Activist investor already having impact at Dalsa

Great news for Dalsa (DSA:TSX) shareholders! Your interests have already been served with the arrival of infamous activist investor / hedge fund boss Eric Rosenfeld (see prior post “Saavas, keep your chin up!” January 31-08). It would appear that The Crooner© (see prior posts “ATS shareholders find their tonic” November 21-07 and “DTM copycats at it again” February 14-08) has pulled off a big coup. He’s swung a deal whereby Dalsa’s 4k digital cinema camera (see prior post “NBF’s Waterloo Bus Tour turns up some nuggets” October 16-07) will be used in the next James Bond film. Eric, talk about value-add.

And he’s only been on board for a few weeks! Shareholders must now say five hail marys as they bow in the direction of New York City.

Here is David Hodgson’s take on the news, courtesy of Genuity Capital Markets ($14 target and a “buy” rating):

“· DALSA announced this morning a real breakthrough in its Digital Cinema business with the announcement that the next James Bond film, Quantum of Solace, will be using DALSA’s 4K Origin camera. Back in February, the 8 Origin camera captured a complex visual effects shot for the Bond film, and with the release of this movie expected in early November, this will provide an important reference account for DALSA’s 4K camera.

· This is an important milestone for the 4K Origin camera, as feedback from cinematographers suggests that this camera is now increasingly being seen as “proven technology”. In particular, the cinematographer working on the Bond movie chose the 4K Origin camera over a 4K offering from RED – an incremental positive regarding Origin’s competitiveness in the marketplace. To be successful, Origin will need to win its share of business versus other 4K cameras coming from RED and Sony.

· Looking ahead, DALSA is bidding on a number of projects that are currently being developed, and the Bond win has definitely opened more doors. We believe that from a financial perspective, winning an end-to-end feature film is the next major checkpoint for DALSA’s nascent technology.

· The financial impact of this deal will be negligible in Q1/F08 with only one week’s worth of Origin camera rental. Up until now, Digital Cinema (DC) has been slow to gain traction, losing $1.8 million in Q4/F07 on flattish rental sales of around $400,000.

· All in all, this is a positive data point for DALSA’s Digital Cinema division, which has been an ongoing drag on corporate profitability. With 2008 being an important “show-me” year for DC, an early sign of traction in the motion picture establishment is encouraging. We reiterate our BUY recommendation and $14.00 price target on shares of DALSA.”

MRM