Research Investment Group Initiates Investment Coverage Of Dicom Imaging Systems, Inc. (OTC-BB: DCIM)
With A Six Month Price Target of $25
Dicom Imaging Systems, Inc. (OTC BB: DCIM), is a profitable, rapidly-growing company that provides DICOM-compliant ("Digital Imaging Communications in Medicine") imaging software. DCIM designs, develops, markets and supports a complete line of imaging software products for use throughout the health professions worldwide including dental professionals, research facilities, dental labs, universities, insurance companies, and, beginning this fall, medical professionals (4x the size of the dental market!).
Dicom has established the standard for DICOM compliance in the dental industry in North America by distributing complimentary copies of its Dental Imaging Suite via the Internet, through direct mail and partnering arrangements. Add-on software modules, service and support contracts, and select hardware devices are marketed through subsequent telephone and e-commerce sales.
An aggressive expansion program into the European, Asian and Latin American markets is now underway. Dicom is a fully-reporting company that will shortly be filing an application with the SEC to have its shares listed on the NASDAQ Small Cap market.
DCIM is projecting pre-tax earnings of about $0.37 per share for FY 2000, not including earnings from medical products, foreign licensing, hardware sales of newly-acquired and future products, and electronic claims processing services.
DICOM IMAGING HAS BECOME THE STANDARD
FOR DENTAL IMAGING, RECORD-KEEPING & FILING / PROCESSING INSURANCE CLAIMS
Dental Imaging Technology allows dentists, orthodontists, oral surgeons and other dental professionals to simulate procedures such as whitening, crowns, and peridontitcal treatment before performing these procedures on patients. The patient can literally see what they will look like with whiter, straighter teeth before undergoing any treatment! DICOM technology also provides imaging for X-rays that allows dentists to file their insurance claims electronically (the preferred method of almost all insurance carriers).
The key benefit to dentists of Dicom?s imaging software is financial.
With the advent of improved oral hygiene and fluoridated water, there are fewer people having cavities and other diseases. Children between the ages of 5 and 17 have 65% fewer cavities than 20 years ago. Therefore, in order to maintain a profitable practice, more and more dentists are shifting their business focus towards Cosmetic Dentistry. Dicom?s imaging technology and equipment makes it much easier and faster to show patients how various procedures can improve their smiles and well being.
In less than one years time, DCIM has become the dominant company in the industry by virtue of a unique marketing strategy whereby Dicom provides dentists, labs, insurance carriers and teaching institutions - at no charge - the core modules of DCIM?s Dental Imaging Suite-: imagExplorer and imagEditor (for additional information, please see dicom-image.com.
Why is Dicom giving away a $2,500 software package?
Because DCIM believes that by providing dental professionals with a fully-functional image communication solution at zero cost, that dentists will discover the many, many advantages of incorporating dental imaging into their daily practice, and that they will eventually purchase one or more of the add-on modular upgrades (Whitener, Simulator, X-Ray & LabRX), service contracts, or other DCIM dental hardware products (such as digital cameras).
Dicom?s strategy for becoming the dominant company in the dental imaging software market is analogous to the "Microsoft Model." An astute company gives away the "operating system" for free (imagExplorer / imagEditor), and then sells all of their other products and services to a captive market.
In fact, all of Dicom Imaging?s software products share a common graphical user interface ("GUI") based on Microsoft's Windows family of products. This provides a consistent "look and feel" to Dicom's applications, including similar pull-down menus, system navigation and point-and-click, mouse-driven functionality. Dicom?s 32-bit architecture products are fully-compatible with Windows 95, Windows 98, Windows 2000 and Windows NT.
We believe that one of the keys to the rapid acceptance of DCIM?s products as the new dental imaging software standard has been the GUI, which allows users to integrate imaging applications and data with other Microsoft Windows-based desktop applications and hardware. For example, customers can easily query DCIM?s system and download data into MS Word. By leveraging health professional's widespread familiarity with personal computers and Microsoft Office products, previously difficult-to-access imaging information, editing, data manipulation and retrieval of archival data is readily available to the casual employee or user (such as a hygienist, dental assistant or receptionist), resulting in potentially significant improvements in productivity.
