The Perfect Investment

Transcription

1 TSX: GCM, Pink Sheets: GEMCF Presented by Krish Daftary The Perfect Investment Operational momentum Long-term business sustainability, predictability, and visibility Price that allows for a significant margin of safety 1

2 Understanding the Business What does Gemcom do? Provides software solutions that help its customers manage the lifecycle of their mining operations including: Drill-hole data entry in exploration phase Mining design & planning Mine operations & production management 2

3 How Does Mining Work? Two main types: Open pit mining Underground Mining Extract tons of ore from the ground Extract tiny bits of precious/base metals i.e. 1 g/ton Timing & efficiency matter! Revenue Sources License fees: one-time in nature Professional Services Update Service & Technical Support (USTS): recurring in nature, renewed semi-annually or annually BREAKDOWN TO COME 3

4 Dec 06 YTD Rev Mix Professional Fees 18% Dec '05 9-Month Rev Mix Other 9% License 44% Professional Fees 14% Dec '06 9-Month Revenue Mix Other 6% License 51% Maintenance 29% Maintenance 29% Licensing a large chunk Surpac Minex Acquisition July 19, Acquired Australian based Surpac For C$28MM Represents multiple of 1.5x sales, 9.3x earnings C$18.3MM sales, C$3.0MM earnings (LTM Jun-06) From July 2002 July 2005 Revenues grew by an average of 36% per year Earnings grew by an average of 50% per year Former key competitor to Gemcom 5,000+ users in 89 countries 4

5 Surpac Minex Financials Surpac Acquisition Cash 13,884,960 Stock 14,916,753 Acquisition Costs 1,006,842 Dilution N/A (-) Cash 3,005,391 26,803,164 Purchase Price 1.5x sales 9.3x earnings Immediately value accretive! LTM March 30, 2006 License sales: $11.3MM AUD Maintenance sales: $5.8MM AUD Professional services: $2.0MM AUD Other: $0.2MM AUD Surpac Minex Acquisition Enhances GCM s competitive profile Increased access to European & Australian markets Access to coal, iron ore, lateritic nickel, bauxite, and oil sands end markets Increased manpower to help R&D efforts Alleviates some pricing pressure Potential cross-selling opportunities 5

6 Competitive Positioning Gemcom now has a dominant ~40% market share Three companies control 80% of the market UK-based Datamine Australia-based Maptek Other major competitors include in-house applications Combined Software Offerings EXPLORATION GEMS Surpac Vision MINE DESIGN/MODELING FOR COAL, OIL SANDS, ETC. Minex MINE PLANNING Whittle Maximiser MINE PERFORMANCE MANAGEMENT In-Site OFFERINGS SPAN THE MINING LIFE CYCLE 6

7 Visuals Minex MineSched Major Customers Covered $139B $25B $17B $14B $20B $15B 7

8 Mining Industry Overview Gold Pricing 8

9 Silver Pricing Copper Pricing 9

10 Zinc Pricing Gold Reserves & Production 10

11 Copper Production 15,500 15,000 Metric Tons (1,000s)2.5% CAGR 14,500 14,000 13,500 13,000 12,500 12, Iron Ore Production 1,800 1,600 1, % CAGR 1,200 Metric Tons (1,000,000s) 1,

12 Pricing/Production: Gold Production Price ($/t) Gold Price vs. Production ,000 25,000,000 2,500 20,000,000 2,000 15,000,000 1,500 10,000,000 1, ,000, Pricing/Production: Copper Production Price ($/t) Copper Price vs. Production ,000, ,000, ,000, ,000, ,000, ,000, ,000, ,000,

13 Pricing/Production: Iron Ore Production Price ($/t) Iron Ore Price vs. Production ,800,000, ,600,000, ,400,000, ,200,000,000 1,000,000, ,000, ,000, ,000, ,000, Financial Metrics 13

