To all:
Considering Global Positioning Systems with CSY;
- 400% Revenue Growth Expected in 4th Quarter
as Differential GPS (Global Positioning System) Demand Grows -
CSI “BUY” Recommendations:
Communication Systems International (CSI) of Calgary (CSY:TSE) has received
a “BUY” rating from Technology Research Analyst, Michael F. Hill, of Acumen
Capital Partners. The positive recommendation follows strong 3rd quarter
results from CSI and anticipated record 4th quarter revenues for the period
ended December 31st, 1998. Revenues in the 4th quarter are expected to be
up 400%.
In his report, Mr. Hill estimates that “CSI will exit fiscal 1998 with $8
million in revenues (85% revenue growth over fiscal 1997) and $0.07 per
share (basic, pre-tax)” Mr. Hill also states that “CSI maintains a strong
balance sheet with an estimated cash position of $0.18 per share, working
cap of $2.5 million and no debt.”
The report concludes with a “BUY” recommendation and says to look for a
“medium-term target stock price in the $1.00 range based on a base case
revenue assumption of $10 million and earnings of $0.10 per share (basic,
pre-tax).”
Mr. Hill's financial projections for CSI are as follows:
Period Sales EPS* P/S P/E
1997A $4.4M ($0.65) 1.0x n/a
1998E 8.0M $0.07 0.5x 9.4x
1999E 10.0M $0.10 0.4x 6.6x
*Pre-Tax (however CSI has $4 million of tax credits available)
SHARE STRUCTURE
Outstanding 6,430,000
Fully Diluted 7,415,000
Management Held 42%
CSI designs and manufactures radio receiver products that utilize
differential global positioning system technology (DGPS). GPS is a global
standard in technology which allows individuals to determine their location
on earth using a constellation of 24 orbiting satellites. CSI's
Differential GPS increases the accuracy of GPS to within 1 to 5 meters, a
substantial improvement over regular GPS accuracies of only 100 meters. It
is used in a wide range of applications including aviation, marine,
surveying and mapping, precision farming, vehicle tracking, natural resource
management, and recreation. AVL – Auto Vehicle Location - represents the
GPS industry's largest potential application as auto manufacturers worldwide
have begun to offer GPS navigation and safety features as an option. The
GPS industry is expected to generate more than $8 billion in annual sales
worldwide by the year 2000, up from only about $1.2 billion in 1995.
In 1998, CSI introduced a low cost, high performance version of its
differential technology making it cost effective for mass adoption. Rapid
market acceptance and rave reviews from customers have helped propel CSI to
record revenues and earnings.
Mr. Hill is bullish on the DGPS industry, reporting that “continued
worldwide expansion of this industry bodes well for CSI, which is recognized
as the industry leader in supplying DGPS technology. A recent GPS market
study has forecasted a significant growth in DGPS based applications over
the next few years from a current penetration of rate of 10%. CSI is also
benefiting from increased activity in the GIS (Geographical Information
Systems) market where CSI has experienced a 400% growth rate in its GIS
revenues over the past year.”
In addition to the Acumen Research Report, CSI has received a lot of
attention recently from some highly regarded independent investment
newsletters. CSI has received three such “BUY” recommendations since
September 1998, namely:
(1) Penny Stock Reporter investment newsletter rated CSI as “September's
Speculative Stock Pick of The Month”;
(2) Parker's Periscope report (written by Brian Parker) of Jennings Capital
Inc. chose CSI as one of three selections for best high risk, high reward
small company investments in the January/February, 1999 issue; and
(3) CanStock's “Buy Low, Sell High!” investment newsletter featured CSI as a
recommendation in January 1999;
Most recently, in CanStock's well known Buy Low, Sell High! report, Grant
Robertson concludes that CSI “is poised for considerable further growth as
the global network of DGPS reference stations grows, more applications are
developed, and as additional OEM supply agreements are consummated.
Management conservatively projects that CSI's revenues and earnings will
rise to at least $9.5 million and $625,000 or $0.097 per share, respectively
in 1999. Based on a price/earnings multiple of 10x, CSI's share price
should rise to the $0.97 level within the next 12 months.”
CSI experienced a difficult year in 1997 with the delay of its next
generation product the “SBX-2”. However, the product was in production by
the beginning of 1998, resulting in record revenues. Mr. Robertson provided
the following analysis in the Buy Low, Sell High! report:
“The new high-performance digital SBX-2 [differential] receiver, which was
delivered to long-time customers in late 1997 for testing, is smaller, more
functional, more reliable, and cheaper than competitors' products. In 1998,
the company released new DGPS and combined GPS/DGPS [differential] receivers
based on the SBX-2 engine. In anticipation of the launch of the SBX-2, the
company moved to an expanded manufacturing and assembly facility in Calgary
capable of supporting annual sales of about $30 million.”
“The SBX-2 immediately received strong support from original equipment
manufacturer (OEM) customers. Sales to OEM customers accounted for roughly
70% of sales. Notable customers include Simrad, Northstar, Furuno,
Achtech/Magellan, Rockwell, and Topcon.”
CSI INFORMATION REQUESTS
To receive the above reports on Communication Systems International in full,
or if you would like annual reports or complete investor information
packages, please contact Cory Pala at The Equicom Group Inc. at:
Email: cpala@equicomgroup.com
Website: www.equicomgroup.com
Tel: 416-815-0700 or 800-385-5451
Fax: 416-815-0080
For online CSI information, visit CSI's website, at www.csi-dgps.com . |