Dicom Imaging?s goal has been to secure a dominant market position with their initial complimentary software package, and then, using e-commerce and direct sales, sell dentists, labs and insurance companies additional software modules, service and support contracts, and hardware. This is an ingenious strategy to get the customer "hooked" on Dicom's high quality products and services.
Additionally, Dicom has entered into numerous strategic alliances and distribution / marketing agreements with the biggest and the best companies in the U.S. dental hardware and software markets.
Perhaps the most far-reaching alliance was a co-marketing agreement with National Electronic Attachment, Inc. ("NEA"), which is the largest online clearinghouse for processing of dental insurance claims. Mr. Thomas Hughes, NEA?s President, stated: "The co-marketing of Dicom's and NEA's products will be very attractive to dental practices because it will save them money in the processing of insurance claims, reduce paperwork and the other costs associated with filing the claims; and, ensure prompt payment of the claims." As part of the co-marketing agreement, Dicom and NEA will bundle Dicom's imagExplore / imagEditor with NEA's FastAttach program, along with a scanner that allows dentists to digitize x-rays for electronic submission.
Given that the dental software industry has potentially high profit margins (compared with other manufactured dental products), DCIM does have some competition.
However, we are comfortable that DCIM has differentiated itself by offering its core products (imagExplorer / imagEditor) for free, while all of its competitors charge at least $2,000 for comparable products. Dicom?s competitive advantages (and its resulting large market share) are attributable to that facts that its line of dental imaging software products are the only Windows-based, DICOM-compliant, high resolution (32-bit versus 16-bit architecture) products available.
All of DCIM?s competitors use widely different database structures, file formats and interface designs, which, until Dicom?s Dental Imaging Suite was introduced, made it very difficult for any one product or format to achieve a dominant market share among dentist offices, labs, and insurance companies.
DCIM IS RAPIDLY ESTABLISHING A GLOBAL PRESENCE FOR ITS PRODUCTS & SERVICS
Having established its products and securing a significant market share in North America during 1999, Dicom Imaging rapidly turned its attention to the international dental markets and its goal of becoming the world leader in dental imaging software. Since the beginning of the year, a series of lucrative licensing and distribution agreements nave been signed for DCIM?s products (the company is currently in discussions with other dental distributors in Asia and Europe):
Centaur Software Development Pty Ltd will be Dicom?s exclusive dealer in Australia and New Zealand, and they will be introducing DCIM?s products (along with their own line of dental practice software) to 9,000 dentists in Australia and New Zealand.
Meanwhile, KADA Innovations Ltd. has been granted the exclusive right to distribute Dicom?s dental imaging software products within the United Kingdom. Separate deals have also been signed with three of Canada?s largest dental supply companies (Schein Arcona, Ash Temple & Synca). Together, these four deals represent direct access to 36,000 dentists in seven countries.
Just a month ago, Dicom announced that it had granted an exclusive license to a private holding company to distribute DCIM?s Dental Imaging Suite in Mexico, Brazil, Spain and Portugal (with an option to expand into other Spanish-speaking countries), in exchange for cash license fees and guaranteed royalty payments.
So, just how lucrative are these deals for Dicom?
Well, just as an example, the agreement for Brazil, Mexico, Spain and Portugal guarantees DCIM minimum revenues of $5.05 million over the term of the agreement, of which more than half is payable in the first year of the agreement. By entering into a series of international distributorship agreements, DCIM?s global production, distribution and marketing costs are tremendously reduced, and the bulk of these revenues should go right to the bottom line.
And remember, these deals are just for the Dental Imaging Products?.there will be a whole new series of marketing and distribution agreements set up in 2000 and 2001 for the Medical Imaging Suite - and here, DCIM will be supplying a market that?s four times the size of the dental business.
DCIM?s MEDICAL IMAGING SUITE (for dermatologists and plastic surgeons)
WILL PROVIDE INCREDIBLE FUTURE GROWTH OPPORTUNITIES FOR THE COMPANY
We believe that Dicom Imaging is poised for a second, and even more significant phase of growth later this year when DCIM introduces its Medical Imaging Suite to the world?s medical community.