14 Price of GCM Price/share 2.00 Shares Outstanding 50,401,412 (+) Dilution 3,827,562 Total Shares Outstanding 54,228,974 Market Capitalization 108,457,948 (-) Cash 10,224,370 (+) Debt 260,234 (+) Minority Interest 23,975 Enterprise Value 98,517,787 Last Q Gangbuster 3 Months Dec-06 Dec-05 Revenue: Products and services 11,055,990 4,575,348 Third-party products 360,596 30,108 Total revenue 11,416,586 4,605,456 % Growth 147.9% Cost of revenue 2,273, ,315 Gross margin 9,142,806 3,866,141 % Margin 80.1% 83.9% Research and development 2,491,167 1,007,355 Sales and marketing 3,873,253 1,821,495 General and administration 416, ,382 2,549, ,052 % Margin 22.3% 18.7% % Growth 196.5% Acquisition accounted for 62% of growth Organic growth accounted for remaining 38% of increase in revenue Implies 56.2% organic growth rate! Annualized, Surpac revenue totals C$16.9MM Breakdown License % Growth 195.2% Maintenance % Growth 138.5% Professional Fees % Growth 128.6% Other % Growth 0 Total % Growth 248.3% 14

15 PF Combined Historical IS ANNUALIZED Dec-06 Jun-06 Jun-05 Gemcom Revenue x 17,967,509 16,895,836 Surpec Revenue x 18,357,379 14,257,695 Total Revenue 44,223,960 36,324,888 31,153,531 % Growth 21.7% 16.6% Gemcom Gross Profit x 15,052,834 13,818,287 Surpec Gross Profit x 14,903,652 11,526,408 Total Gross Profit 36,571,224 29,956,486 25,344,695 % Margin 82.7% 82.5% 81.4% Gemcom x 3,688,106 2,807,094 Surpec x 4,202,142 2,644,825 Total 10,199,032 7,890,248 5,451,919 % Margin 23.1% 21.7% 17.5% % Growth 29.3% 44.7% Gemcom FCF x 2,010, ,022 Surpec FCF x 2,883,870 2,070,485 Total FCF 10,000,968 4,893,947 2,867,507 % of 98.1% 62.0% 52.6% Undervalued? Annualized Q3 Multiples Sales 45,666, x 10,199, x EBIT 7,450, x Net Income 4,842, x FCFE 6,314, x Not so sure on an absolute basis Thoughts on multiples: Annualizing a record quarter (aggressive) however Must consider growth in 2007 and beyond and Must consider operational leverage 15

16 Relative: EV/S E 2008E EV EV/R EV/R EV/R Autodesk Inc. (NasdaqNM:ADSK) 10, x 4.9x 4.3x Business Objects SA (NasdaqNM:BOBJ) 3, x 1.9x 1.7x Cognos Inc. (NasdaqNM:COGN) 3, x 2.7x 2.5x Dassault Systemes SA (ENXTPA:DSY) 6, x 3.2x 2.6x Hyperion Solutions Corp. (NasdaqNM:HYSL) 2, x 2.7x 2.4x Matrikon Inc. (TSX:MTK) x 1.0x??? Open Text Corp. (NasdaqNM:OTEX) 1, x 2.5x 2.2x Average 4, x 2.7x 2.6x Median 3, x 2.7x 2.5x Gemcom Software International Inc. (TSX:GC x 2.2x??? Slightly undervalued Relative: EV/ E 2008E EV TEV/ TEV/ TEV/ Autodesk Inc. (NasdaqNM:ADSK) 10, x 14.9x 12.9x Business Objects SA (NasdaqNM:BOBJ) 3, x 8.6x 7.7x Cognos Inc. (NasdaqNM:COGN) 3, x 11.7x 10.1x Dassault Systemes SA (ENXTPA:DSY) 6, x 10.7x 9.6x Hyperion Solutions Corp. (NasdaqNM:HYSL) 2, x 11.2x 9.5x Matrikon Inc. (TSX:MTK) x 6.3x??? Open Text Corp. (NasdaqNM:OTEX) 1, x 8.0x 6.9x Average 4, x 10.2x 9.4x Median 3, x 10.7x 9.5x Gemcom Software International Inc. (TSX:GC x 9.7x??? Slightly undervalued 16

