GMP initiates research coverage on Intrinsyc Software

Canada’s longest-standing wireless equity research analyst, Ray Sharma of GMP Securities, initiated coverage on Wellington Financial Fund II portfolio company, Intrinsyc Software (ICS:TSX) earlier today. His timing couldn’t be better, I suspect, with a cashed-up balance sheet, a stable core business and a couple of real customer announcements for Intrinsyc’s proprietary Soleus platform already under their belt.

Here is a summary of his large report:

Intrinsyc Software International Inc.
BUY
ICS-T $0.65 Target: $1.00
Initiating coverage with BUY rating

– Intrinsyc is a supplier of software and services to the feature-phone segment of the mobile handset market, the largest consumer electronics category in the world

– The key drivers of our investment thesis are an exceptionally strong management team and a product (Soleus) that is ready for commercial prime time

– A significant challenge for management will be the drive toward profitability, a critical long-term driver of shareholder value that we do not project until late F09. We are looking for the company to moderate expenses because R&D spending as a percentage of sales is significantly above industry norms

– We are initiating coverage of Intrinsyc Software with a BUY recommendation. We apply a comparable market multiple of 3.5x P/S multiple to our F09 revenue estimate of $36 mm to arrive at our $1.00 price objective

MRM
(disclosure – our Fund II holds warrants in ICS)