New report issued: Reiterate Strong Buy
Fri Jun 02 09:07:07 2000
(FIRST CALL) CRES: OPMR: Channel and Management Checks Encouraging; Reiterat
CRES: OPMR: Channel and Management Checks Encouraging; Reiterate Strong Buy (1)
09:07am EDT 2-Jun-00 Pacific Crest Securities (Allison Hamilton (800) 314-983)
Pacific Crest Securities
111 SW Fifth Ave. 42nd Floor
Portland, OR 97204
Optimal Robotics Corporation (OPMR - $34 3/8) June 2, 2000
Allison Hamilton, 800-314-9837, ahamilton@pacific-crest.com
Spoke with Management and Conducted Channel Checks; Quarter Shaping Up Well
Rating: Strong Buy (1)
Changes: None
Price: $34.38 52-Week Range $9-$49
FY End: Dec. FY 2000 Price Tgt $65
Shares Out (Mil) 13.9
EPS 1999A 2000E 2001E Market Cap (Mil) $477.8
Mar ($0.08) $0.06A --- Avg Daily Vol (1000s) 1100
Jun $0.04 $0.10 --- Book Value $5.25
Sep $0.11 $0.12 --- Dividend Nil
Dec ($0.03) $0.03 --- 3-5 Yr EPS Growth 50%-70%
FY $.05* $0.29 $0.92
P/E 800x 118.5x 37.3x FY 2000E EPS - Street: 0.31
FY 2001E EPS - Street: 0.90
Rev (mils) 1999A 2000E 2001E
Mar $5.1 $12.0 --- CY 2000E Rev/Mult: 3.3x
Jun $7.2 $15.7 --- CY 2001E Rev/Mult: 2.6x
Sep $10.6 $19.8 ---
Dec $6.8 $11.3 --- Qtr End Jun 30, 2000
FY $29.6 $58.9 $90.2 Est Rep Date Jul 25, 2000
* 1999 results do not reflect a one-time $3.5M tax benefit and a one-time $600K
inventory write down. Reported EPS was $0.35 for FY 1999.
Key Points
-- Spoke with management, quarter is on track. We're projecting EPS of $0.10
vs. $0.04, and 155 U-Scan installations. We are very comfortable with our
numbers.
-- Company mentioned it will be introducing its self-checkout stations at a
trade show in London this month.
-- Also said it is moving forward with banner advertising on its touchscreen
monitors. Will provide more detail on the conf. call in July.
-- Also spoke with a large OPMR grocery customer and it said the company is very
pleased with OPMR's U-Scan Express.
-- The customer said it will expand roll-out of U-Scan Express very rapidly,
will go in all new stores and remodels or roughly 50-100 stores per year.
-- The customer said the main benefit of U-Scan systems is labor flexibility.
For instance, for late night shifts a store could close down all check stands
and leave one U-Scan open, pay one cashier and have the equivalent of four
lanes. Late night orders tend to be smaller, ideal for self-checkout. Also
said it addresses labor shortages in some markets and improves customer service
by providing more efficient option.
-- The customer also said that from what it has seen of competitor's products,
OPMR's U-Scan is the best, "the real deal".
-- Shares have pulled back recently from 43x our 2001 EPS estimate to 37x our
2001 EPS estimate providing an attractive entry price. --- We are very
optimistic about OPMR's expansion opportunities and positive feedback we are
hearing from its customers. We are expecting a solid quarter with possible
upside to our U-Scan installation projection. We would be buyers at this level.
Investment Conclusion
At roughly 43x 2001 our EPS estimates and almost 6x our 2001 revenue estimates
OPMR's valuation may seem a little lofty. However, we are projecting EPS to
grow at a CAGR in excess of 70% over the next 3-5 years. We looked at several
companies in OPMR's public peer group (technology/consumer goods) and found that
the group on average is trading roughly in-line with its projected growth rate.
Given its strong visibility, market leadership position and the opportunity to
penetrate new markets, we believe OPMR can trade in line with is growth rate
and are setting a 12-month price target of $65 or 70x our 2001 EPS estimate of
$0.92. We would look for several positive catalysts over the next year such as
upside earnings surprises, new customer announcements and market expansion to
boost the stock higher and rate the shares a Strong Buy (1) with a $65 price
target.
Obewon/Valuation Guy |
