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Biotech / Medical : Merge Healthcare Inc.

MRGE 0.00200

0.0%

Oct 31 9:30 AM EDT

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To: Sultan who wrote (120)	4/28/2015 7:43:22 PM
From: E_K_S	Read Replies (1) of 134

Re: MRGE earnings My takeaway is that fair value can be estimate at 3x sales (minimum value maybe more if a double digit grower). 2015 sales estimated by management is $248mlm. 98mln shares outstanding, so current fair value could be around $7.80/share. The key item I was listening for is something about growth rate of the two merged companies. Nothing specific there but YoY growth from MRGE was 7%. Also, Revenue recognition will stabilize as some of the new wins were not in this report. There still should be new revenues from cross account selling but that should end w/i the year. Their new services that are billed based on client per use pricing could/should be a grower especially as Medicare reimbursements prefer this type of client based accounting. Future growth here is not known so it's one thing to watch especially on when/how they recognize these revenues. Based on the above, if I assume a 7% growth rate and minimum 3x sales, my fair value price target for 2016 is $ 8.35/share and as much as $8.70/share. This could go much higher if revenues grow faster and/or service/software margins increase. My 24 month expected return s/d be 46% or an annual return of 32%. My most recent buy was yesterday at $5.15/share and my original Buy was when the merger was announced at $3.82 on 2/26/2015. This is a growing sector creating many productivity efficiencies in the health industry. The downside risk is small and it is now up to management to complete the merger and perhaps look at investing more into the marketing and sales force. First let's get the synergies from the merger. EKS

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