RE: RE: RE: Newbie questionsThree consecutive quarters of positive earnings
Intrinsyc Software (TSX: T.ICS; 7.5 cents)
www.intrinsyc.com
52-wk high: 16 cents; Low: five cents
Shares outstanding: 163 million
Cash & receivables less debt: $11.5 million (seven cents/share)
Annual revenue: $16 to $18 million
Three consecutive quarters of positive earnings
Intrinsyc (TSX: T.ICS, Stock Forum) provides proprietary software, hardware, and services for the growing market of mobile handheld products, which includes consumer mobile handsets, personal navigation devices, smart phones, ereaders, and other mobile and embedded devices.
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Two years ago Intrinsyc traded at $1.20, commenced a downward slope to five cents by the time markets collapsed in Q4/08, and has been unable to break 15 cents ever since. The market currently values their business (above cash liquidation value) at $800,000. This is a company in business for 12 years, profitable on revenue of almost $20 million, and has extensive business relationships around the world with Fortune 500 and Fortune 100 companies. The TSX listing is probably worth $800k.
At the very least (because they are earnings positive), this company should be worth one times annual sales. This would value them at 10 cents/share (over and above their cash value). Even if we assumed that was too high, a value of five cents above cash value would generate a gain of 70% from current levels.
But for some reason, the market has no interest in this company and existing shareholders are more than happy to throw in the towel near seven cents. If the liquidity below eight cents continues, it “may” create opportunity for others who recognize the underlying value (and future potential) of this company.
Capital gains could be realized just by having the company move to a more realistic discounted value, but if we see increased demand for their technology as smaller mobile devices become more and more popular, then the upside will come from revenue growth and increased profitability.
Their main issue is the poor share structure with 163 million shares outstanding. This was evident in early January when it ran 50% on large volume and then lost every ounce of the gains within a week. I tend to avoid companies with too much stock outstanding but near seven cents, this is a tough one to ignore.
Growth opportunities
If you have ever used a device like Garmin in your vehicle, you will know how GPS devices will save countless divorces. My wife and I are to the point we will not travel anywhere without our Garmin for navigating traffic and finding specific locations. Garmin, the company itself, is based in Europe but has seen phenomenal growth over the years. www.garmin.com
As effective as Garmin is, the newest version of Intrinsyc's Destinator delivers the mobile industry's highest quality user experience in navigation devices, with a host of new capabilities and features designed to get people to their destinations easily, quickly and safely (walking or driving). Destinator 9 is available for Google Android mobile phones, Microsoft Windows Mobile smart phones, and other Personal Navigation Devices (PNDs).
Destinator functionality is identical to Garmin but rather than a stand-alone device, it is built into a mobile phone. They will derive income by licensing the software platform to mobile device manufacturers. For example, the technology was recently incorporated into a device based in China with a Blue Chip brand name. LG is also launching smartphones with Destinator software in Singapore, with subsequent product rollouts planned for other Asian countries, including India, Indonesia, Malaysia and Thailand.
Destinator may be a significant area of growth for the company but you can get more info on this from their website.
The company has a large portfolio of software and services designed specifically for mobile computing. This has been their area of focus for over a decade but the stock has struggled because they have been ahead of the curve and unable to grow sales at the rate analysts expect. However, given what we're seeing with consumers and the huge demand for devices like the Blackberry and Apple iPhone (as everyone else scrambles to compete against them), I believe interest in their stock will grow over the next year.
They also have important platforms in development that are built around Google's Android software and something called Femtocells.
"The vision of a chameleon phone which changes its look and feel depending on its environment used to be the preserve of science fiction," said Keith Day, vice-president of marketing, Ubiquisys. "The combination of our femtocell technology and the Android operating system makes this a reality. We are delighted to be working with Intrinsyc on the first of many such innovative applications."
Since the economic collapse in Q4/08, they have done an excellent job reducing and controlling costs.
Important third party validation
On October 8, Intrinsyc received (from Microsoft) the 2009 Partner of the Year award in the Consumer Devices category for outstanding efforts in driving Windows CE designs for Consumer Internet Devices, such as connected PNDs, feature phones, e-Readers, and portable media players.
Years ago we would have seen such a news release generate significant interest in their stock - instead the market just yawned. This was a real shame because it was an award that comes with significant prestige. What it did, however, was validate the importance (and value) of its technology platforms.
Keeping this in mind, it’s hard to imagine the market feels this company is only worth its cash liquidation value. If they are wrong (as we hope they are), then there is a definite opportunity down here.
A few of its 2009 highlights
•Selected by LG Electronics (LG) to provide Destinator navigation and LBS software for multiple models of handsets running on Android, Symbian and Windows Mobile® operating systems.
•Signed an engineering services agreement with a Fortune 500 company to assist in development of a mobile consumer electronics device based on Android.
•Led the systems integration of the eBook reader recently announced by Barnes & Noble
•Destinator 9 was selected by Moscow-based Vobis Computer, to power the GPS navigation experience in the newest additions to Vobis’ handset and Personal Navigation Device (PND) portfolio.
•Announced a broad-based alliance with the Blom Group, a leading international provider in the collection and processing of geographic information.
•Along with Ubiquisys, the leading developer of 3G femtocells, announced UX-Zone, an application that changes the appearance of the Android phone interface automatically as you enter your home or office.
•Announced that the Destinator GPS navigation software solution is currently shipping in a smart phone companion navigation system being sold in China.
•Announced that Destinator GPS Navigation is available on Samsung phones in Brazil.
•Opened the Intrinsyc Center of Excellence, which will support Android software development in Beijing, China. Aiming to serve the growing number of handset manufacturers based in Asia choosing Android, Launched industry’s only commercial-grade, open market solution for developing radio interface layer (RIL) software for Android mobile phones.
•With Intrinsyc's UX- Zone, the appearance of a phone interface can change automatically to alert the user to the availability of high bandwidth services.
•InterDigital's MIH client running with Intrinsyc's RapidRIL/Connection Manager software supports a seamless transfer of communications and media between different wireless technologies and improves the quality of the end-users' mobile experience.
•Bringing social networks to new frontiers, Intrinsyc announced a partnership with GyPSii to bridge social networks to Destinator's popular turn-by-turn navigation.
•In February ICS announced that the company expects to reduce its total annualized expenses by approximately $800,000, or 8%, as a result of restructuring initiatives.
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Disclosure: Danny Deadlock owns 75,000 shares of Intrinsyc
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Danny Deadlock has specialized in microcap and smallcap companies for over 25 years and is a registered member of the Stockhouse community since 1997. You can find his website at www.MicroCap.com - a service that has specialized in TSX and TSX.V penny stocks since 1998. You can also email Danny at microcap@telus.net
ABOUT THE AUTHOR
Danny Deadlock
In addition to the editorial published on Stockhouse, Danny Deadock is lead analyst and publisher of MicroCap.com. With over 25 years experience speculating on penny stocks, their focus is Canadian juniors traded on the TSX and TSX.V. The service covers various sectors but is weighted towards natural resources. Annual cost is $163 Cdn. For details, please visit www.microcap.com