"Strong buy" from Octagon on Dec 10 with target of $14.
The complete report is on ACD's site. Here are some selected extracts:
Born and Raised on the Internet
ACD Systems (Automated Catalogue and Delivery) designs, develops and markets leading edge Digital Imaging and Network Communications Technologies. Based out of Victoria, BC, this 6 year old company established a very successful market presence by utilizing an internet-based sales and distribution model and today enjoys strong brand recognition, especially in the U.S. market. The company?s competitive advantage is its unique ability to deliver high quality, robust products that are easy to use, intuitive, and operate at very fast speeds.
- For the month of November, the company reported approximately 10.8 M hits on its website.
- Within the last 3 months alone, the company has provided over 1 M downloads of its products from its website.
- ACD Systems currently boasts an installed base of 15 M users in over 126 countries.
- Over 12,000 corporate customers.
- Revenues have grown at an average compound monthly growth rate in excess of 26% (01/95-04/99).
- A Linux version of the company?s Express Server is under development and is expected to be released in the
second quarter of calendar 2000.
Valuation
The key to a successful Internet strategy is ubiquity. Building a substantial client base creates the opportunity for powerful future revenue growth, and with appropriate execution and the right business model, profits will ensue. Real Networks (RNWK, Nasdaq) has successfully accomplished both of these goals (as has ACD Systems). Real Networks
has assembled a loyal and growing user base and in its latest quarter the company reported a profit and over half of its revenues were derived from selling its Real Player G2 Plus (an upgrade to G2) to only 2% of its installed base. As a result, the market has awarded the company with a market capitalization of US$12B, or approximately US$180 for each
of its 65M registered users.
ACD has a similar opportunity. ACD has an installed base of 15 M users. Attaching a conservative value of C$20 per user gives us our preliminary 12 month target price of $14.00. |
