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American Science & Engineering Inc. Message Board

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  • bengrahamvalueinvestor bengrahamvalueinvestor Sep 13, 2004 10:41 PM Flag


    You are 100% correct about OSI making some major misteps. However, I MAY pick this one up on the speculation that the company is going to spin off the only piece of the company that is worth a damn---the security division. If this is done, which I think it will be, they will be the only other pure play for scanners etc. Here's a bit of a recent Morgan Keegan report on OSI

    "Upgrading shares of OSIS from Market Perform to Outperform investment
    rating based on valuation
    We are upgrading shares of OSIS from Market Perform to Outperform investment
    rating based on valuation. As of the end of Q4:04, OSI Systems' book value is
    $14.40 per share, and as of the end of Q3:04, its book value was $12.60 per
    share and tangible book value was $9.40 per share. Importantly, OSI Systems is
    considering strategic reorganization of the company potentially establishing stand
    alone entities from its two segments, Security and Opto/Medical. We believe the
    Security segment can create substantial shareholder value as a stand alone
    company. We value OSI's Security segment at 2.0 - 2.2x trailing revenue of $112
    million, or $224 million ($14.20 per share) to $246 million ($15.62 per share). In
    addition, while the company's Opto/Medical business is currently struggling, we
    value this division at 50% of its June quarter annualized run rate revenue. The
    company produced Opto/Medical revenue in June of $64.4 million, if this revenue
    is annualized it would be $257.6 million. We believe, even with the company's
    current problems, on a stand alone basis this division would be valued at 50% of
    this revenue, or $129 million or $8.16 per share. We value the total company on a
    breakup analysis between $22.36 per share and $23.78 per share. In addition, we
    believe additional orders in the Security segment will be coming down in the next
    few months that could boost our estimates in the Security division."
    Keep in mind though.....MK downgraded ASE after its lousy Q3/04 at a level about 1/2 of its current value. MK has been on the wrong side of a hot sector..."BUYS" on dogs that continue to run into problems-- and "Market Performs" on the cream of the crop.

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