*******Special Report******** Vol. 2, No. 27, May 17, 2000
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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
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Research Investment Group is not a Registered Investment Advisor or a
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Prior to publication of this report, the Company reviewed and approved the
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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
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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
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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. |
