ULTRALIFE CORPORATION 
By SAN FRANCISCO, Jan. 11 /PRNewswire-FirstCall/ -- Merriman Curhan Ford (Nasdaq: MERR) today announced that it has initiated coverage on the Defense Electronics/Advanced Communications sector under equity research analyst James McIlree, CFA.
(Logo: http://www.newscom.com/cgi-bin/prnh/20090911/MCFLOGO)
McIlree's research thesis includes company coverage of Comtech Telecomm (Nasdaq: CMTL), Force Protection (Nasdaq: FRPT), GeoEye (Nasdaq: GEOY) and Harris Corp. (NYSE: HRS) with Buy ratings, and Applied Signal (Nasdaq: APSG), DigitalGlobe (NYSE: DGI), Globecomm (Nasdaq: GCOM) and Ultralife (Nasdaq: ULBI) with Neutral ratings.
McIlree highlighted these themes in his company initiation reports:
-- Comtech Telecomm (Nasdaq: CMTL) ($37.00) (Buy)
-- We are initiating coverage of Comtech Telecomm with a Buy rating and
believe a potential valuation range of $45-50 per share based on an
EV/EBITDA multiple of 5.5-6.5x is achievable. As the year progresses
we expect clarity on the BFT (Blue Force Tracking) and MTS (Movement
Tracking System) contracts to move the multiple. We also believe a
strengthening economy will lead to better than expected satcom modem
results, and excellent cost controls to propel estimates higher.
-- Force Protection (Nasdaq: FRPT) ($5.35) (Buy)
-- We are initiating coverage of Force Protection with a Buy rating and
believe a potential valuation range of $7 - 8 per share based on an
EV/EBITDA multiple 6.5-7.7x is achievable. We believe our estimates
can be exceeded since we assume a drop in maintenance revenue per
vehicle in 2010, but given the high operational tempo in
Afghanistan, this could prove conservative. In addition, we have not
built in potential international vehicle production wins, which
could also drive estimates higher.
-- GeoEye (Nasdaq: GEOY) ($28.49) (Buy)
-- We are initiating coverage of GeoEye with a Buy rating and believe
the shares have the potential to reach $35-40 per share. This is
based on achieving an EV/EBITDA multiple of approximately 5-5.5x.
While there is not as much upside to estimates relative to
DigitalGlobe, there is upside. Even at 5x FTM EBITDA, we regard the
shares as cheap given the limited competition, strong customer
demand and favorable financial characteristics.
-- Harris Corp. (NYSE: HRS) ($48.69) (Buy)
-- We are initiating coverage of Harris Corp. with a Buy recommendation
and believe a potential valuation of $60-65 per share is reasonable.
This is based on the shares trading between a market multiple and a
10% premium. In the short-term we believe the driver for possible
upside to estimates is the increased troop deployment to
Afghanistan. In the long-term, we believe the exigent procurement of
radios today could lead to a greater role in the Joint Tactical
Radio System (JTRS) and greater long-term revenue and EPS
visibility.
-- Applied Signal (Nasdaq: APSG) ($19.14) (Neutral)
-- At less than 7x FTM EBITDA, valuation for APSG is attractive, but a
catalyst is lacking. The company's move into tactical SIGINT
(products used to detect and locate 3G wireless signals) is taking
longer than expected to develop and will be a drag on growth this
fiscal year. The company's core broadband communications business is
strong, but growing modestly. And while sensor systems are growing
quickly, the base is small. Patient investors should take a look,
since the company is in the right place at the right time and a
potential takeover target.
-- DigitalGlobe (NYSE: DGI) ($25.92) (Neutral)
-- We believe revenue and EBITDA estimates for DigitalGlobe's FY10
remain too high. That and the valuation premium to GeoEye keep us on
the sidelines. We estimate the company's recently launched
WorldView-2 satellite, which achieved full operational capability
this year, will become fully utilized in the 2011 time frame,
driving a significant increase in financial results. For us, the
take up of WorldView-2's capacity is a matter of when, not if.
-- Globecomm (Nasdaq: GCOM) ($7.86) (Neutral)
-- Globecomm has made an impressive transformation from a commodity
supplier of satellite ground station equipment to a leading
independent teleport operator and designer and manufacturer of
military and commercial satellite ground station equipment. The
shares are trading at 5.4x FTM EBITDA and, in our opinion, could
probably trade up from here. However, given the lack of liquidity in
the name we are looking for a bigger potential upside before
recommending the shares.
-- Ultralife (Nasdaq: ULBI) ($4.47) (Neutral)
-- The short-term task for Ultralife is to convert the
Satellite-on-the-move (SOTM) kits in inventory to cash and pay down
short-term debt. This is an urgent and achievable task. Over the
long-term, we believe the company needs to generate more consistent
results in order to win back investor favor and improve its
multiple.
Members of the media can obtain a copy of these Merriman Curhan Ford research reports by e-mailing the Equity Research department at editorial@mcfco.com or by calling (646)292-1429.
About Merriman Curhan Ford
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Rating Universe Stocks Description next three months
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MCF & Co. expects
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Buy 76% 87 appreciate 10% or 9%
more over the next
12 months. Initiate
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MCF & Co. expects
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