company report - vmbl

Company ReportInformation Technology

November 5, 2007 A Logical Choice Recommendation:

Logibec Groupe Informatique Ltd. Buy

Alex Grassino, MScInformation Technology Analyst

(514) [email protected]

Alex Grassino, MSc Information Technology Analyst 514-350-2855 [email protected] November 5, 2007

Logibec Groupe Informatique Ltd. A Logical Choice

Page

Logibec Groupe Informatique Ltd. ...................................................................... 3 Strategy: Organic Growth, Acquisitions To Drive LGI ............................................ 5 Share Structure............................................................................................... 7 Experienced Management, Board ....................................................................... 8 Q3/F07: Growth Flat, Revenue Quality Improves ................................................. 9 Moderate Organic Growth Going Forward.......................................................... 10 Valuation ...................................................................................................... 12 Risks............................................................................................................ 14 Financial Statements...................................................................................... 15 Appendix I - A Healthcare Support Software Primer ........................................... 18 Appendix II - Major Competitors ...................................................................... 21 Appendix III – Important Disclosures ............................................................... 22

Logibec Groupe Informatique Ltd.

2 Alex Grassino, MSc Information Technology Analyst 514-350-2855 [email protected] November 5, 2007

Investment Highlights

Logibec (LGI-T – $20.41)

Company Profile

Logibec develops, markets, supports and implements information systems for the health and social services sectors. Based in Montreal, Quebec, Logibec represents over 225 clients throughout Quebec and the rest of Canada, and serves 3,400 senior living communities and long-term care facilities throughout the United States.

Source: BigCharts.com

Buy – Target Price: $25.00

We are initiating coverage on Logibec with a Buy rating and a one-year share price target of $25.00, implying a 22.5% ROR. We derive our share price target by applying a 20x multiple to the next twelve months, one year forward, EPS of $1.24 (i.e. Q4/F08E-Q3/F09E). We highlight the following:

♦ Strong management team: Logibec has a core of senior executives that have a demonstrated track record of successfully developing the existing business while consistently improving profitability.

♦ We believe the company’s growth strategy is one of acquisitions: Although some potential for organic growth exists as the company competes for smaller contracts in the United States, the most likely driver of revenue expansion is for Logibec to pursue smaller, bolt-on acquisitions. We note that the company has a demonstrated track record of successfully integrating companies. Since 2002, Logibec has made six acquisitions of different sizes ranging from $0.4 million to $38.2 million while consistently improving both its EBITDA and net margins.

♦ Financing in place: Logibec recently secured a US$10 million line of credit in the United States, bringing its total borrowing capacity up to $20.3 million. These credit facilities, along with its $7.7 million ($0.87 per share) in cash, enable the company to pursue smaller acquisitions as it sees fit.

♦ Robust Business Model: As of Q3/F07, Logibec had 80.7% recurring revenue, an EBITDA margin of 38.3% and a net margin of 16.1%. We further note that from the time period between 2002 and 2006, Logibec has successfully expanded these margins by 705 bps and by 887 bps, respectively.

Ticker LGI-T Shares O/S (M) 8.9Rating Buy Market Cap (M) $185Risk High Float O/S (M) 6.9Price $20.41 Float Value (M) $1411-Yr Target $25.00 Avg Daily Volume (K) n/mDividend $0.00 Control Blocks1-Yr ROR 22.5% C. Roy - 22.9%52-Wk High-Low $21.25-$14.50 -Next Reporting Management 27.7%Valuation 20x P/E 1-year forward

Fully Diluted EPS From Continuing Operations (Septemder 30 Year End)Q1 Q2 Q3 Q4 Annual

F2006 $0.15 A $0.16 A $0.19 A $0.23 A $0.74F2007 $0.19 A $0.26 A $0.21 A $0.21 $0.87F2008 $0.21 $0.29 $0.27 $0.29 $1.05F2009 $1.31

EBITDA (M)Q1 Q2 Q3 Q4 Annual

F2006 $3.5 A $3.7 A $4.4 A $4.3 A $15.9F2007 $4.0 A $5.3 A $4.4 A $4.5 $18.2F2008 $4.3 $5.3 $5.0 $5.0 $19.5F2009 $20.9Source: Company Reports; Thomson One; LBS Estimates.

Market Data

November-07




Logibec – Buy, $25.00 Target Price

We are initiating coverage on Logibec with a Buy rating and a one-year share price target of $25.00, implying a 22.5% ROR. We derive our share price target by applying a 20x multiple to the next twelve months, one year forward, EPS of $1.24 (i.e. Q4/F08E-Q3/F09E).

Investment Thesis

Consolidation And Tight Management

Although potential exists for organic growth in the United States, we believe that Logibec’s key driver of revenue growth going forward will be acquisitions. In doing so, we believe that Logibec will expand its position as an important player in the long-term healthcare sector in selected regions of North America. We note that Logibec’s management has a demonstrated history of successful integration of companies into its portfolio. Moreover, Logibec has experienced expanding EBITDA and net margins in each of the last four years. We believe that there is room for further improvement on this front, which should accelerate earnings growth.

Helping Medical Facilities Run Smoothly

A Provider Of Healthcare IT

Logibec develops, markets, implements and supports information systems for the health and social services sectors. In particular, Logibec focuses on administrative management, patient and clinical management, and business intelligence management. Logibec currently segments its revenue along geographic lines:

♦ Canada: a key player in Quebec. 72.6% of Q3/F07 revenue was generated in Canada, with the bulk of sales coming from the province of Quebec. We note that the company also has a presence in Alberta, where Logibec has implemented its Clinibase software package in the Calgary area, and in Manitoba. Overall, Logibec serves over 225 clients throughout Quebec and the rest of Canada.

♦ United States: a national player. 27.4% of Q3/F07 revenue was generated in the United States. Logibec marked its entry into the American sub-acute healthcare market with the acquisition of MDI Technologies in June 2005, and the subsequent acquisition of Monette Information Systems Corporation in March 2006. We note that Logibec has since made two further acquisitions in the United States (Ideal Software and Choice Systems), which both also cater to the long-term healthcare/ assisted living sub sectors of the healthcare IT sector. Through its wholly owned subsidiary, MDI Technologies Inc., Logibec serves approximately 3,400 senior living communities and long-term care facilities throughout the United States as of the end of Q3/F07.



Good Segmented Data In addition to revenue breakdown, Logibec provides good income statement and balance sheet data for each of its two segments. Exhibit 1 provides a summary of segmented data as of Q3/F07:

Canada ($ Million) United States ($ Million)Revenue 8.2758 Revenue 3.1% of Total 72.6% % of Total 27.4%Operating Expenses 4.9 Operating Expenses 2.1% of Total OpEx 69.6% % of Total OpEx 30.4%EBITDA Margin 40.8% EBITDA Margin 31.6%Fixed Assets 3.1 Fixed Assets 0.7Intangible Assets 12.3 Intangible Assets 13.2Goodwill 7.0 Goodwill 29.0Total Assets 37.1 Total Assets 47.7Source: Company Reports.

