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General Body Meeting 10.27.10

General Body Meeting 10.27.10. Agenda. Announcements Headline by Energy Junior Analyst Long pitch by the Tech Analyst Team Long pitch by the Healthcare Analyst Team. Events coming up. Doug Braunstein , CFO of JP Morgan Thursday (tomorrow) at 8:00pm in Statler Ballroom

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General Body Meeting 10.27.10

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  1. General Body Meeting 10.27.10

  2. Agenda • Announcements • Headline by Energy Junior Analyst • Long pitch by the Tech Analyst Team • Long pitch by the Healthcare Analyst Team

  3. 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

  4. Energy Headline

  5. 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%

  6. TeleCommunication Systems, Inc. (TSYS) John Yoshida, Nicole Kim, David Kim, Joshua Lyons, Zachary Peskin

  7. Industry Overview

  8. General Industry Overview • Communication Equipment Industry • Heavy Hitters: • Motorola • Harris Corporation • Alcatel-Lucent

  9. Industry at a Glance

  10. 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

  11. Key External Drivers • Demand from wireless telecommunication carriers • GDP • Exchange rates • Demand from TV broadcasters • Demand from radio broadcasting

  12. Products and Services

  13. Industry Costs

  14. Where Does TSYS Fit?

  15. 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

  16. 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

  17. 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

  18. Past Acquisitions • Second Quarter, 2009: • AutodeskLocationLogic • Fourth Quarter, 2009: • Sidereal Solutions • Solvern Innovations • Networks in Motion (NIM)

  19. 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

  20. Thesis • Commercial LBS business growth • Reducing reliance on business • Continues to be undervalued • Rosy acquisition target • Inclusion to Indices/Funds

  21. Past Share Performance

  22. 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

  23. 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

  24. LBS Trends

  25. TSYS LBS Products

  26. Risks

  27. Risks • Government Segment • Spending cutback • 44% revenue from government agencies • Control of contract • Government controls contracts; can terminate for convenience or default by TSYS • Can audit and review cost, performance, accounting and adjust based on results • Competitors • Government utilizes other big competitors; General Dynamics Corp

  28. Risks • Commercial Segment • Lack of marketing from wireless providers • Providers neglect marking of Location-Based Systems • Discontinuation of text messaging applications • Competitors • Wireless providers look to other big competitors for communication technology; Nokia, Motorola • Rapidly changing industry; need to offer services to heavy influx of Smartphones

  29. Financials

  30. 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%

  31. Financials – Industry Comparison

  32. Financials – Balance Sheet

  33. Financials – Cash Flows

  34. 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

  35. Catalysts and Proposal

  36. Potential Short-term Catalysts • 11/04 Q3 Earnings • New government contracts • Analyst upgrades (Oppenheimer)

  37. Proposal BUY 300 shares @ $5.31 • Total value: $1593

  38. Technical Analysis

  39. Quaneam Analytics

  40. Quaneam 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, TSYSisat the upper 66% of its evaluation range.

  41. 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

  42. Prediction • Short term price change is estimated to be flat • May continue to experience correction in price

  43. Emdeon Coverage: Healthcare Senior Analysts: AmithaKurmala, Tracey Zhou Junior Analysts: Eric Hoffman, Yang Zhao

  44. 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

  45. 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

  46. 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

  47. 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

  48. 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

  49. 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

  50. 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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