17 Relative: P/E E 2008E EV P/E P/E P/E Autodesk Inc. (NasdaqNM:ADSK) 10, x 25.7x 20.7x Business Objects SA (NasdaqNM:BOBJ) 3, x 16.7x 13.8x Cognos Inc. (NasdaqNM:COGN) 3, x 18.8x 16.2x Dassault Systemes SA (ENXTPA:DSY) 6, x 20.2x 17.2x Hyperion Solutions Corp. (NasdaqNM:HYSL) 2, x 25.1x 21.1x Matrikon Inc. (TSX:MTK) x 17.1x??? Open Text Corp. (NasdaqNM:OTEX) 1, x 17.6x 13.8x Average 4, x 20.2x 17.1x Median 3, x 18.8x 16.7x Gemcom Software International Inc. (TSX:GC x 22.4x??? In-line Relative: Growth Rates EV 1-Yr Revenue G 1-Yr G Est. LT G Rate Autodesk Inc. (NasdaqNM:ADSK) 10, Business Objects SA (NasdaqNM:BOBJ) 3, Cognos Inc. (NasdaqNM:COGN) 3, (2.49) Dassault Systemes SA (ENXTPA:DSY) 6, Hyperion Solutions Corp. (NasdaqNM:HYSL) 2, Matrikon Inc. (TSX:MTK) (20.02) NA Open Text Corp. (NasdaqNM:OTEX) 1, Average 4, Median 3, Gemcom Software International Inc. (TSX:GC ??? Grossly undervalued 17

18 Application Software Comps TEV/LTM Total Rev TEV/LTM P/Diluted EPS Before Extra TEV/ NTM Total Rev TEV/NTM P/NTM EPS Mean 4.2x 21.7x 39.4x 3.0x 14.7x 31.2x Median 3.2x 15.9x 31.2x 2.8x 13.1x 26.5x Gemcom 3.4x 15.7x 36.0x 2.2x 9.7x 22.4x Undervalued on a forward basis Business Software & Services Comps TEV/LTM Total Rev TEV/LTM P/Diluted EPS Before Extra TEV/ NTM Total Rev TEV/NTM P/NTM EPS Mean 4.1x 22.2x 38.3x 2.8x 15.5x 35.0x Median 2.4x 14.1x 30.9x 2.3x 12.9x 25.6x Gemcom 3.4x 15.7x 36.0x 2.2x 9.7x 22.4x Undervalued on a forward basis 18

19 Internet Software & Services Comps TEV/LTM Total Rev TEV/LTM P/Diluted EPS Before Extra TEV/ NTM Total Rev TEV/NTM P/NTM EPS Mean 5.0x 25.8x 40.9x 2.9x 18.4x 34.9x Median 2.5x 15.1x 31.4x 2.4x 13.6x 25.9x Gemcom 3.4x 15.7x 36.0x 2.2x 9.7x 22.4x Undervalued on a forward basis Multimedia & Graphics Software Comps TEV/LTM Total Rev TEV/LTM P/Diluted EPS Before Extra TEV/ NTM Total Rev TEV/NTM P/NTM EPS Mean 4.9x 25.3x 41.8x 2.9x 18.3x 34.4x Median 2.5x 15.2x 31.7x 2.4x 13.6x 25.8x Gemcom 3.4x 15.7x 36.0x 2.2x 9.7x 22.4x Undervalued on a forward basis 19

20 Security Software & Services Comps TEV/LTM Total Rev TEV/LTM P/Diluted EPS Before Extra TEV/ NTM Total Rev TEV/NTM P/NTM EPS Mean 5.0x 24.7x 41.0x 2.9x 18.1x 34.3x Median 2.6x 15.2x 31.5x 2.4x 13.6x 25.8x Gemcom 3.4x 15.7x 36.0x 2.2x 9.7x 22.4x Undervalued on a forward basis Technical & System Software Comps TEV/LTM Total Rev TEV/LTM P/Diluted EPS Before Extra TEV/ NTM Total Rev TEV/NTM P/NTM EPS Mean 4.9x 24.8x 43.0x 2.9x 17.8x 35.4x Median 2.7x 15.3x 32.4x 2.4x 13.5x 25.7x Gemcom 3.4x 15.7x 36.0x 2.2x 9.7x 22.4x Undervalued on a forward basis 20

21 Reasons to Hate the Stock Why I m Hesitant Valuation may be rich Business ever changing, relies heavily on R&D Half of revenue stream dependent on bulky license sales Strengthening CAD Dilutive warrants, options could suppress stock in shortterm Business difficult to understand No catalysts Integration risk Transaction comp 52-week highs 21

22 Missed the Boat? or more room to run? GARP? 22