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EXHIBIT A
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I hereby certify that THOMAS WEISEL INTERNATIONAL PRIVATE LIMITED is this day incorporated under The Companies Act, 1956 (N . 1 of 1956) and that the Company is Limited.
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EXHIBIT B
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TWPL00000003
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EXHIBIT C
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FILED UNDER SEAL
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EXHIBIT D
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Septetriber 24, 2007
TECHNOLOGY Semiconductors: Intellectual Property Abhiram Eleswarapu 415.262.6361 aeleswarapu@tweiseLcom
ACACIA TECHNOLOGIES GROUP
-ACTG
NASDAQ: $14.82 as of 9/21/07
KEY TAKEAWAYS FROM IN-HOUSE MANAGEMENT PRESENTATION
Overweight Company Update · Acacia management presents to TWP: We hosted Paul Ryan, CEO, and Rob Stewart of
Investor Relations at Acacia Technologies in our San Francisco office on September 19, 2007. · Key takeaways from the day: 1) Acacia's target market is a relatively untapped group of individual inventors and small companies that own 60% of all technology patents but generates only 1% of the total $500bn technology licensing market. 2) The company's lucrative business model allows it to retain 35-40% of all proceeds from a license deal while providing margin leverage on a manageable cost structure. 3) It has a proven business model, having enforced more than 500 licenses from its 78 patent portfolios, and has averaged a new acquisition every two weeks since FY06 with current focus on high value portfolios. 4) The company could continue to see lumpy revenue as the timing of the deals it closes each quarter is unpredictable, and the value of the portfolios settled can vary significantly. 5) We estimate that Acacia presently has more than 40 mature portfolios (that can contribute to the top line in the near term) and several "passive" portfolios (currently subject to litigation) that could provide significant upside in the future.
· Licensing and acquisition activity continues in F3Q07: In F3Q07 so far, Acacia has
announced 22 licensing agreements (21 in F2Q07) covering six of its patent portfolios. In addition, the company also announced acquiring four new patent portfolios so far this quarter.
· Possible impact of recently passed patent overhaul bill: On September 7, 2007, the House
passed a patent reform bill that aims to raise the quality of patents and reduce litigation. Among the issues likely to come up before the Senate are the possibility of introducing a post-grant opposition period once a patent has been granted, deciding the patent ownership on a "first-to-file" basis rather than "first-to-invent", and new guidelines on calculating infringement damages. While Acacia's management did concede that there could be a possible impact on the company, they believe that only the fundamental aspects of the bill are likely to become part of the law, and that continued lobbying is likely to make the bill friendlier to smaller companies that it is currently perceived to be. In addition, it believes that the reform would be long-term positive for the company. Our DCF model currently incorporates $400mn ($1bn weighted at a 40% probability of success) in revenue from passive portfolios between FY08 and FY12. The 40% probability estimate captures the likelihood of any negative impact of patent reform, in our view.
Please see analyst certification and other important disclosures starting on page 2 and continuing through page 3.
· Valuation: We maintain our Overweight rating on ACTG shares and a 12-18 month price target
of $19 (approximately split as active portfolios $8.68, passive portfolios $8.73 and cash per share of $1.71), based on a sum-of-the parts DCF valuation. The primary catalysts, in our view, are the possible settlements of the computing device performance and DMT portfolios over the next year or so. Key risks to our price target include our set of elaborate growth assumptions not playing out, and the timing and probability of Acacia settling with companies with which it is in litigation.
Thomas Weisel Partners and its affiliates do and seek to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Customers of Thomas Weisel Partners in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.tweisacom or can call (877) 921-3900 to request a copy of this research. Investors should consider this report as only a single factor in making their investment decision
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ADDITIONAL rNFORMATION IS AVAILABLE UPON REQUEST. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES: The Research Analyst(s) principally responsible for the analysis of any security or issuer included in this report certifies that the views expressed accurately reflect the personal views of the Research Analyst(s) about the subject securities or issuers and certifies that no part of his or her compensation was or is or will be, directly or indirectly, related to the specific recommendations or views expressed by the Research Analyst(s) in this report.
Notes: Price chart updated as of 9/21/2007.All price targets displayed in the chart above represent either a specific price target or the midpoint of a range. Source: First Call, FactSet and Thomas Weisel International Private Ltd.