The Medical Imaging Suite will feature the same components and function much in the same way as Dicom?s Dental Imaging Suite, but will instead be geared towards dermatologists, plastic surgeons and general surgeons. It has been designed to enable doctors to work more closely with their patients when providing cosmetic procedures and to allow patients to preview proposed procedures prior to treatment.
The Medical Imaging Suite will soon be submitted for FDA review. The company plans a commercial launch in October at the annual meeting of the American Society of Plastic Surgery.
We believe that the Medical Imaging Suite will be an instant hit for the simple reason that dermatologists and plastic surgeons are very much into photo documentation for legal and consultative services, and there is no other product quite like this available. Judging by the speed at which DCIM?s dental software products achieved a dominant market position and became accepted as the industry standard, we foresee a similar period of explosive growth in revenues and market share for the medial imaging products.
This expansion into the much larger medical field, primarily through the use of strategic distribution partners and institutional retail clients (which means very minimal costs for DCIM), should greatly expand Dicom's revenues for the 2000 and 2001 fiscal years.
WE BELIEVE THAT DICOM?S PROJECTED EARNINGS JUSTIFY A MUCH HIGHER SHARE PRICE
For the current year, Dicom Imaging is projecting an estimated pre-tax profit of approximately $8 million (about $0.37/share).
However, we believe that Dicom will do significantly better than its previously-announced earnings estimates.
Two weeks ago, Dicom announced that by expanding its imaging hardware line to include the COMPUCAM (a turnkey digital intraoral camera solution), that it will add an additional $2 million in revenues for FY 2000. As the year progresses, we expect to see additional deals that will increase the scope of DCIM?s product line.
More importantly, DCIM?s earning estimates do not include several other major revenue sources: the international release of the Dental Imaging Suite (and the global marketing of these products is still in their infancy), or the 4Q 2000 release of the Medical Imaging Suite. Additionally, DCIM?s reported earnings estimates are based solely on minimum advance royalty payments from licensing and distribution partners, with no provisions for additional sales of DCIM products and services (areas where we believe there is still significant growth potential). Nor do Dicom?s earnings estimates reflect fees from electronic claims processing services and technology, which has enormous profit potential.
Together, the items not included in DCIM?s FY 2000 earnings forecast could potentially add up to an additional $0.50 per share in earnings.
We believe that Dicom?s earnings estimates are conservative, and that DCIM will generate pre-tax earnings on the order of $0.80 per share this year. At a 30x multiple (not an unreasonable multiple in the current market for a software company generating such solid earnings), this would suggest a market price of over $25 per share.
STRONG ANALYST COVERAGE & AGGRESSIVE INVESTOR RELATIONS PROGRAM
WILL CONTINUE TO BENEFIT BOTH EXSITING SHAREHOLDERS AND NEW INVESTORS
So far this year, DCIM has received four strong "Buy recommendations" from respected investment advisory groups, and, for a company that has been publicly-trading less than six months, this is virtually unheard of !!
Southern Financial Services ("SFS") published the first DCIM buy recommendation on December 20, 1999 and on January 25th, SFS reiterated its investment opinion, setting a near-term price objective of $10 per share.
Capital Research Group published an investment opinion on February 11th that set a target price of $20 per share for Dicom, based on the company?s projected $1 per share earnings estimate in FY 2000.
On March 13th, TheSubway.com published a comprehensive investment opinion on DCIM, with a price target of $20 per share; this buy recommendation provides an excellent independent overview of Dicom Imaging, and can be viewed at thesubway.com
Strategic Investors Group ("SIG")has published a series of strong Buy recommendations on DCIM over the last several months. SIG believes that at $10 per share or less, that DCIM represent a substantial buying opportunity for investors, and that a near-term price target of $20 and a year-end level of $30 should be attainable, based on the planned October 2000 release of the Medical Imaging Suite. SIG?s investment coverage of DCIM can be reviewed at stratego.net
DCIM SHARE STRUCTURE & RECENT TRADING RANGE
Total Shares Outstanding: 21,600,000
Public Float: 12,596,400
52-week Trading Range: $1.63 (low) by $12.25 (high)
Last Trade (April 25, 2000): $6.50
Dicom Imaging was founded in March 1999 and began trading on the OTC-BB on November 12th under the symbol "DCIM". Since going public, the company?s market capitalization has increased from $36 million to approximately $150 million.