Exhibit 1: Selected Segmented Data (Q3F07)

Products Divisible Into Three Categories

Although Logibec’s segmented information is given according to geographical lines, the company has three general product categories. Below is an overview of the areas and a summary of their functionalities:

♦ Administrative software packages: Logibec’s major product offering in this area, Espresso, helps healthcare institutions effectively address a range of administrative areas including financial and budget management, materials management and inventories, HR and payrolls management, and time/scheduling management. Although Espresso is a software-based product, Logibec has also created eEspresso, a web-based applications that provides clients with the ability to address certain functions in a decentralized manner. Variations of this product line are available in both Canada and the United States.

♦ Patient and clinical management software packages: Logibec also provides various specialized software suites designed to address various other needs in hospitals, specialized practices, and other long-term care facilities. Below is a brief summary of the packages offered in Canada: • Clinibase (eClinibase), Schied Plus, and Clinibase CI are software suites that are

designed for acute care, long-term care, and multipurpose facilities. These products are currently deployed in regions of Quebec, Manitoba, and Alberta, and contain several modules relating to patient admission and resource scheduling.

• I-CLSC is the software package used by all community health centers in the province of Quebec.

• Med-Echo Plus is a code-based data-warehousing package designed for detailed patient stay records.

• SIURGE is the standard for emergency room software used throughout Quebec. • Workload is operational software designed for offer in various specialties, allowing the

user to take advantage of operational needs while incorporating a resource scheduling package.



• Caretools gives care providers fast access to clinical information over a network. • Pharmacy is designed to help pharmacists inside acute care and long-term care facilities

monitor drug dispensation. In addition to its suite of Canadian clinical solutions, Logibec also operates various software solutions designed for the long-term care industry in the United States under their subsidiary, MDI Technologies. Key modules include RNet Therapy, ULTRACare, and REPS care. On the clinical side, MDI offers Clinical Care, Charting, and Med Pass.

♦ Business intelligence solutions: Logibec offers business intelligence suites in both Canada and the United States (marketed as Power Cube), which integrates different offerings on strategic, tactical, and operational levels.

Strategy: Organic Growth, Acquisitions To Drive LGI

Some Organic Growth Expected In The United States

Although there is some opportunity for Canadian expansion, Logibec’s organic growth strategy is largely focused on developing the US business. Given that most potential clients in the United States are privately run organizations, Logibec has focused sales efforts on that market, given the length of the sales cycle relative to government contracts. We note that Logibec also has significant market positions in the Provinces of Quebec, Alberta and, to a lesser degree, Manitoba, but has elected not to aggressively pursue additional opportunities in other Canadian markets for the time being.

Acquisitions To Drive Growth

Acquisitions should play an important role in Logibec’s development going forward. As outlined in Exhibit 2, Logibec has acquired five companies of varying sizes between $0.4 million and $38.2 million since June 2005. The most notable of these purchases was MDI Technologies (MDI), which marked Logibec’s entry into the American healthcare software market. Each of Logibec’s additions have so far been smaller regional players that have provided the company with a foothold in a given regional market, or have expanded on Logibec’s product offerings (as with Choice Systems and Ideal Software). We believe this strategy to be an integral component of Logibec’s revenue growth going forward, given that one of the major barriers to entry in this sub-sector is the logistical difficulty associated with switching software platforms.

Date Target Location Size ($M)May-07 Ideal Software Inc. US 6.7Mar-07 Choice Systems Internet LLC US 3.0Jul-06 Lagibert Inc. CAN 0.4Mar-06 Monette Information Systems Corporation US 2.7Jun-05 MDI Technologies Inc. US 38.2

Centre Hospitalier de l'Universite de Montreal, Information Technology Business

Dec-00 Informatique Laliberte Lanctot Inc. CAN 0.83Source: Company Reports.

12.5Dec-02

Exhibit 2: Acquisition Summary

CAN



Logibec Has A Successful Track Record Of Integration

As outlined in Exhibit 3, we note that through five acquisitions of varying sizes in the last five years, Logibec has consistently improved EBITDA and Net margins over that period while experiencing revenue growth. The company has so far been able to increase its net margin by 887 basis points during the four-year period between 2002 and 2006 (to 16.4% at FYE2006). We note that this drastic improvement is partly due to lower interest payments as debt has been paid down. During that same period, Logibec has been able to improve EBITDA margin by 705 basis points (to 39.1% at FYE2006), which to some extent reflects the scalability of the business as SG&A costs have increased at a lower rate than revenue growth. We note that as of Q3/F07, Logibec’s EBITDA margin and net margins were 38.3% and 16.1%, respectively.

Exhibit 3: Historical EBITDA And Net Margins

0%5%

10%15%20%25%30%35%40%45%

F2002 F2003 F2004 F2005 F2006EBITDA Margin Net Margin

Source: Company Reports.

EBITDA Margin: +705 bps

Net Margin: +887 bps

Acquisitions Have Been Responsibly Made

Another part of the reason why Logibec has been able to expand margins with this degree of success has been the cautious approach used to evaluate target companies. Although purchases have been made for both client lists and the acquisition of technology to incorporate into their product offering, companies have typically been EBITDA positive with high levels of recurring revenue. This development has partly been due to Logibec’s focus on maintaining their own margins, generally using an EBITDA multiple as a key component of pricing potential acquisitions.

Sub-Acute Care Remains Logibec’s Focus Of Expansion

As has been demonstrated by its most recent US acquisitions, Logibec has made a conscious decision to focus on the sub-acute (i.e. long-term care) side of the healthcare sector. Since Logibec’s acquisition of MDI, three of the company’s four acquisitions (Ideal Software, Choice Systems, and Monette) have been geared towards servicing long-term care facilities. Given the ageing American population, the fragmented nature of the software providers, and the large number of potential clients (as outlined in Appendix A, there are approximately 10,000 hospitals in North America, and 50,000+ long-term care facilities), we believe that focusing on this segment is a wise strategic decision, positioning Logibec to grow with a sector that should continue to benefit from long-term growth as an ageing American population increasingly requires such facilities.



Now Is A Good Time For Logibec To Buy

We believe that the current economic environment is conducive to US acquisitions. With the Canadian dollar currently trading at a premium to the US dollar, now is the ideal time for Logibec to continue its path of expansion. Moreover, the acquisition of US assets at current exchange rates could prove beneficial to the balance sheet in the form of foreign exchange gains should the Canadian dollar weaken relative to the US dollar. We note that in order to give itself some measure of flexibility, Logibec has already secured a US$10.0 million credit facility for the express purpose of pursuing strategic acquisitions, bringing the company’s total current borrowing capacity to CAD$20.3 million, of which CAD$7.3 million has been used to finance recent acquisitions. As the size of the facility suggests, we believe that Logibec’s most likely course of action going forward will be to pursue smaller, more regional players that have existing client lists that Logibec could absorb. However, should a compelling larger opportunity develop, we do not believe that Logibec will have difficulty raising additional funds.