Thomas Weisel Partners LLC makes a market in the securities of the following company or companies mentioned in this report and may sell any of the securities to or buy them from customers on a principal basis: Acacia Technologies Group
September 24, 2007 2
Thomas Weisel International Abhiram Eleswarapu 415.262.6361
TWPL00001426
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The following grid outlines the Thomas Weisel Partners LLC stock rating system, along with the relevant definitions, effective November 16, 2006. PCT. OF PCT. FOR SECURITIES WHICH IB RATED IN SERVICES HAVE STOCK STOCK RATINGS DEFINITIONS BEEN PROVIDED RATING EACH CATEGORY When an analyst rates a stock Overweight, he/she 47.5% 33.9% is advising our clients to carry a position in the stock that is in excess of its weighting relative to Overweight (0) the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst.
3
0
Market Weight (M)
When an analyst rates a stock Market Weight, he/she is advising our clients to carry a position in the stock that is in line with its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst. When an analyst rates a stock Underweight, he/she is advising our clients to carry a position in the stock that is below its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst.
49.4°/o
7.7%
7. 3.2%
6.7%
Underweight (U)
,,Total St211, Suspended Rating (S) Not Rated (NR) Not Covered (NC)
6.7
The stock rating has been suspended. The stock is not rated, but it is covered by a Thomas Weisel Partners LLC analyst. The stock is not covered by a Thomas Weisel Partners LLC analyst.
Notes: The percentage of investment banking services is calculated as of 6/30/2007. The percentage of securities rated in each category is calculated as of 9/24/2007. An analyst's coverage universe is defined as all of the stocks within the analyses industry that reasonably are part of his/her potential coverage, not necessarily the stocks specifically covered. "Buy", "Hold" and "Sell" are not ratings categories defined by Thomas Weisel International and should not be interpreted as investment opinions. We show these categories for illustrative purposes in accordance with NASD and NYSE regulations. The above table includes Thomas Weisel International stocks. Source: FactSet and Thomas Weisel Partners LIC
This report contains statements of fact relating to economic conditions generally and to parties other than Thomas Weisel International. Although these statements of fact have been obtained from and are based on sources that Thomas Weisel International believes to be reliable, we do not guarantee their accuracy and any such information might be incomplete or condensed. All opinions and estimates included in this report constitute Thomas Weisel International's judgment as of the date of this report and are subject to change without notice. This report is for information purposes only. It is not intended as an offer or a solicitation with respect to the purchase or sale of a security, and it should not be interpreted as such. This report does not take into account the investment objective, financial situation or particular needs of any particular investor. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision based on the recommendations in this report. In the United Kingdom, this document is intended only to be directed at market counterparties and intermediate customers. It is not intended to be directed at private customers, and it may not and is not intended to be distributed to or passed on, directly or indirectly, to private customers. The investments and/or services detailed in this document are available only to market counterparties and intermediate customers. Only market countexparties and intermediate customers may rely on this document. Private customers should not rely on the contents of this document. Thomas Weisel Partners International Limited, authorized by the FSA, has approved this document for the sole purpose of the financial promotion regime under Section 21 of the Financial Services and Markets Act of 2000.
© Thomas Weisel Partners LLC, 2007. All rights reserved. Any unauthorized use, duplication or disclosure is prohibited by law and will result in prosecution.
