3SOF

QuoteDavid...please take a look at ILC...I think you will like what you see once you dig into a bit. This is a ground-floor opportunity IMO.

Ok, let me take a brief look at ILC. First of all let me say I like the sector, it is software, it is internet and has to do with people starting to work from home like I do. Unfortunately this is a simplistic way to look at things, not always a good macro environment or idea means an attractive company to invest.

First of all, let me see the chart:



I see a double top at $0.81 followed by a sharp fall in point number 1. What happened on that day? The news was:

• iLinc Announces Preliminary Unaudited Fiscal Year 2007 and Fourth Quarter Results
PR Newswire (Thu, May 3)

15% revenue growth YoY for fiscal 2007 but just 3% growth in Q4 2007 when compared to Q4 2006. People didn't like that.

Then on point 2 the stock rebounded strongly, and the news on those days were:

• iLinc to Present at the RedChip Small-Cap Conference
PR Newswire (Fri, May 18)

Ok, it had to do with the conference you posted, which I've listened to.

Let me make a quick round for the fundamentals and apply my valuation model to ILC:

1) Dilution factor

ILC has an history of dilution, the share count rose from 6.4 million shares in 1998 to 33.4 million now. Balance sheet is quite weak, since the current ratio is 1.14, there are $7 M in long term debt and about $1.5 M in cash and marketable securities.

The share count CAGR since 1998 was 20%. The dilution factor I'll put in my valuation model will be 1.2.

2) Revenue CAGR

Revenue in 2004 was $5 M, and the company expects $14.4 M for fiscal 2007. The revenue CAGR is 42.28%. However, revenues in Q4 grew just 3% from the year ago levels. Let's be optimistic and consider revenue growth going forward will be 25%. Revenue CAGR estimate is therefore 1.25.

3) Net profit margin estimate

The company lost money in 2003, 2004, 2005 and 2006. Net income was slightly positive for the past three quarters. The company has a net profit margin of 2.4%. Let's be enthusiastic and consider the net profit margin will expand to 5% over the medium term.

4) EPS multiple estimate

Here, as usual, I'll use the industry average which in ILC's case (Application Software industry) is 33.17.

Computing ...



Unless the company exceeds these estimates by a lot, the stock is not attractive, since the share price is estimated to be at $0.81 three years from now. It depends a lot on net profit margin, but because the company has this history of losses and dilution, coupled with a weak balance sheet, I would say that with the currently publicly available information an investment in ILC is too risky.

Can be wrong though, good luck

ILC is in danger of falling to the OTCBB or Pink Sheets, just $8.8 M market cap:

AFTER HOURS - TOP STORY