Share Structure

Shares Are Closely Held

The company’s shares are closely held. As illustrated in Exhibits 4 and 5, The single largest shareholder in Logibec is the company’s CEO, Claude Roy, with a 22.9% stake in the company. The rest of management owns approximately 4.9% of the shares outstanding, and institutional investors account for another 31.6% of holdings. We note that the company has a low share count, with only 8.9 million shares outstanding, and that the top five holders account for approximately 48.0% of shares outstanding.

Shareholder StakeClaude Roy 22.9%Natcan Investment Management 9.8%Bissett & Associates 6.3%Natcan Investment Management 5.0%Northwest Mutual Funds 4.0%TOTAL 48.0%Source: Bloomberg.

Exhibit 4: Top 5 Shareholders

Exhibit 5: Share Structure

Other40.7%

Other Mgmt.4.9%

Claude Roy22.8%

Institutional 31.6%

Source: Bloomberg.



Experienced Management, Board

Experienced Management Team Has A 27.7% Stake

The senior management team is deep, with strong backgrounds in their areas of focus. As summarized in Exhibit 6, Management currently has a 27.7% stake in the company. We note that Key management includes the following people:

♦ Claude Roy, MBA: Mr. Roy founded Logibec in 1982 and has been the company’s President and Chief Executive Officer since then. He also sits on the Board of Directors. He holds an engineering degree from Université de Montréal and an MBA from HEC Montréal. He also sits on the Board of Directors for Mediagrif International Technologies Inc. As mentioned earlier, Mr. Roy holds 22.9% of the company’s total shares.

♦ André Paiement: Mr. Paiement has been Chairman of the Board of Directors since 2002, and has served on the Board in various capacities since 1986. Mr. Paiement currently provides legal consulting services; prior to that, Mr. Paiement was Assistant General Counsel at Bell Canada, where he practiced labour law between 1977 and 2004.

♦ Gilles Laporte: Mr. Laporte joined Logibec in 2001 as Senior Vice President, Business Development. Prior to that, Mr. Laporte worked Societé d’Information Banque Nationale (SIBN), where he served as VP, business development. Prior to that, Mr. Laporte spent 20 years working at Calculus (including 17 years as president form 1980 to 1997), an IT firm specializing in human resources software packages, up until it merged with SIBN.

♦ Marc Brunet, MBA: Mr. Brunet has been CFO of Logibec since March 2004. Before assuming his current role, Mr. Brunet worked at PEAK Financial Group, where he served as VP, Finance and Administration from 2003-2004, and as CFO of Proxima Systems Ltd. between 2000 and 2002. Prior to that, Mr. Brunet worked at Merrill Lynch Canada Inc. from 1992-1999, where he worked in investment banking and served as Senior Vice President/Director and Vice President.

♦ Marc Malouin, CA, CPA: Mr. Malouin had acted as Secretary of Logibec since 1982, and has been on the Board of Directors since 1992. He is currently Chairman of the Audit Committee and sits on the Human Resources Committee. He is now Head of Business Development for Bombardier Aeronautical. Prior to that, Mr. Malouin served in various senior financial roles with Algo Group Inc., Bombardier Inc., Quebecor Inc. and Provigo, and had spent ten years working at Ernst and Young. Mr. Malouin also serves as a director of Sand Technology Inc.

000's Of % Of Shares Total

Roy, Claude 1,994 22.9%Gauthier, Andre 131 1.5%Roy, Robert 109 1.2%Trudeau, Sylvain 82 0.9%Laporte, Gilles 67 0.8%Brunet, Marc 35 0.4%TOTAL 2,418 27.70%Source: Bloomberg.

Exhibit 6: Summary Of Insider Holdings



Board Strong, Experienced

Logibec’s board consists of six directors, four of whom are independent. We note that Robert Roy is Claude Roy’s brother. Further details are provided in Exhibit 7.

Board Member OccupationHuman Resources Audit

André Paiement 1,2 Lawyer XClaude Roy, ING, MBA President, CEO of LGI

VP, Finance and Economic Affairs, Centre Hospitalierde l'Université de Montréal (CHUM)

André Gauthier 2 President, André Gauthier Holding Inc. XTreasurer, Director of Finance and Treasury, Société de Transport de Montréal (STM)

Robert Roy President, Lotec Inc. 1: Chairman of the Board; 2: Independent Board MemberSource: Company Reports.

Marc C. Malouin, CA, CPA 2

Committe MembershipExhibit 7: Board Of Directors Composition

Jocelyn Boucher 2 X X

X X

Q3/F07: Growth Flat, Revenue Quality Improves

Revenue Growth Flat In Q3/F07

On July 26th, Logibec announced Q3/F07 results. Although revenue for the nine month period ending June 30th was up 11.2% (to $33.7 million) Y/Y, sales increased by only 0.9% (to $11.4 million) Y/Y during the quarter. However, we highlight that underlying flat revenue growth was a shift towards increased levels of recurring revenue, which accounted for 80.7% of sales during the quarter. On a segmented basis, we note the following:

♦ Canadian revenue down 2.7% Y/Y in Q3/F07, to $8.3 million. However, we note that as a comparable period, Q3/F06 was a difficult quarter to beat given that it had been bolstered by non-recurring revenue recognition for professional services rendered, and by the sale of computer equipment. Recurring revenue increased by 4.4% (to $6.3 million) Y/Y, implying a recurring revenue rate of 75.9%.

♦ American revenue up 13.6% Y/Y, to $3.1 million. During this period, recurring revenue increased by 26.8%, to $2.9 million (which accounted for 93.6% of sales), due to a combination of organic growth and the acquisitions of REPS and Choice Systems. We note that this improvement is against the backdrop of a weakening US Dollar, which has to some extent eroded revenue growth.

Balance Sheet Profile: Still Healthy

During Q3/F07, Logibec increased its total indebtedness to $7.3 million, drawing down on its revolving term loans to finance the acquisitions made during the third quarter. Despite this, the company has remained in a net cash positive position ($0.4 million as of Q3/F07). We highlight that Logibec has a history of quickly repaying its loans (the $28.3 million loan used to purchase MDI in June 2005 was repaid in full by the end of F2006), and do not expect the company to carry debt for an extended period of time.



Company Continues To Generate Free Cash Flow

In Q3/F07, Logibec generated $15.0 million in cash from operating activities, and approximately $14.8 million in free cash flow. As outlined in Exhibit 8, we note that Logibec has a demonstrated track record of solid cash flow generation. Since 2002, cash from operations has increased at a compound annual growth rate (CAGR) of 65.1%. Free cash flow has historically tracked close to operating cash flow, given Logibec’s minimal capital expenditure requirements; FCF CAGR was even more pronounced, increasing by 88.2%.

