From Canaccord Nov 4/04Here is a report from Sara Elford who is the Analyist at Canaccord following PURE. It appeared in their Daily Letter briefing on Nov. 4th.
Pure Technologies Ltd (PUR : TSX-V : C$1.80) - Buy - Target: C$3.50
Sara Elford
Comment: Pure Q3/F04 results in line with expectations
Pure reported its Q3/F04 financial results yesterday after the market
closed. Revenue for the quarter was $2.9 million, up 221% on a year-over-
year basis and in line with our $3.0 million forecast. Net earnings were
$0.5 million ($0.03/share), much improved from a loss of $0.5 million
($0.04/share) last year. We had been targeting net earnings of $0.6 million
($0.04/share). Excluding a $0.1 million loss on the translation of US
dollar receivables, Pure's results matched our forecast. Note that the
company does enjoy a natural hedge as these US dollar cash inflows will be
used to pay its US dollar expenses. We're sticking to our F04 and F05 EPS
estimates of $0.12 and $0.15, respectively. While Pure did not give
specific guidance at this early stage, it did say for the first time that
it expects F05 to be another year of growth. Of particular note, the
company also said that it has begun preliminary marketing to the oil and
gas industry. This suggests its fiber optic technology is nearing
commercial readiness. Our BUY rating is unchanged. Pure's business is made
up of high margin systems revenue and a higher margin recurring revenue
stream from monitoring and technical support services. The business is also
very scaleable and should enjoy better bottom line than top line growth.
Pure is still a relatively undiscovered microcap with great long-term
growth potential. Our $3.50 target price is based on our discounted cash
flow (DCF) model. Our model assumes Pure can deliver 20% annual revenue
growth through 2013 (and roughly 27% bottom line growth), and relies on a
15% discount rate and a terminal multiple of 15 times.