Simulations Plus (SLP)

[dickmilde]

Taglich Brothers report update

Key Investment Considerations:
Maintaining Speculative Buy rating. Increasing (12-month) price target to $5.45 from $5.00 per share due to
improved sector valuation.
Profit growth will be driven by gross margin gains stemming from the purchase of a royalty agreement, high
margin simulation software sales, and funded collaborations, which carry a gross margin of over 86%.
Use of software tools and analytics for drug discovery and development is becoming more widespread within
the pharmaceutical and biotechnology industries due to reduced R&D budgets.
SLP has penetrated only 10% of the 1,000+ potential pharmaceutical and biotechnology customers, leaving
ample revenue upside. Toxicology products, release of MembranePlus™ in FY13, and development of a new
chemical entity molecular library could underlie further revenue upside into FY14.
4Q12 income from continuing operations (reported 11-19-12) was $349,000 or $0.02 per share, up from $170,000 or
$0.01 last year, on a 14.9% sales increase to $1.6 million. 4Q12 sales and EPS were in line with our forecast.
Reduced our FY13 EPS projection by $0.03 to $0.19 on sales of $10.3 million (down $500,000). We anticipate
20 fewer new customers (60), a larger scientific team (3), and laboratory experiment expenses for development
of a second new chemical entity that was unanticipated earlier.
In FY14, we project 12.5% sales growth to $11.5 million and EPS of $0.23 per share. After four years of stable
pricing, we anticipate a price increase on software offerings, traction gains by MembranePlus, and a total of
70 (new) customers, up from 60 in FY13 and 43 in FY12.

Full report here:
http://www.taglichbrothers.com/TaglichTrack/Reports/simplus/simplus-12102012.pdf