general body meeting 10.27.10. mutual investment club of cornell agenda announcements headline by...
TRANSCRIPT
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General Body Meeting 10.27.10
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Agenda
Announcements Headline by Energy Junior Analyst Long pitch by the Tech Analyst Team Long pitch by the Healthcare Analyst
Team
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Events coming up
Doug Braunstein, CFO of JP Morgan Thursday (tomorrow) at 8:00pm in Statler
Ballroom Rolla Huff, CEO of Earthlink
Thursday (tomorrow) at 10:00am, location TBD
Social event for MICC The weekend before elections, Jai’s house
Elections for MICC Executive Board Tentatively November 10th
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Energy Headline
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Mutual Investment Club of Cornell
Maxwell Technologies: Stop-Start Design
Maxwell announced it has commenced deliveries of Boostcap ultracapacitors to Continental AG for use in a new stop-start idle elimination system for diesel passenger cars - will extend battery life
Stop-start will become a major new energy storage market over the next 3-5 years. It has potential to be a multi-billion dollar market because it meets many of the new US and EU fuel economy and emissions standards
This concept used in hybrid electric vehicles saves fuel and reduces emissions by about 5%
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TeleCommunication Systems, Inc. (TSYS)
John Yoshida, Nicole Kim, David Kim,
Joshua Lyons, Zachary Peskin
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Industry Overview
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General Industry Overview
Communication Equipment Industry Heavy Hitters:
Motorola Harris Corporation Alcatel-Lucent
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Industry at a Glance
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Summary within US
Technological Innovation Demand for Mobility Expected revenue for 2010: $38.7
billion Domestic demand is forecasted to grow
at a real average rate of 3.5% for the next 5 years
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Key External Drivers
Demand from wireless telecommunication carriers
GDP Exchange rates Demand from TV broadcasters Demand from radio broadcasting
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Products and Services
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Industry Costs
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Where Does TSYS Fit?
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Company Overview
Global leader of high-availability and secure mobile communication technology
Provides end-to-end solutions for E9-1-1, text messaging, location-based services (LBS), and deployable wireless communication
Forefront of mobile cloud computing services providing wireless applications
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Government Segment Offerings Technology
SwiftLink Deployable Communications Services
Secure Satellite Teleport Data Landing and Transmission
Integrated Logistics Support (ILS) Services Information Technology Services Cyber Security Services
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Commercial Segment Offerings Technology
Xypoint Location Platform (XLP) and Applications for Mobile LBS
Short Message Service Center and Wireless Intelligent Gateway
Services Subscriptions to wireless application-
based services (navigation, people-finder, points-of-interest)
Hosted LBS infrastructure, including E9-1-1
Software and system maintenance
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Past Acquisitions
Second Quarter, 2009: AutodeskLocationLogic
Fourth Quarter, 2009: Sidereal Solutions Solvern Innovations Networks in Motion (NIM)
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Advantages
Provides integrated and end-to-end solutions Speeds time to market and eliminates
integration problems Partnership with Qualcomm and
marketing alliance in China Serve 60+ wireless carrier networks
and VoIP providers in 16 countries Solid foundation and scale for support
and maintenance Many patents on applications
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Thesis
Commercial LBS business growth Reducing reliance on business
Continues to be undervalued Rosy acquisition target Inclusion to Indices/Funds
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Past Share Performance
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Recent News
10/25/10: TCS receives $4.1 million in spending from U.S. Army for deployable satellite equipment and support
10/20/10: TCS wins $9.6 million equipment order from U.S. Army for 3D terrain mapping
10/14/10: TCS demonstrates LBS service technology at Huawei Innovation Summit
10/06/10: TCS named sole awardee on $269 million contract to deliver U.S. Marine Corps integrated communications systems
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Location Based Services (LBS) Added layer of convenience for QOL LBS finally gaining a foothold
2009: Only 21.5 million subscribers in N.A. used
Immediate avenues for growth
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LBS Trends
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TSYS LBS Products
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Risks