Dicom is currently preparing to file an application to have its shares listed on the NASDAQ Small Cap Market; this filing will be made just as soon as KMPG International completes its audit of DCIM?s 1999 financials.
We believe that DCIM has a tremendous marketing plan, management team and Board of Directors with a proven ability to implement and enhance their business plan at record-breaking pace. The company should achieve effective worldwide distribution of its dental products by year-end. Not only does management, under the leadership of Dr. David Gane, excel in the marketing of their unique products, but they have also done an awesome job of promoting the merits of DCIM and its products to the investment community.
For investors that missed out on the initial run-up in DCIM, the current market offers a window of opportunity to establish a core position in Dicom Imaging in advance of the release of the Medical Imaging Suite and further news regarding OEM and strategic distribution alliances.
For additional information, please contact:
Demonte Associates
Cynthia Demonte or Marjorie Hays
Phone: (212) 473 - 3700
DISCLAIMER - PLEASE READ
Research Investment Group is not a Registered Investment Advisor or a Broker / Dealer. Readers are advised that this report is issued solely for information purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy. Reproduction of this report, in whole or in part, by any means, electronic or otherwise, including via the Internet, without prior written permission, is strictly prohibited.
Research Investment Group has independently prepared this report, drawing upon a range of public news and information sources, as well as data and opinions provided by Dicom Imaging Systems, Inc. ("DCIM" or the "Company"). Prior to publication of this report, the Company reviewed and approved the contents hereof. Research Investment Group has not independently verified the Company 's representations. Any opinions expressed in this report are statements of judgment as of the date of publication (25 April 2000) and are subject to change without further notice, and may not necessarily be reprinted in future publications or elsewhere. Neither Research Investment Group nor its owners, employees or consultants accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
The information contained herein is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. The opinions and analysis included herein are based on sources believed by Research Investment Group to be reliable and in good faith but no representation or warranty, expressed or implied, is made as to their accuracy, completeness or correctness. The foregoing discussion also contains forward-looking statements that are based on current expectations and differences can be expected. The information and opinions contained herein is not intended to be a complete discussion of information regarding some of the current and/or intended business activities of the Company, and all information contained in this report should be independently verified with the Company. Readers are urged to consult with independent financial advisors with respect to an investment in the shares mentioned herein. Investors should review a complete information package on the Company which should include, but not be limited to, the Company's annual report, quarterly report, press releases, as well as all regulatory filings.
In order to be in full compliance with the Securities Act of 1933, Section 17(b), Research Investment Group advises readers of this report that it has received a fee of 10,000 free-trading shares of DCIM from Capital Research Group, plus $100,000 cash for its efforts in researching, writing and disseminating the information contained herein. Research Investment Group, its owners, employees and consultants may profit in the event the shares of the Company increase in value. These positions may be liquidated from time to time even after Publisher, its owners, employees and consultants have made positive comments regarding the Company.
THE READER SHOULD VERIFY ALL CLAIMS AND DO THEIR OWN DUE DILIGENCE BEFORE
INVESTING IN ANY SECURITIES MENTIONED. INVESTING IN SECURITIES IS SPECULATIVE AND CARRIES A HIGH DEGREE OF RISK. INVESTORS MUST ALSO INDEPENDENTLY VERIFY THE "BLUE SKY" ELIGIBILITY OF THE SECURITY MENTIONED IN THIS REPORT BEFORE MAKING ANY INVESTMENT DECISIONS. TIMING OF, AND ANY BUYING OR SELLING DECISIONS, ARE THE SOLE RESPONSIBILITY OF THE READER.
Research Investment Group encourages readers to review the investing information available from the Securities and Exchange Commission ("SEC") at sec.gov and/or the National Association of Securities Dealers ("NASD") at nasdr.com The NASD has published information on how to invest carefully at its website.
DCIM is a fully-reporting company with the SEC. The company?s recent SEC Filings may be accessed through the Company?s website (http://www.dicom-image.com/) and following the links to the EDGAR database. Readers may access and review all of Dicom Imaging Systems? SEC filings at freeedgar.com and searching the EDGAR database.
¸ 2000 Research Investment Group |
