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Blind, crippled and mute:
Indonesia Telecom jumps 37% in a month
by Christian DeHaemer
Taking a cue from the U.S. Republicans of the Clinton era, emerging market legislatures have found a new tool for dealing with corrupt and incompetent heads of state. They try to impeach them. It beats a bloody coup d’état any old day.
Blind Indonesian cleric Wahid was elected president on a platform deriding corruption and nepotism, and promptly fell into the sort of scandal he promised to eradicate. On February 1, he was censured by parliament for his involvement in two financial imbroglios. There is no solid evidence of a crime, but the stench of corruption was strong enough for the parliament to act.
The lesson for the market is that this government, if not stable, at least has the tools required to replace an unwanted government in a non-violent manner, if necessary. Mr. Wahid is ineffectual, and his Vice President appears to be a more productive leader. Given the other (bloodier) alternatives priced into Indonesian Telekom (TLK:NYSE) — its stock rose on the news.
In fact, if you had bought TLK at US$4.50 on my recommendation last month, you would now be up 37%.
 Spoonful of sugar: Making money off the medicine men
Our Medicines Company (MDCO:NASDAQ) short play is up 41% since we entered this position two months ago. MDCO recently announced that it would be extending its lockup expiration for most of the stock by 90 days. Only three million of the 20.3 million shares that were to become unlocked will be set free.
The stock climbed 13% on the news. We believe that most of this was short covering. We don’t see any benefit to the company in delaying the inevitable. But the thin float does allow for manipulation by the market makers. It’s time to take profits. Cover your MDCO shorts and lock in gains.
Here’s mud in your eye! 29% on Boer brewskis
Our other emerging market play, South African Breweries (SAB.L:London), is up some 29% to 532 British pounds. It continues to extend its profitable tentacles around the globe. The population base of Asia (minus Japan) is younger than in the western world, and has more disposable income than in the past. We all know that kids with cash buy beer, and SAB is set to capitalize on this.
 It has recently established China Resources Brewery, in the Anhui province in Central China. SAB has acquired the brewing assets and brands of three breweries situated in Bengbu and Hefei, the provincial capital of Anhui province.
The three breweries have a combined capacity of 3.8 million hectoliters. Further investment will be made through refurbishment and expansion, with a total investment of US$67 million. This brings SAB’s total number of breweries in China to 11, with a combined total capacity of 17 million hectoliters. SAB continues to look good for the long term.
Millennium on the fast track, up 93% in 2000?
Millennium Pharmaceuticals (MLNM:NASDAQ) recently received fast-track status for their chronic lymphocytic leukemia drug (CCL), CAMPATH.
CLL, which is nearly always fatal, is the most prevalent form of adult leukemia. It affects about 120,000 patients in the U.S. and Europe, causing an accumulation of leukemic cells in bone marrow, blood, and other tissues.
The accumulation triggers bone marrow dysfunction and enlargement of lymph nodes, the liver, and the spleen. Millennium is developing CAMPATH to target the CD52 antigen, clearing the blood and bone marrow of cancer cells. Since CAMPATH addresses an unmet need, it could be a US$100 million drug in 2 to 3 years. Millennium and ILEX Oncology are jointly developing the drug, and with the fast-track status, they hope to have it on the market early next year.
Univision continues to roll
Although top-line growth has cooled off for Univision (UVN:NYSE), it’s still Taipan microcap specialist Brian Hicks’s favorite pure play on the surging Hispanic culture in the U.S., and it continues to give subscribers a healthy return.
We initially recommended UVN in 1999 at a split-adjusted price of US$28.50. It has rebounded from the selloff last year, and currently trades at US$49 a share, up 72%.
Looking at the chart, we see that UVN formed a strong bottom in October 2000, and has since rallied, forming higher lows. A rally to US$60 a share is our technical target. Fundamentally, Univision will be fully valued at US$60 (a forward P/E multiple of 33). Our price target is US$60. Sell once that price is achieved.
I, Robot
When we first covered Optimal Robotics (OPMR:NASDAQ) in 1999, not one institutional analyst was recommending the stock. Why? Because a big institution simply couldn’t make a lot of money pumping OPMR stock.
But who’s getting the last laugh? We originally recommended OPMR under US$11. In mid-February, it was trading for US$37 a share — more than a triple gain.
The company just announced two new orders from Kroger and Harris Teeter for 500 and 50 units of the U-Scan Express, respectively. We love Optimal Robotics. Continue to hold.
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