Exhibit 8: Free Cash Flow

$0$2$4$6$8

$10$12$14$16$18$20

F2002 F2003 F2004 F2005 F2006

Milli

on


FCF CAGR: 88.2%

Moderate Organic Growth Going Forward

Acquisitions To Contribute To Growth In F2008

As outlined in Exhibit 9, we expect revenues of $45.2 million, $49.7 million, and $53.3 million in F2007 F2008, and F2009 respectively. Included in this growth rate are the additions of Ideal Software (REPS) and Choice Systems, which should contribute approximately 6.0% to total revenue growth in F2008. The company expects to generate an additional $2.0 million in recurring revenue from the REPS Software business, and $0.4 million from Choice Systems during F2008. We expect that the United States division will experience Y/Y revenue growth of approximately 15.3% in F2007, 25.0% in F2008 before moderating to 15.0% in F2009, for sales figures of $11.3 million, $14.1 million and $16.2 million, respectively. In Canada, we expect revenue growth to moderate, increasing by 9.5% in F2007, 5.0% in F2008 and 4.0% in F2009 to reach $33.9 million, $35.6 million, and $37.1 million, respectively.



Exhibit 9: Revenue Growth

$0

$10

$20

$30

$40

$50

$60

F2004 F2005 F2006 F2007E F2008E F2009E

Rev

enue

(Mill

ion)

0%5%10%15%20%25%30%35%40%

% G

rowt

h

Revenue Forecast Revenue Growth


Earnings Should Continue To Increase Due To Higher Revenue, Better Margins

Our estimates call for EPS of $0.87 in F2007, $1.05 in F2008, and $1.31 in F2009. As summarized in Exhibit 10, we expect that Logibec’s EPS and net margins will continue to improve slightly going forward. In particular, we believe that the scalability of Logibec’s business implies that SG&A expenses should increase at a slower pace than revenue growth. Moreover, depreciation as a percentage of revenue should continue to decline slightly, given Logibec’s limited capital expenditure requirements.

Exhibit 10: EPS Evolution

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

F2002 F2003 F2004 F2005 F2006 F2007E F2008E

$ Pe

r Sha

re


EPS CAGR: 36.1%

We Expect Seasonality To Persist In Cash Flows

We believe that Logibec will continue to generate cash from operations (CFO) of $16.1 million in F2007, $22.6 million in F2008, and $23.4 million in F2009, implying free cash flows of $15.3 million, $21.8 million, and $22.5 million. We expect that, on a quarterly basis, changes in non-cash working capital will remain jagged due to spiking levels for accounts receivable and deferred revenue during the second and third quarters. We note that this trend reflects the fact that Logibec’s contracts with the Canadian provincial governments are generally paid in full near the beginning of the governmental fiscal year, which is April 1st for all provinces.



Balance Sheet Expected To Remain Strong

Although Logibec has historically used debt to finance acquisitions, we believe that the company will fully repay its loans outstanding by Q3/F08, barring additional debt incurred by acquisitions. We note that as of Q3/F07, Logibec had $7.7 million in cash on its balance sheet, versus $7.3 million in debt. Going forward, we forecast the company will continue to experience improving cash balances in each of the next two years; we have estimates of $9.7 million, $27.3 million, and $49.8 million in F2007, F2008, and F2009, respectively. We highlight that these figures are highly sensitive to future acquisitions, which we believe are likely to occur given that corporate activity remains an integral part of Logibec’s expansion plans.

No Acquisitions Factored In

We expect that Logibec will be active on the acquisition front going forward. However, given the level of uncertainty over the size, cost, and even the number of potential acquisitions, we have not factored them into our estimates. We note that Logibec’s profile has so far been to pay between multiples of up to 6x forward EBITDA for companies with high levels of recurring revenue and a compelling strategic fit, and do not expect a significant divergence from this pattern; we note that Logibec currently trades at 9.5x forward EBITDA. Although Logibec could conceivably pursue larger transactions, the company has so far used MDI Technologies as the vehicle for American acquisitions and has elected to pursue smaller operations (at $6.7 million, the Ideal Software acquisition has been the largest purchase since MDI), adding 5% or less to consolidated revenue. Logibec has then focused on rapidly integrating purchased companies.

Valuation

Buy Rating; Target Price: $25.00

We are initiating coverage on Logibec with a Buy rating and a one-year share price target of $25.00, which implies a 22.5% rate of return. We derive our share price target by applying a 20x multiple to the next twelve months’ one year forward EPS of $1.24 (i.e. Q4/F08E-Q3/F09E). We believe that acquisitions should drive future share price increases.

Publicly Traded Direct US Comps Difficult To Come By

Estimates for directly comparable companies are sparse. There are no forecasts available for Logibec’s Canadian comparables, with the largest company (Medisolution) having a market capitalization of only $25.3 million. In the United States, although the larger companies like Cerner, Eclipsys, and McKesson offer similar products, they are generally more focused on the acute-care side of the industry, and Logibec’s other direct American competitors (as outlined in Appendix 1) are either subsidiaries of larger corporations or are smaller, private firms with little visibility.



North American Healthcare IT Solutions ProvidersTicker Last EPS Growth

5-Nov-07 Mkt. Cap. Last Y/E CFY2007 NFY2008 NFY2008 CFY2007 NFY2008 CFY2007 NFY2008LOGIBEC GRP INFORMATIQUE LGI-T $20.41 $185 $0.74 $0.87 $1.05 ** 20.7% 23.5x 19.4x 1.34 0.94LORIAN CAPITAL CORP MWX-V $0.16 $10 ($0.04) n/a n/a n/a n/a n/a n/a n/aMEDISOLUTION LTD MSH-T $0.18 $27 $0.00 n/a n/a n/a n/a n/a n/a n/aQHR TECHNOLOGIES INC QHR-V $0.35 $6 ($0.03) n/a n/a n/a n/a n/a n/a n/a

CERNER CORP * CERN-O $58.02 $4,742 $1.34 $1.74 $2.14 23.2% 33.4x 27.1x 1.13 1.17ECLIPSYS CORP * ECLP-O $24.66 $1,306 $0.57 $0.79 $1.01 28.5% 31.4x 24.4x 0.83 0.86HEALTHSTREAM INC * HSTM-O $3.35 $75 $0.05 $0.08 $0.22 175.0% 41.8x 15.2x 0.70 0.09QUADRAMED CORP * QD-O $2.60 $203 $0.14 n/a n/a n/a n/a n/a n/a n/aMCKESSON CORP * MCK-O $64.82 $19,770 $3.15 $3.33 $3.78 13.6% 19.5x 17.1x n/a 1.26TRIZETTO GROUP INC * TZIX-O $15.98 $730 $0.33 $0.50 $0.66 32.1% 31.9x 24.1x 0.62 0.75

Average Excluding Logibec: 31.6x 21.6x 0.82x 0.83xPremium (Discount) To Peers: -8.1x -2.2x 0.52x 0.11x* USD; ** LBS estimates; Others I/B/E/S.Source: I/B/E/S; Bloomberg; LBS Estimates.

