NEW YORK, Jan. 20, 2004 (PRIMEZONE) -- (Investrend Research Syndicate) International Monetary Systems, Inc. (OTCBB:INLM) has been rated "Speculative/3," with a target valuation of $0.40, according to Investrend Research analyst Benjamin P. Chui, CFA, in an Institutional research update, an upgrade from the initial Benchmark coverage.
According to Chui, International's "divestiture of its Canadian operations to focus on the more profitable US market should help improve the financial ratios as well as profit margins, client enrollment is picking up speed, and hit a record in 3Q2003, a good measure of future recurring revenue potential. This is also a good measure of internal growth."
IMS has nearly 6,000 barter customers. There are more than 250 barter system firms in the US, with 200,000 member companies, noted Chui. "We believe the market is ripe for consolidation, and that IMS is well positioned to be one of the eventual top five players in this market that is growing approximately 15% a year, to $3 billion in 10 years."
IMS currently enjoys gross margins exceeding 80%, and IMS is uniquely positioned for global expansion, expansion into vertical markets and more strategic industry acquisitions, he stated.
Chui said that for the nine months in 2003, IMS had $2.9 million revenue, with gross profit of $2.8 million, and has a book value of $2.6 million, of which current assets account for $1 million versus $620,000 liabilities, a "healthy current ratio well above 1."
The company is "approaching breakeven, which can occur in fiscal 2004, assuming they have good control on their costs. The concern is that the biggest cost factor (payroll) is growing at a rate similar to the revenue growth. If the barter trade has the economies of scale similar to say a software company, its earnings would grow disproportionately; thereby a high multiple would be appropriate. However, if IMS cannot enjoy the economies of scale, a significantly lower earnings multiple would be appropriate."
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