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Mutual Investment Club of Cornell
Government Segmento Spending cutback
o 44% revenue from government agencieso Control of contract
o Government controls contracts; can terminate for convenience or default by TSYS
o Can audit and review cost, performance, accounting and adjust based on results
o Competitorso Government utilizes other big competitors;
General Dynamics Corp
Risks
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Mutual Investment Club of Cornell
Commercial Segmento Lack of marketing from wireless providers
o Providers neglect marking of Location-Based Systems
o Discontinuation of text messaging applicationso Competitors
o Wireless providers look to other big competitors for communication technology; Nokia, Motorola
o Rapidly changing industry; need to offer services to heavy influx of Smartphones
Risks
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Financials
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Mutual Investment Club of Cornell
Financials - Basics
Share price: 5.32 (10/26/2010) 52wk range: 2.96-10.55 Market cap: $286.6m
YTD: -44.21% Month: +41.36%
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Financials – Industry Comparison
TSYS Industry
P/E 12.24 35.9
P/B 1.421 3.43
P/S 0.9616 1.13
Operating Margin
9.5% 5.08%
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Financials – Balance Sheet
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Financials – Cash Flows
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Financials – Valuation
Computed DCF with NPV Average 12-month EPS - $0.50 8% projected earnings growth for 3
years 3% projected growth thereafter
Current Price: $5.31 Target Price: $7.07
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Catalysts and Proposal
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Potential Short-term Catalysts 11/04 Q3 Earnings New government contracts Analyst upgrades (Oppenheimer)
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Proposal
BUY 300 shares @ $5.31 Total value: $1593
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Technical Analysis
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Quaneam Analytics
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Quaneam Analytics
Using 300 days of past data the Z-scores follow:
BollingerBands= -1.45
MACD= 1.12
RSI= 1.60 Aggregating these we get an average Z-score
of: 0.42
This means that conditional to the past 300 days of data, TSYSis at the upper 66% of its evaluation range.
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Insights
Technicals indicate price momentum has decreased TSYS well in the range of Bollinger Bands
May continue to experience correction in price RSI and MACD both has only come down
slightly below overbought signal
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Prediction
Short term price change is estimated to be flat May continue to experience correction in price
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Mutual Investment Club of Cornell
Emdeon
Coverage: Healthcare
Senior Analysts: Amitha Kurmala, Tracey Zhou
Junior Analysts:Eric Hoffman, Yang Zhao
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Mutual Investment Club of Cornell
Thesis and Key Debates
Buy NOW! Earnings Report: November 8th
Healthcare Reform is good for HIT Acquisitions are predicted positive
synergies Valuation supports undervaluation
thesis
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Mutual Investment Club of Cornell
State of Healthcare Industry
HC expenditures are a significant component of the US economy 16.2% of GDP in 2008; expected to grow
to $4.4 trillion, or 20% of GDP, in 2018 HC administrative costs totaled $360
billion in 2008 Healthcare is provided through a
fragmented industry that has historically underinvested in HIT
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Condition of US Hospitals
Many hospitals lack resources to bill, collect, and receive full reimbursement for their services
Nearly one-third of hospitals had negative total margins in 2003
In 2009, 50 percent of U.S. hospitals lost money, and total total margins for U.S. hospitals had declined further
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Recent Legislation
American Recovery and Reinvestment Act Stimulus intends to create job, promote
investment, and increase consumer spending
Cost of $787 billion Obamacare
Aims to insure 33 million Americans by 2018
Series of HC changes
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Health Insurance Portability and Accountability Act
Major components Regulates group health plans and certain
individual health insurance policies Defines HC offenses and sets penalties for
them Creates rules to increase the efficiency of
the HC system Effect of HIPAA on research and clinical
care
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HC Current Events
Determining the constitutionality of Obama’s healthcare plan Is requiring Americans to have health
insurance constitutional? Fraud in HC system Patient Protection and Affordable Care
Act New federal law mandating that at least 80
percent of premium revenue must be spent on medical, not retained as profits or used to pay overhead
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What is Emdeon?