Exhibit 11: Relative Valuation (Millions Of Dollars Except Per Share Amounts)

P/E PEGI/B/E/S EST. EPS

We Are Comfortable With A Multiple Of 20x

We have elected to use a forward P/E multiple of 20x, which we believe represents an appropriate liquidity discount relative to peers and is consistent with historic valuation. As outlined in Exhibit 12, Although the company’s historic forward P/E has fluctuated between 7.4x and 24.2x (in the months following the MDI technologies acquisition), levels appear to have stabilized in the high teens in recent quarters since the end of F2005.

Exhibit 12: Historic Forward P/E

0x

5x

10x

15x

20x

25x

30x

Sep-01Mar-02

Sep-02Mar-03

Sep-03Mar-04

Sep-04Mar-05

Sep-05Mar-06

Source: Company Reports, Bloomberg.

LGI Trades At A Discount To Comps

Logibec trades at a discount to its comparables in the United States. As summarized in Exhibit 11, From a P/E perspective, the only companies that have forecast earnings available are Cerner, Eclipsys, Healthstream, McKesson, and The Trizetto Group, which are currently trading at 27.1x, 24.4x, 15.2x, 17.1x, and 24.1x F2008 earnings, respectively, for an average multiple of 21.6x next fiscal year’s (NFY) earnings (see Exhibit 11). We note that Logibec currently trades at 19.4x F2008 earnings, which represents a discount of 2.2x relative to its comparables, but note that a discount is warranted due to the company’s lack of liquidity and Canadian Listing. Moreover, although Logibec’s F2008 PEG ratio of 0.94x is above the group average of 0.83x, Healthstream’s PEG ratio is a very low 0.09x in F2008; excluding this company, the PEG ratio would 1.01x, or in line with Logibec for F2008.



Risks

Foreign Exchange Risks

Logibec currently derives 27.4% of their business from the United States, exposing the company to fluctuations in the exchange rate between the US and Canadian dollar. Moreover, as Logibec continues its expansion, this percentage should continue to increase. Given the recent run-up in the Canadian dollar, Logibec’s revenue is currently being adversely affected by recent movements. We note that the company has so far not hedged against foreign exchange gains/losses.

Dependence On Key Clients

Logibec has a high concentration of clients that operate under the umbrella of Quebec’s health and social services system. Consequently, any changes relating to either a reorganization of the network or shifts in the regulatory environment (particularly with regards budget allocation) made by the Ministère de la Santé et des Services Sociaux could adversely affect revenues.

Acquisitions Logibec has a track record of successfully acquiring and integrating companies. However, there is no guarantee that future acquisitions the company might wish to pursue will have the same effect going forward.

Technology Substitution

There is a risk that other software companies could enter Logibec’s space and either provide a new innovation on a given product or offer services at lower cost to the employers. We further note that the protection of intellectual property could affect Logibec due to patent infringements on either side of the fence. Alternately, there is a risk that larger clients could elect to develop their software in-house.

Liquidity There is very little liquidity on Logibec’s trading volume, making it difficult to build up or exit positions in the company.



Financial Statements

CAD$ Million F2004 F2005 F2006 Q1/F07 Q2/F07 Q3/F07 Q4/F07E F2007E F2008E F2009ESales 27.8 29.7 40.8 10.0 12.3 11.4 11.5 45.2 49.7 53.3Cost of Goods Sold 12.9 13.0 16.3 4.1 4.7 4.9 4.9 18.6 21.1 22.6Gross Profit 14.9 16.6 24.5 5.8 7.6 6.5 6.6 26.6 28.6 30.6

SG&A 5.1 5.6 8.3 1.8 2.3 2.1 2.1 8.3 9.0 9.7Stock Based Compensation 0.0 0.2 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0EBITDA 9.8 10.9 15.9 4.0 5.3 4.4 4.5 18.2 19.5 20.9

Amortization 1.1 0.9 1.1 0.3 0.3 0.3 0.3 1.1 1.0 1.0Amortization of Intangible and Other Long Term Assets 4.0 4.2 5.2 1.3 1.4 1.3 1.3 5.3 4.7 3.8EBIT 4.6 5.7 9.7 2.5 3.7 2.8 2.9 11.9 13.8 16.2

Income From Temporary Investments -0.1 0.0 -0.1 0.0 0.0 -0.1 -0.1 -0.2 -0.9 -2.1Financial Expenses 0.8 0.6 0.6 0.0 0.2 0.2 0.2 0.6 1.0 1.1EBT 4.0 5.2 9.1 2.5 3.5 2.6 2.8 11.4 13.7 17.2

Current Taxes 1.0 1.6 2.4 0.8 1.2 0.8 0.9 3.7 4.4 5.5Future Taxes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Net Earnings From Continuing Operations 3.0 3.6 6.7 1.7 2.3 1.8 1.9 7.7 9.3 11.7

Discontinued Operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Gain on Sale of Discontinued Operations 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Earnings 3.0 3.6 6.7 1.7 2.3 1.8 1.9 7.7 9.3 11.7

Weighted Average Shares Outstanding - Basic 6.7 7.4 9.0 8.9 8.9 8.8 8.8 8.8 8.8 8.8Weighted Average Shares Outstanding - Diluted 7.1 7.9 9.0 9.0 9.0 8.9 8.9 8.9 8.9 8.9

EPS From Continuing Operations $0.42 $0.45 $0.74 $0.19 $0.26 $0.21 $0.21 $0.87 $1.05 $1.31

Basic EPS $0.45 $0.48 $0.75 $0.19 $0.26 $0.21 $0.21 $0.87 $1.05 $1.32Diluted EPS $0.42 $0.45 $0.74 $0.19 $0.26 $0.21 $0.21 $0.87 $1.05 $1.31Source: Company Reports, LBS Estimates.

As a % of SalesCost of Goods Sold 46.5% 43.9% 39.9% 41.6% 38.0% 42.9% 42.5% 41.2% 42.5% 42.5%Gross Profit 53.5% 56.1% 60.1% 58.4% 62.0% 57.1% 57.5% 58.8% 57.5% 57.5%SG&A 18.3% 18.9% 20.4% 17.7% 18.7% 18.8% 18.5% 18.4% 18.2% 18.2%EBITDA 35.2% 36.6% 39.1% 40.4% 43.1% 38.3% 39.0% 40.4% 39.3% 39.3%EBT 14.3% 17.5% 22.4% 25.2% 28.5% 22.7% 24.0% 25.3% 27.5% 32.2%Net Earnings 10.8% 12.0% 16.4% 16.8% 18.7% 16.1% 16.3% 17.0% 18.7% 21.9%

Growth RateRevenue Growth 27.4% 6.9% 37.3% 5.7% 28.2% 1.3% 10.0% 10.9% 10.0% 7.1%

Canada na na na 1.6% 30.9% -2.7% 10.0% 9.5% 5.0% 4.0%United States na na na 19.8% 19.2% 13.6% 10.0% 15.3% 25.0% 15.0%

EDITDA Growth 39.1% 11.2% 46.8% 15.4% 41.7% -1.9% 5.3% 14.4% 7.1% 7.1%Net Income Growth 54.1% 19.1% 88.1% 20.0% 56.7% 4.7% -8.1% 16.9% 54.1% 43.1%

Tax Rate 24.6% 31.4% 26.7% 33.5% 34.4% 29.1% 32.0% 32.0% 32.0% 32.0%Source: Company Reports, LBS Estimates.

