive outlook.
Watch out for Apple results then. Creative recovered too fast n too much. If no solid news to show that MP3 is indeed recovering, may go back down
Apple Computer reported fiscal 3Q05 earnings that beat market
expectations by 18%. During the quarter, Apple shipped 6.2m iPods, +5.3m in 2Q and 860K units from a year ago. Its guidance for fiscal 4Q05 earnings was slightly below expectations. This was puzzling as many have expected the back-to-school buying season to boost computer and iPod sales in the US. Apple responded by saying that the reason why they had not raised 4Q05 forecast is because 3Q05 earnings was better than expected due to the release of Apple's latest operating system, Tiger. They added that they have chosen to be prudent as it will be the first full quarter where they will produce Mac with Intel chips
instead of those made by IBM, and Freescale Semiconductor.
Just on iPods alone, shipment was up 16% although revenue was only up 9%. We believe this reflects the ongoing competition in the
MP3 market and the introduction of the cheaper iPod Shuffle - a
flash memory-based player. Apple does not see iPod inventories
as a major concern.
Singapore Shares End Up Led By Creative Tech's 6.2% Gain
Singapore(Dow Jones)--Singapore shares closed at a five-year high Thursday led by MP3 player manufacturer Creative Technology, traders said.
Creative, which fell to a one-year low after an earnings downgrade late last month, continued to add to recent gains following comments from Microsoft Corp. Chairman Bill Gates that the U.S. software giant will work with vendors like Creative to produce better-designed MP3 players to counter the success of Apple's iPod.
Creative added 6.2% to S$13.70. Analysts, however, remained skeptical about the gains, with OCBC Securities, UOB Kay-Hian Securities and Kim Eng Securities maintaining their "sell" rating, saying investors should use the current rise in the share price as an opportunity to exit Creative.
The index stock helped the Straits Times Index gain 11.15 points, or 0.5%, to 2250.16, its highest level since 2285.68 in February 2000.
Press Release Source: Creative Labs, Inc.
Creative Sound Blaster Live! 24-Bit Audio Processor Chosen by GIGABYTE, MSI and Shuttle Computer for Integration in Their Upcoming Motherboards
Tuesday July 19, 11:08 am ET
Major Motherboard Manufacturers Choose Sound Blaster Live! 24-Bit Chip for Superior High-Definition Audio and EAX ADVANCED HD
MILPITAS, Calif., July 19 /PRNewswire-FirstCall/ -- Creative Technology Ltd. (Nasdaq: CREAF - News), a worldwide leader in digital entertainment solutions for PC users and the creator of Sound Blaster®, today announced that three major PC motherboard manufacturers: GIGABYTE, Shuttle Computer and MSI, will be incorporating the Sound Blaster Live!® 24-bit processor into their upcoming product lineups as their on-board audio solution.
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"The PC industry recognizes the fact that Sound Blaster audio technology is far superior to any of the host HD Audio solutions or integrated chipsets currently on the market," said Steve Erickson, vice president of audio for Creative. "More and more, we're seeing motherboard manufacturers choosing Sound Blaster technology for their on-board audio solutions, because of its exceptional high-definition audio quality and clarity, and we're pleased to welcome GIGABYTE, MSI and Shuttle Computer to the Sound Blaster family."
GIGABYTE will be incorporating the Sound Blaster Live! 24-bit processor in its GA-G1915P motherboard that will ship worldwide in August. MSI is currently using the technology in its K8N Diamond and P4N Diamond models. Shuttle Computer has incorporated the processor into its currently available SD31P motherboard, and will be doing so on its upcoming SD11G5, SD35P, and M1000 models that will be shipping worldwide this fall. In all of these cases, the Sound Blaster Live! 24-bit chip is the only integrated audio solution available on these motherboards.
The Sound Blaster Live! 24-bit chip delivers superior 24-bit/96kHz, 7.1 surround sound with EAX® technology that significantly enhances music, movie, and PC game audio. EAX Music Enhancements dramatically improve MP3 and CD listening with features such as Bass Boost, Multi-Band Graphic Equalizer, and Audio Clean-Up. Gamers will benefit from EAX ADVANCED HD(TM) Effects that deliver ultra-realistic environmental audio in hundreds of today's hottest PC games. With the Creative Multi-Speaker Surround (CMSS®) technology, users can listen to all their audio content, even if it was originally recorded in stereo, in 7.1 surround-sound playback.
Comment:
Well, at least this would improve Creative margin as Sound Blaster has higher margin than MP3. Furthermore, it would help Creative break into integrated motherboard. Once Gigabyte and MSI manufacturer use it for their motherboard, it should create a snowball effect in Taiwan as most of the motherboard manufacturers are from Taiwan. I think most manufacturers would look for Creative to work together as they do not want their high end motherboard to lost out to Gigabye, MSI and Shuttle. If this is true, it would provide Creative ammo for the MP3 war with Apple.
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