Leading provider of medical revenue and payment cycle solutions (Revenue cycle management)
Connects payers and providers Improves efficiency of the US
healthcare system Take advantage of governments
movement towards a digital, computer run system
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Emdeon Provider Solutions
Simplifies the business of healthcare for hospitals and other medical offices
Effectively and securely shares patient information between payers, hospitals and pharmacies
Successful Internal Programs: Emdeon Assistant Emdeon Claim Master®
Emdeon Patient Connect Emdeon Office Suite
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Emdeon Payer Solutions
Improves patient payment processing; lowers costs
Transforms data into greater business intelligence
Successful Unique Programs: Member eligibility Management Solutions Interactive Care Management Services Payment Integrity Services
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Emdeon Consulting Services Recently acquired Healthcare
Technology Management Services (HTMS)
Offer consulting services to help payers: Innovate Solve problems Optimize performance Keep up with changing times
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Emdeon Pharmacy Services
Quickly and accurately connects doctors with local and national pharmacies
July 1, 2009, Emdeon acquired eRx Network, LLC
Successful Internal Programs: Emdeon CardFinder™ Emdeon Flu™
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Emdeon History
More current connections to payers, providers, and vendors in the industry
Roots traced back to Healtheon in 1996 Merged with Microsoft’s WebMD in 1999 Changed name in 2005 to Emdeon General Atlantic bought 52% stake in 2006 Following buyout, acquired several
companies IPO on August 11th, 2009 as a profitable
company (rare)
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Mutual Investment Club of Cornell
Recent Events
Acquisitions HTMS, FV, Chapmin RCM, Chamberlin
Edmonds• Strategic Alliances
• Noridian Insurance
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Fundamental Analysis
Undervalued
Comparable Valuation Metrics*All figures in thousands except per share numbers
Company Shares Market YoY
Ticker Name Price Out Cap Growth Revenue 2009A 2010E 2009A 2010E P/Book EV/Sales
MDAS MedAssets 22.10 58 1,276 33.3% 95 52.6x 52.6x 20.5x 15.4x 2.7x 15.7xATHN AthenaHealth 37.42 91 3,407 19.3% 152 467.8x 133.6x 185.5x 155.5x 30.9x 22.5x
Em Emdeon 13.32 91 1,210 6.2% 243 111.0x 57.9x 10.5x 9.9x 1.6x 9.0x
Min 19.3% 95 52.6x 52.6x 20.5x 15.4x 2.7x 15.7xMean 26.3% 124 260.2x 93.1x 103.0x 85.4x 16.8x 19.1xMedian 26.3% 124 260.2x 93.1x 103.0x 85.4x 16.8x 19.1xMax 33.3% 152 467.8x 133.6x 185.5x 155.5x 30.9x 22.5x
P/E EV/EBITDA
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Mutual Investment Club of Cornell
Fundamental Analysis (cont’d)
Comparable Profitability and Liquidity Metrics*All figures in thousands except per share numbers
Company EBITDA EBIT Net Current Quick Debt/ InterestTicker Name RONA ROE Margin% Margin% Margin% Ratio Ratio Equity Coverage
MDAS MedAssets 34.5% 4.6% 28.5% 14.9% 5.8% 1.0x 0.1x 0.5x 5.4xATHN AthenaHealth 7.6% 7.3% 14.6% 10.1% 4.9% 3.4x 0.8x 0.1x 28.5x
EM Emdeon 0.5% 1.3% 24.1% 11.1% 1.0% 3.7x 2.0x 1.3x 3.2x
Min 0.1x 0.0x 0.1x 0.1x 0.0x 1.0x 0.1x 0.1x 5.4xMean 0.2x 0.1x 0.2x 0.1x 0.1x 2.2x 0.4x 0.3x 16.9xMedian 21.0% 5.9% 21.5% 12.5% 5.4% 216.9% 43.5% 26.5% 1690.8%Max 0.3x 0.1x 0.3x 0.1x 0.1x 3.4x 0.8x 0.5x 28.5x
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Mutual Investment Club of Cornell
Financial Data: Balance Sheet
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Mutual Investment Club of Cornell
Financial Data: Income Statement
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Mutual Investment Club of Cornell
Good Entry Point
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Mutual Investment Club of Cornell
Risks
Software commoditization and lack of SM arm
Some of their customers compete with them and some, instead of using a third party provider, perform internally some of the same services that they offer.
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Mutual Investment Club of Cornell
Conclusion
Buy NOW!
Hold for 1 to 2 years Expected Amount: 1000-2000 shares
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Mutual Investment Club of Cornell
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Thanks for coming by!
Reminder for tomorrow’s JP Morgan event