Exhibit 13: Income Statement

Exhibit 14: Income Statement Statistics



CAD$ Million F2004 F2005 F2006 Q1/F07 Q2/F07 Q3/F07 Q4/F07E F2007E F2008E F2009EAssetsCurrent AssetsCash 6.6 3.2 3.1 0.4 0.7 7.7 9.7 9.7 27.3 49.8Accounts Receivable 3.7 4.0 4.3 3.5 6.0 6.7 4.0 4.0 4.7 8.0Income Tax Credits Receivable 1.1 1.6 2.0 1.9 1.8 2.1 2.1 2.1 2.1 2.1Prepaid Expenses 0.3 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Income Tax Receivable 0.2 1.1 0.2 0.3 0.5 0.5 0.5 0.5 0.5 0.5Future Income Taxes 0.0 0.0 0.4 0.0 0.4 0.3 0.3 0.3 0.3 0.3Other 0.4 1.7 1.4 1.9 2.1 2.3 2.3 2.3 2.3 2.3Total Current Assets 12.2 12.0 11.3 8.1 11.5 19.7 19.0 19.0 37.3 63.1

Non-Current AssetsCapital Assets 4.5 4.6 4.1 4.0 3.8 3.7 3.7 3.7 3.5 3.4Goodwill 7.0 30.5 31.7 32.7 35.1 36.0 36.0 36.0 36.0 36.0Future Income Taxes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Deferred Charges 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Non-Current Assets 25.9 61.0 61.0 61.2 62.9 65.1 63.7 63.7 58.8 54.9Total Assets 38.2 72.9 72.4 69.3 74.3 84.8 82.7 82.7 96.1 118.0

Liabilities & Shareholders' EquityAccounts Payable & Accrued Liabilities 5.2 4.7 5.7 5.2 5.6 5.4 5.3 5.3 3.4 1.6Income Taxes Payable 0.1 0.3 4.1 1.9 3.0 0.9 0.8 0.8 -0.4 -1.4Deferred Revenue 7.1 10.0 11.3 8.3 4.7 19.6 17.9 17.9 29.3 42.2Current Portion Long Term Debt 1.8 4.6 0.0 0.0 4.6 1.1 1.1 1.1 1.1 1.1Future Income Tax Liabilities 0.0 0.0 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2Total Current Liabilities 14.1 19.5 21.3 15.6 19.0 27.2 25.2 25.2 33.6 43.8

Non-Current LiabilitiesLong Term Debt 2.8 7.8 0.0 0.0 1.1 6.2 4.2 4.2 0.0 0.0Future Income Tax Liabilities 3.6 9.2 7.3 7.5 7.6 7.2 7.2 7.2 7.2 7.2Restructuring Accruals 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Non-Current Liabilities 6.4 19.8 13.1 12.8 14.3 19.2 17.2 17.2 13.0 13.0Total Liabilities 20.5 39.4 34.4 28.4 33.4 46.4 42.4 42.4 46.5 56.8

Shareholders' EquityShare Capital 11.3 27.8 28.4 28.4 28.1 27.8 27.8 27.8 27.8 27.8Contributed Surplus 0.0 0.2 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5Foreign Currency Translation Adjustments 0.0 -2.1 -3.4 -2.1 -2.3 -4.8 -4.8 -4.8 -4.8 -4.8Warrants 1.2 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Retained Earnings 5.1 7.6 12.4 14.1 14.7 14.9 16.8 16.8 26.0 37.7Total Shareholders' Equity 17.6 33.6 37.9 40.9 40.9 38.4 40.3 40.3 49.6 61.3Total Liabilities & Shareholders' Equity 38.2 72.9 72.4 69.3 74.3 84.8 82.7 82.7 96.1 118.0Source: Company Reports, LBS Estimates.

Return On Equity (ROE) 19.2% 13.9% 0.0% 4.2% 5.6% 4.6% 4.8% 18.6% 19.2% 19.1%Book Value Per Share $2.49 $4.25 $4.19 $4.55 $4.56 $4.32 $4.53 $4.53 $5.58 $6.89Net Cash Per Share $0.93 $0.40 $0.34 $0.05 $0.07 $0.87 $1.10 $1.10 $3.07 $5.61Source: Company Reports, LBS Estimates.

Exhibit 15: Logibec Balance Sheet

Exhibit 16: Balance Sheet Statistics



CAD$ Million F2004 F2005 F2006 Q1/F07 Q2/F07 Q3/F07 Q4/F07E F2007E F2008E F2009EOperating ActivitiesNet Earnings 3.0 3.6 6.7 1.7 2.3 1.8 1.9 7.7 9.3 11.7Non-Cash Items:Amortization of Intangible Assets 4.0 4.2 5.2 1.3 1.4 1.3 1.3 5.3 4.7 3.8Future Income Taxes 1.3 1.2 -1.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0Stock-Based Compensation Expense 0.0 0.2 0.2 0.0 0.0 0.0 0.0 0.1 0.0 0.0Loss on Sale of Capital Assets 0.1 0.0 0.0 0.0 0.1 0.0 0.0 0.1 0.0 0.0Unrealized Forex Gains 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Decrease (Increase) in Non-Cash Working Capital 3.1 1.4 8.0 -5.2 -5.2 11.6 0.7 1.8 7.6 6.9Cash From Operating Activities 12.5 11.5 19.3 -2.0 -1.1 15.0 4.2 16.1 22.6 23.4

Investing Activities

Purchase of Capital Assets -3.4 -0.4 -0.6 -0.2 -0.2 -0.2 -0.2 -0.8 -0.9 -0.9Purchase of Intangible Assets -2.8 -2.2 -2.1 -0.5 -0.4 -0.5 0.0 0.0 0.0 0.0Business Acquisitions (Net of Cash) -0.1 -35.3 -3.2 0.0 -2.7 -6.3 0.0 0.0 0.0 0.0Other 0.1 0.3 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0Cash From Investing Activities -6.1 -37.6 -5.9 -0.4 -3.3 -7.0 -0.2 -0.8 -0.9 -0.9

Financing ActivitiesIncrease in Pension LiabilityShare Repurchase 0.0 -0.3 -2.3 0.0 -2.0 -2.0 0.0 -4.0 0.0 0.0Bank Indebtedness -8.0 7.7 -12.3 0.0 5.7 1.8 -2.0 5.5 -4.2 0.0Change in Non-Cash Financing Working Capital 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0Cash From Financing Activities -6.9 22.7 -13.7 0.0 3.7 -0.2 -2.0 1.5 -4.2 0.0

Effects of Exchange Rate Changes on Cash 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Increase (Decrease) in Net Cash -0.6 -3.4 -0.1 -2.4 -0.7 7.8 1.9 6.6 17.6 22.5Cash at Beginning of Period 7.1 6.6 3.2 3.1 0.7 0.0 7.8 3.1 9.7 27.3Cash at End of Period 6.6 3.2 3.1 0.7 0.0 7.8 9.7 9.7 27.3 49.8Source: Company Reports, LBS Estimates.

