The three ISCO opportunities aren't factored in here is there investment thesis.
INVESTMENT THESIS
We are initiating coverage of ISCO International (ISO) with a PERFORM rating and a 12-
month Target Price of $0.63 based on a Price-to-sales multiple of 8x our 2006 revenue
forecast. ISCO has improved financial performance over the last three quarters but is not
profitable. We believe ISCO will be on the cusp of profitability in 2006 and could do even
better, depending on its success in translating three immediate sales opportunities into new
revenue. Longer term, substantial sales opportunities exist for ISCO's products and
technologies due to telecommunications industry consolidation and integration requirements,
integration with 3G systems requirements, as well as international opportunities.
Positive near-term developments include three immediate sales opportunities announced by
the company this month, any one of which could potentially boost sales significantly. Longer
term catalysts for sales growth include 1) the need for technologies and products required for
system integration due to industry consolidation, 2) opportunities for ISCO solutions that
facilitate systems integration due to deployment of 2.5G and 3G systems, and 3) increased
opportunities for existing products in new markets.
Despite positive industry developments and encouraging near-term potential, we cannot be
more bullish in our rating of the stock due to the Company’s lack of profitability, the
illiquidity of the stock, and the uncertainty of ISCO’s sales outlook. As we expect the
Company to be on the cusp of profitability in 2006, better-than-expected performance early in
the year could trigger a positive reevaluation of our investment opinion.
