S&P Boosts Kinder Morgan, Myriad Genetics

Plus: Analysts downgrade AMB Property; and comment on news about the Viacom-DreamWorks deal and ConocoPhillips' reported interest in buying Burlington Resources

AMB Property (AMB ): Cuts to 3 STARS (hold) from 4 STARS (buy)

Analyst: Robert McMillan

Shares of AMB Property have gained over 14% in the past month. Although we expect the company's operating trends to continue to improve, driven by economic growth, expanding global trade and rising demand for industrial space, we think the shares are fairly valued at current levels and would not add to positions. We are maintaining our 2004 and 2005 per-share funds from operations estimates of $2.60 and $3.00, respectively. Our 12-month target price increases to $50 from $47.

LP Units Of Kinder Morgan Energy Partners (KMP ): Ups to 5 STARS (strong buy) from 4 STARS (buy)

Analyst: Royal Shepard

Kinder Morgan Energy Partners units have drifted about 6% lower since late October. We believe the units now offer both an attractive current yield of 6.3% and solid capital appreciation potential. Over the next 12 months, we expect the cash distribution to increase 8% to 10% owing to investments in CO2 injection operations, recent acquisitions, and a leading position in refined products transportation. We also think two new natural gas pipeline construction projects enhance the long-term growth profile. We have a $59 12-month target price.

ConocoPhillips (COP ) : Reiterates 5 STARS (strong buy)

Analyst: Tina Vital

An unconfirmed report in the Wall Street Journal says that the company may be in talks to purchase independent exploration and production company Burlington Resources (BR ) for more than $30 billion. While ConocoPhillips would not comment, we believe such a deal would be unlikely if the asking premium was too high amid current high energy prices. Burlington Resources is a top 10 North American gas producer, however, and we see an increased likelihood of a deal because of, in our view, increased investment from integrated oils in non-conventional North America oil & gas assets as technology and high energy prices improves returns.

Myriad Genetics (MYGN ): Ups to 5 STARS (strong buy) from 4 STARS (buy)

Analyst: Frank DiLorenzo, CFA

We remain positive on Myriad Genetics's predictive medicine testing business. We look for predictive sales of $96 million in fiscal year 2006 (ending June), up 34% over fiscal year 2005, and we see peak annual sales reaching $181 million in 2012 (3% terminal growth thereafter). We are positive on Flurizan (in 800 patient Phase III trial) to treat patients with mild Alzheimer's disease. We project losses per share of $1.24 in fiscal year 2006 and $1.29 in fiscal year 2007. We think Myriad Genetics's rate of cash burn is reasonable. We find the stock attractive in the under $1 billion market cap segment. We are raising our target price by $2 to $28.

DreamWorks Animation (DWA ) : Reiterates 3 STARS (hold)

Analyst: Tuna Amobi, CPA and CFA

Shares are up about 2% this morning, as DreamWorks Animation enters a 7-yr. distribution pact with Viacom's (VIA.B ) Paramount studio, which is also to get the 8% fee now received by DreamWorks SKG. DreamWorks Animation would get $75 million cash from Paramount for debt paydown. We expected more cash up front but the deal offers DreamWorks Animation, in our view, valuable film promotion and TV collaboration opportunities across Viacom's cable networks led by MTV. Also, DreamWorks's films should see minimal conflicts from Paramount's mostly live-action slate. The new pact depends on a DreamWorks Animation sale to Paramount, and is to close in the first quarter of 2006 pending approvals.

Viacom Class B Shares (VIA.B ) : Reiterates 3 STARS (hold)

Analyst: Tuna Amobi, CPA and CFA

Viacom's Paramount studio agreed to buy the private DreamWorks SKG live-action studio for $1.6 billion cash and debt. This surprise deal keeps a production pact with DreamWorks co-founders Spielberg and Geffen, and includes a 59-title library (which Viacom plans to sell for partial funding), development projects and TV assets. It also offers Paramount key worldwide theatrical/ancillary distribution rights to DreamWorks Animation (DWA ) films held by DreamWorks. This potentially transforming deal is set to close first quarter of 2006 pending approvals. But we are neutral on the near-term impact for the new Viacom pending more details.

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