Operating Cash Flow 9.5 10.1 11.4 3.2 4.1 3.4 3.5 14.2 15.0 16.4 Change in Working Capital 3.1 1.4 8.0 -5.2 -5.2 11.6 0.7 1.8 7.6 6.9Total Sources 12.5 11.5 19.3 -2.0 -1.1 15.0 4.2 16.1 22.6 23.4

Capital Expenditures 3.4 0.4 0.6 0.2 0.2 0.2 0.2 0.8 0.9 0.9Free Cash Flow 9.1 11.1 18.8 -2.2 -1.3 14.8 3.9 15.3 21.8 22.5

Diluted Shares Outstanding 7.1 7.9 9.0 9.0 9.0 8.9 8.9 8.9 8.9 8.9

Free Cash Flow Per Share $1.29 $1.41 $2.07 ($0.24) ($0.15) $1.67 $0.44 $1.72 $2.45 $2.53Operating Cash Flow Per Share $1.34 $1.29 $1.25 $0.36 $0.45 $0.39 $0.39 $1.60 $1.69 $1.85Source: Company Reports, LBS Estimates.

Exhibit 18: Free Cash Flow

Exhibit 17: Cash Flow Statement



Appendix I - A Healthcare Support Software Primer

The US Market Is Massive

In the United States, the market size for Healthcare IT is massive. There are an estimated 10,000 hospitals in the United States, and a further 50,000 sub-acute healthcare providers, which includes everything from independent living facilities to in-patient rehab facilities, with a total estimated spend of approximately US$6 billion. Moreover, the market is expected to grow at a rate of approximately 7.5% during until 2010. Exhibit 19 provides a summary of the different facility types in the sum-acute healthcare sector, and a summary of how healthcare intensive they are.

Care Specialization/ Medical Attention Required

Independent Living Communities LowAssisted Living Communities Moderate

Home Health Agencies ModeratePublic Health Agencies ModerateHospices/ Residences Moderate

Skilled Nursing Facilities Moderate/ HighIn-Patient Rehab Facilities High


Exhibit 19: Sub-Acute Healthcare Provider Description

Facility Type

A Regional Landscape In Canada

In the provinces where Logibec operates (notably Quebec and Alberta), hospital groupings are divided into regions, which have autonomy over administration. In Quebec, there are currently 96 regions, 12 of which are in the Montreal area. Alberta is more centralized, with entire municipalities being run under a single jurisdiction.

A Fragmented Industry The North American healthcare management sector is fragmented. On the acute care side, major players like Cerner, McKesson, and Eclipsys are present. However, as outlined in Exhibit 19, on the sub-acute side, no single player accounts for more than 10% of the market; we note that MDI Technologies (Logibec’s subsidiary in the United States) is currently the fourth largest player in the space, with approximately 3,400 clients. At present, the two main companies besides Logibec that have been aggressive in picking up market share have been Point Click Care, having grown from under 100 facilities managed in 2000 to current levels of approximately 2,500, and Answers On Demand.



Company LTC Clients Market ShareAccu-Med Services Inc. 5,075 10.2%Keane Care, Inc. 4,250 8.5%American Health Tech 3,450 6.9%MDI Techonologies (Logibec) 3,400 6.8%Achieve Healthcare Technologies 2,600 5.2%Point Click Care 2,300 4.6%QuickCARE 1,000 2.0%HealthMEDX Inc. 1,000 2.0%Interactive Health Network 615 1.2%Answers On Demand 600 1.2%SOS Corporation 500 1.0%RH Positive 400 0.8%Other 24,810 49.6%Approx. Total 50,000 100.0%Source: Company Reports.

Exhibit 20: US Competitive Landscape For Long-Term Care

Difficult To Pick Up Market Share

We believe that it is unlikely that any single company will pick up significant market share through contract wins. Healthcare providers are themselves part of a fragmented industry. Clients of these healthcare IT provides generally consist of smaller groups, with each hospital or group of healthcare organizations having autonomy with regards to purchasing and operational decisions. Moreover, switching operational software can be logistically difficult, implying that barring a compelling reason to switch (i.e. inferior product or compelling cost savings). Consequently, most contract wins have a relatively high chance of being renewed. With these trends in mind, we believe that there are two principal ways that competing firms could improve market share:

♦ The first (and most obvious) route would be through acquisition. We note that Logibec has successfully pursued this strategy in the past.

♦ A second possibility could be to reach a strategic agreement with a more universally used piece of software. We believe that any moves on this front with a royalty/ license structure would be an intriguing way for companies in the space to pick up market share.

We note that the expansion route is difficult for smaller players to achieve. Due to the difficulty

associated with gaining market share, the myriad of smaller, regional players in the sector are generally categorized as stable companies with few growth prospects. Moreover, this problem is compounded by the fact that most firms at this level do not have the access to capital required to meaningfully expand their business, generally electing to join larger companies.



Demographics To Impact Industry Expansion

An aging population is unlikely to drive growth directly; increased patient traffic will force improved efficiency. In both Canada and the United States, the average age is expected to steadily increase in each of the next four decades as the Baby Boomer generation ages (see Exhibits 21 and 22). As this trend develops, the ability to efficiently manage care facilities will become increasingly important. Moreover, we note that this demographic shift implies not only improved efficiency in senior living facilities, but also an increasing number of facilities available. This development ties in nicely to Logibec’s subscription-based revenue model, as expanding facilities provide a natural source in increasing revenue going forward.

Exhibit 21: Canadian Population Projections

0

10

20

30

40

50

1946 1966 1986 2006 2011e 2031e 2051e

Age

0%

5%

10%

15%

20%

25%

30%

% O

ver 6

5

Median Age % Over 65Source: Statistics Canada

Exhibit 22: An Aging US Population

0

20

40

60

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2000 2010e 2020e 2030e 2040e 2050e

Popu

latio

n Ov

er 65

(Milli

on)

0%

5%

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20%

25%

% o

f Tot

al

Population Over 65 % of Total Source: US Census Bureau.



Appendix II - Major Competitors

Competitors Logibec’s competitors generally fall into one of three categories: large multinationals, smaller regional players, and IT companies that develop generalized HR software but that operate in a healthcare setting. In the healthcare support IT services sub sector, QHR Technologies, Medisolutions, and Medworxx are all Canadian companies operating in the space, and QuadraMed and Healthstream are public regional operators in the United States. We note that, in addition to the companies mentioned, there are several smaller, private companies that operate regionally in the United States. In addition to the summary list previously outlined in Exhibit 20, below is a summary list of Logibec’s publicly traded competitors:

Medisolutions Ltd. (MSH-T) is a Montreal based healthcare and service sector information technology company, providing software and services to the healthcare and service sectors. The company serves over 500 hospitals and other healthcare facilities and close to 200 public and service sector organizations across North America, providing resource management systems and health information systems to clients.

