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Stock Upgrades, Downgrades From Ratings

Each weekday, Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates.

While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.

Kookmin Bank (KB - Get Report) provides commercial banking services to individuals and small- and medium-sized businesses in South Korea. It has been upgraded to a hold from a sell. The company's third-quarter revenue grew by 19.3% compared with the same period last year, outpacing the industry average of 16.7%.

Kookmin's earnings grew by 19.1%, or $2.56 per share, in the third quarter, compared with $2.15 a share in the same period last year. This continued a pattern of positive EPS growth over the past year. believes this trend will continue. The company also shows attractive valuation levels and expanding profit margins.

However, as a counter to these strengths, the company's return on equity is disappointing. In addition, its stock price has fallen by 7.67% in the last 12 months. Kookmin had been rated a sell since coverage was initiated in December 2006.

Open-end investment trust Enerplus Resources Fund (ERF) owns a diversified portfolio of crude oil and natural gas producing properties in western Canada and the U.S. It has been downgraded to a hold from a buy.

While the company's third-quarter gross profit margin of 74.3% was very high, it was neverthless down from the same period last year. Although Enerplus has a very low debt-to-equity ratio of 0.24, it is currently higher than that of the industry, and its quick ratio of 0.32 demonstrates a lack of ability to pay short-term obligations.

The company's stock price is down 9.06% over the last 12 months. Despite the decline in its share price over the last year, the stock is still more expensive than most other companies in its industry.

On Dec. 3, Enerplus agreed to acquire Focus Energy Trust for $1.38 billion, its largest acquisition and one expected to increase production of oil and natural gas by around 26% in 2008. Enerplus had been rated a buy since November 2005, until it was briefly downgraded to a sell on Nov. 14 then returned to a buy rating on Nov. 28 based on fluctuations in its stock price. Until there is a clearer picture of where it is headed going forward, a hold rating is warranted.

Repsol YPF (REP) is a Spanish integrated oil and gas company. It has been downgraded to a hold from a buy. The company's third-quarter revenue rose by 17.7% compared with the same period last year, exceeding the industry average of 3.7%.

In the same time frame, earnings increased to 95 cents per share from 88 cents a share. Repsol has demonstrated a pattern of positive earnings growth over the past two years, a trend Ratings believes will continue. It also shows good cash flow from operations.

However, as a counter to these strengths, we also find weaknesses that include disappointing return on equity and poor profit margins. Repsol had been rated a buy since December 2005.

Cognos (COGN) sells business intelligence and performance management products worldwide. It has been downgraded to a hold from a buy. The company's stock price has gone up by 34.02% over the past 12 months; our hold rating indicates that we do not recommend additional investment in the stock at these levels.

Cognos' other strengths can be seen in its revenue growth and a largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, the company's net income growth has been quite unimpressive. Cognos had been rated a buy since September 2007.

Lincare Holdings (LNCR) provides oxygen and other respiratory therapy services to the home health care market. It has been downgraded to a hold from a buy. The company's third-quarter revenue rose by 14.0% compared with the same period last year, outpacing the industry average of 1.1%.

Lincare's third-quarter earnings improved 15.8% to 66 cents per share compared with 57 cents a share a year earlier. Its debt-to-equity ratio of 0.39 is below that of the industry average, implying that there has been successful management of debt levels. However, its quick ratio of 0.43 demonstrates a lack of ability to pay short-term obligations.

In addition, the company's stock price has declined 8.30% in the last 12 months, and the fact that the stock is now selling for less than others in its industry in relation to current earnings is not reason enough to justify a buy rating at this time. Lincare had been rated a buy since December 2005.

Additional ratings changes are listed below.

Stock Upgrades, Downgrades
Company Name Ticker Country Code Change New Rating Former Rating
Cognos COGN USA Downgrade Hold Buy
Echelon ELON USA Downgrade Sell Hold
Enerplus Resources ERF USA Downgrade Hold Buy
First Bancorp FBP USA Downgrade Sell Hold
Englobal ENG USA Upgrade Buy Hold
Ardea Biosciences RDEA USA Downgrade Sell Hold
Lincare Holdings LNCR USA Downgrade Hold Buy
Rand Capital RAND USA Downgrade Hold Buy
Repsol YPF REP USA Downgrade Hold Buy
Restoration Hardware RSTO USA Upgrade Hold Hold
SCM Microsystems SCMM USA Upgrade Hold Sell
Versant VSNT USA Upgrade Buy Hold
Kookmin Bank KB USA Upgrade Hold Sell
PSB Holdings PSBH USA Upgrade Hold Sell
Northeast Community Bancorp NECB USA Initiation Sell n/a
Source: Ratings

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