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Technology Stocks : Optimal Robotics Corp. (OPMR) -- Ignore unavailable to you. Want to Upgrade?

To: Sir Auric Goldfinger who wrote (219)	6/7/2000 3:22:00 PM
From: Obewon	Respond to of 325

OPTIMAL ROBOTICS R. SCOT CICCARELLI, CFA (OPMR*+# -- 39.31; BUY) (212) 885-4017 UK Licensing Deal Provides Big Upside w/Min Risk FY Ends --EPS-- Dec Curr Prior P/E 52-Week Range: 49.00-9.00 12/99A 0.09 Price Target: 60 12/00E 0.30 131.0x Market Cap.: $535.0 Mil. 12/01E 0.95 41.4x o Announces licensing agreement with Retec Europe LTD for the distribution of U-Scan in the UK. Optimal yesterday announced its intention to enter into a licensing agreement with Retec, whereby Retec will distribute Optimal's U- Scan self checkout system in the UK. OPMR is currently exhibiting the product to prospective customers for the first time in Europe, at a major trade show in England. We believe this exhibition coupled with finding a marketing partner are important first steps to penetrating what we believe is a major market opportunity. Given the continuing sales momentum of Optimal's U-Scan line of products, we continue to rate OPMR BUY with a 12-month price target of $60. o Licensing deal is low risk, but has high reward potential. While details are still being flushed out, we believe Optimal's risk in this venture is very minimal, as shipping the product and travel will essentially be the only costs associated with this project. No major infrastructure investments need to be made - the relationships and any infrastructure needed will be Retec's responsibility. On the revenue side, we believe Optimal will receive a large licensing fee on systems sold. If this becomes the final arrangement, the company will not receive as much revenue on a per-system sale basis as it currently does in selling the whole system, but would capture a portion of each sale in the form a licensing fee at 100% gross profit. We believe such an arrangement is a best-case scenario, since it provides significant upside potential to profitability while limiting associated costs and risks. o Initially, the systems will likely be assembled in the US, with final touches being made overseas. However, plans are already underway to assemble the U-Scan in Europe, so logistics should become far easier (and the product less expensive) once any customer commits to a major "rollout". INVESTMENT CONCLUSION We continue to believe 2Q is on track and that there could even be some upside potential to our revenue forecasts. For the quarter, we are forecasting 155 U-Scan sales and just under $15.7 million in revenue vs. 68 systems and $7.0 million in revenue in 2Q99. We are also projecting 2Q earnings will rise dramatically, as pretax income should jump by over 400% to $2.19 million from $430,000, and EPS should more than double to $0.10 vs. $0.04 (assuming full taxation last year) despite a 32% increase in diluted shares outstanding. Further, this profit performance should occur despite the company's relationship with PSC, which is capping Optimal's current profitability and forcing the company to incur duplicate costs during preparations to take over the assembly operation on January 1, 2001. The company's real profitability potential should become much more apparent in 2001. We continue to rate OPMR BUY with a 12-month price target of $60. Obewon/VG