CHINA Still Favorably Priced

We are maintaining our Buy rating on software maker CDC Corp. (CHINA), as we still think that the company is well positioned to leverage the growth opportunities in small-to-medium business enterprise software and China's online-game market. In addition, the stock is trading at a lower valuation than its peers and does not reflect the company's intrinsic value.

CDC has achieved 15 percent to 20 percent organic license revenue growth, which may be among the strongest in the industry. With a differentiated combination of online games, mobile applications, Internet portals and media services, CDC's New Media Business is positioned to take advantage of the burgeoning demand for online services and entertainment in the China market. Online gaming is the most important of CDC's business units and the company intends to launch one to two new games in every quarter this year.

Based on our estimate for fiscal year 2008 earnings per ADS, the stock is trading at 41.5x, which is similar to the industry mean. Based on our estimate for fiscal year 2009 earnings per ADS, the stock is trading at 15.8x, which is much lower than the industry mean. Using a P/E multiple of 19.0x our fiscal year 2009 earnings per ADS estimate of $0.21 yields a target price of $4, which can reflect company's great growth prospects, in our view.

Buy Small-Cap CWEI Up to $96

We are maintaining our Buy recommendation on small-cap company Clayton Williams Energy, Inc. ( CWEI ), but raising our estimates and price objective on account of an updated price deck. The stock's recent strength of the stock makes it evident that the market is taking another look at it after staying from the Clayton story given management's appetite for wildcat exploration with less than stellar results and a highly levered balance sheet. The current surge in oil prices no doubt serves as a very important backdrop.

We believe that Clayton's proved developed reserve base is not getting the value it deserves in the market. The company is devoting more resources to oil drilling in the Permian Basin and Austin Chalk, which is expected to bring a substantial amount of oil production online in 2008 and 2009. We are raising our earnings view to $7.48 from $5.90 per share for 2008 and to $9.46 from $6.38 per share for 2009.

With prices locked in place, Clayton's revenue streams and cash flows should be consistent and more attractive to investors. Energy markets are also likely to remain extremely volatile. The company has effectively mitigated its exposure to price swings. These factors should help Clayton's price appreciate in the near term. Our revised price target of $96 is the result of a multi-faceted valuation approach anchored by our after-tax NAV estimate.

Rely On Allion Healthcare

Allion Healthcare (ALLI) is a national provider of specialty pharmacy and disease management services focused on HIV/AIDS patients.