Medworxx (MWX-T), which also operates under the name Lorian Capital Corp, is a Toronto-Based company that provides management systems to Hospitals. Over 200 hospitals currently use the system.

QHR Technologies Inc. (QHR-V) is a publicly traded Canadian company specializing in software designed to improve the efficiency of professionals in healthcare and other markets. The company currently offers an integrated Human Resource Information System (HRIS) and an Electronic Medical Records (EMR) solution.

Cerner (CERN-O) is the leading U.S. supplier of healthcare information technology solutions that optimize clinical and financial outcomes. Cerner’s client list includes health organizations ranging from single-doctor practices to entire countries around the world.

Eclipsys (ECLP-O) is a leading provider of information solutions that help hospitals and health systems across North America be among the best places to give and receive care, delivering workflow and knowledge support to smooth “handoffs” between physicians, nurses, managers and other members of the healthcare team.

McKesson (MCK-NY) is a leading technology company with software and hardware technology installed in more than 70% of the nation's hospitals with greater than 200 beds. The company provides decision support software for physicians, develops and installs electronic systems that eliminate the need for paper prescriptions and paper medical records, and provides physicians with easy and secure online access to patient information.

QuadraMed (QD-A) develops information technology solutions for healthcare organizations. Product offerings include clinical management, patient information management, revenue cycle management and health information management software suites.

The TriZetto Group (TZIX-O) develops benefits management software and solutions designed to increase business efficiency in the Healthcare sector.



Percentage of companies covered by Laurentian Bank Securities Equity Research within each rating category.

Appendix III – Important Disclosures

Company Ticker Disclosures* Logibec Groupe Informatique Ltee LGI-T Nil

The analyst(s) certify that (1) the views expressed in this report in connection with securities or issuers they analyze accurately reflect their personal views and (2) no part of their compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by them in this report. The Research Analyst’s compensation is based on various performance and market criteria and is charged as an expense to certain departments of Laurentian Bank Securities (LBS), including investment banking.

* Legend A The Analyst, in his/her own account or in a related account, owns securities of this issuer.

L LBS collectively beneficially owns in excess of 1% of one or more classes of the issued and outstanding equity securities of this issuer.

O The Director of Equity Research/Co-Director, in his/her own account or in a related account, owns securities of this issuer.

U Within the last 24 months, LBS has undertaken an underwriting liability with respect to equity securities of, or has provided advice for a fee with respect to, this issuer.

V The Analyst has visited material operations of this issuer.

P This issuer paid a portion of the travel-related expenses incurred by the Analyst to visit material operations of this issuer

Laurentian Bank Securities Equity Research Ratings Distribution

5%

57%

5%0%

33%

0%

10%

20%

30%

40%

50%

60%

Top Pick Buy Spec Buy Hold Reduce



Recommendation LBS (Laurentian Bank Securities) recommendation terminology is as follows: Terminology

Top Pick Our best investment idea, the greatest potential value appreciation. Buy The stock is expected to generate significant risk-adjusted returns over the next 12 months. Hold The stock is expected to generate modest risk-adjusted returns over the next 12 months. Reduce The stock is expected to generate negative risk-adjusted returns over the next 12 months.

Our ratings may be followed by “(S)” which denotes that the investment is speculative and has a higher degree of risk associated with it.

Additionally, our target prices are based on a 12-month investment horizon.

The information contained in this document is based on what we deem to be reliable sources, but no guarantee or promise, explicit or implicit, is given as to the accuracy and exhaustiveness of these sources. This report shall under no circumstances be considered an offer to buy or sell, or a request to buy and/or sell the stocks mentioned. Laurentian Bank Securities Inc. and its employees may not be held liable for any monetary losses stemming from the implementation of the recommendations contained in this document. Laurentian Bank Securities Inc. and/or its officers, directors, representatives, traders, analysts and members of their families may hold positions in the stocks mentioned in this document and may buy and/or sell these stocks on the market or otherwise. Stocks in foreign currency may be adversely affected by exchange rate fluctuations. Laurentian Bank Securities Inc. is a wholly-owned subsidiary of Laurentian Bank of Canada. The opinions, projections and estimates are those of the Economic and Financial Research department of Laurentian Bank Securities Inc. as at the date appearing on the cover page, and are subject to change without prior notice. Laurentian Bank Securities Inc. may, in exchange for remuneration, act as a financial advisor or tax consultant for, or participate in the financing of companies mentioned in this document. This study may not be reproduced, in whole or in part, without the consent of Laurentian Bank Securities Inc.



Laurentian Bank Securities (LBS)

President Michel Trudeau, MBA

Institutional Equity

Simon Lussier, MBA (514) 350-3060 Senior Vice President [email protected]

Research

Yuri Lynk, MSc, CFA (514) 350-2876 Head of Equity Research Materials Analyst [email protected] David Buma, CFA (514) 350-2957 Deputy Head of Equity Research Industrial Products Analyst [email protected] Alex Grassino, MSc (514) 350-2855 Information Technology Analyst [email protected] Catherine Bouchard, MSc, MBA (514) 350-2938 Healthcare Analyst [email protected] Alka Patel (514) 350-2941 Consumer Products Analyst [email protected] Mathieu Chevrier (514) 350-2949 Research Associate [email protected]

Trading

Maurice Gariepy (514) 350-3055 Head Trader [email protected] Demitri Prassinos (514) 350-2823 [email protected]

Sales

Suzy Champagne, MSc, CFA (514) 350-3055 [email protected] Marcia Wisniewski, CFA (416) 865-5982 [email protected] Patrick D’Amico, MBA (514) 350-2988 [email protected]

Investment Banking

Patrick Langlois, CFA, MBA (514) 350-3045 [email protected]

Frédéric Beausoleil, CFA (514) 350-2839 [email protected]

Fixed Income Sales Division

Chris B. Ward (514) 350-2904 Vice President Sales [email protected]

Syndication

Pierre Godbout, CIM (514) 350-3050 Vice President [email protected]

Retail Division

Riccardo Magini (514) 350-2960 Vice President* [email protected]

Economics & Strategy

Carlos Leitao (514) 350-3000 Chief Economist [email protected]

Sébastien Lavoie (514) 350-2931 Economist [email protected]

Boris Wyka (514) 350-2975 Strategist [email protected]

Stéphane Martial (514) 350-2881 Trainee [email protected]

Martine Bérubé (514) 350-3006 Research Assistant [email protected]

* Subject to approval by the regulatory authorities.

Head Office – Montreal Laurentian Bank Securities Tour Banque Laurentienne 1981 McGill College Ave. Suite 1900 Montreal, Quebec H3A 3K3 Toronto Office Laurentian Bank Securities 130 Adelaide St. West 2nd Floor Toronto, Ontario M5H 3P5

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