September 24, 2007 3
Thomas Weisel International Abhiram Eleswarapu 415.262.6361
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Discovery Research
September 25, 2001
Tbomas kettOm tirml
HEALTHCARE Healthcare Services
Vishal Sharma 415.262.6355 [email protected]
ACCELRYS, INC. --ACCL
ANNOUNCES COMPREHENSIVE RESALE AGREEMENT WITH AGILENT
Market Weight Company Update · Agreement with Agilent enables integration of their respective informatics products: The
partnership covers the breadth of informatics portfolios of both companies. Cost reduction and automation of data-analysis and reporting tools in biology, chemistry and QA/QC should benefit customers in the pharmaceutical industry. As part of the agreement, Accelrys will resell OpenLA.B Enterprise Content Manager, Kalabie Electronic Lab Notebook and GeneSpring gene expression solutions. A.gilent will resell Accord cheminformatics solutions and Pipeline Pilot Scientific Operating Platform solutions. We believe that the new sales channel created by this agreement is a positive for the company. · Our take: This agreement is an example of the company's efforts to expand its sales distribution channel, in our view. We believe this partnership will have a positive impact on ACCL's sales, given Agilent's breadth of products and market hold. We will, however, look to detailed terms of the agreement to get more visibility on the timing and magnitude of the incremental benefits for ACCL from this partnership. · Maintaining estimates, rating and 12-month price target: We are maintaining our FY08 and FY09 revenue estimates at $80.75mn and $88.01mn, and EPS estimates at $0.04 and $0.17, respectively. We are also maintaining our Market Weight rating and 12-month price target of $7. · Valuation: Our 12-month price target of $7 is based on our FY08 revenue estimate of $80.75mn and TEV/sales multiple of approximately 1.5x compared to the peer group mean of 2.0x. Our valuation is at a discount to the peer group because of poor revenue growth visibility. There always are risks that the price target for any security will not be realized. In addition to general market and macroeconomic risks, for ACCL, these risks include, among others, a reduction in development expenses because of consolidation in the pharmaceutical industry and pricing pressures from the availability of open-source code in the bioinforrnatics space. NASDAQ: $6.74 as of 9/24/07
Please see analyst certification and other important disclosures starting on page 2 and continuing through page 3. Thornis Weisel Partners and its affiliates do and seek to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Customers of Thomas Weisel Partners in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.tweisel.com or can call (877) 921-3900 to request a copy of this research Investors should consider this report as only a single factor in making their investment decision.
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ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES: The Research Analyst(s) principally responsible for the analysis of any security or issuer included in this report certifies that the views expressed accurately reflect the personal views of the Research Analyst(s) about the subject securities or issuers and certifies that no part of his or her compensation was or is or will be, directly or indirectly, related to the specific recommendations or views expressed by the Research Analyst(s) in this report.
Notes: Price chart updated as of 9/22/2007-All price targets displayed in the chart above represent either a specific price target or the midpoint of a range. Source: First Call, FactSet and Thomas Weisel International Private Ltd.
Thomas Weisel Partners LLC makes a market in the securities of the following company or companies mentioned in this report and may sell any of the securities to or buy them from customers on a principal basis: Accelrys, Inc. Thomas Weisel Partners LLC expects to receive or intends to seek compensation for investment banking services from the following company or companies mentioned in this report over the next three months: Accelrys, Inc.
September 25, 2007 2
Thomas Weisel International Vishal Sharma 415.262.6355
TWPL00001429
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The following grid outlines the Thomas Weisel Partners LLC stock rating system, along with the relevant definitions, effective November 16, 2006. PCT. OF SECURITIES RATED IN EACH CATEGORY 47.7% PCT. FOR WHICH IB SERVICES HAVE BEEN PROVIDED 33.8%
STOCK RATING
Overweight (0)
STOCK RATINGS DEFINITIONS When an analyst rates a stock Overweight, he/she is advising our clients to carry a position in the stock that is in excess of its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered bj that analyst. When an analyst rates a stock Market Weight, he/she is advising our clients to carry a position in the stock that is in line with its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst. When an analyst rates a stock Underweight, he/she is advising our clients to carry a position in the stock that is below its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst.
49.2%
7.8%
Market Weight (M)
rot
a
old
4
0
3.2%
6.7%
Underweight (U)
Suspended Rating (S) Not Rated (Nit) Not Covered (NC)
Notes: The percentage of investment banking services is calculated as of 6/30/2007. The percentage of securities rated in each category is calculated as of 9/25/2007. An analyst's coverage universe is defined as all of the stocks within the analyst's industry that reasonably are part of his/her potential coverage, not necessarily the stocks specifically covered. "Buy", "Hold" and "Sell" are not ratings categories defined by Thomas Weisel International and should not be interpreted as investment opinions. We show these categories for illustrative purposes in accordance with NASD and NYSE regulations. The above cable includes Thomas Weisel International stocks. Source: FactSet and Thomas Weisel Partners LLC
The stock rating has been suspended. The stock is not rated, but it is covered by a Thomas Weisel Partners LLC analyst. The stock is not covered by a Thomas Weisel Partners LLC analyst.
This report contains statements of fact relating to economic conditions generally and to parties other than Thomas Weisel International. Although these statements of fact have been obtained from and are based on sources that Thomas Weisel International believes to be reliable, we do not guarantee their accuracy and any such information might be incomplete or condensed. All opinions and estimates included in this report constitute Thomas Weisel International's judgment as of the date of this report and are subject to change without notice. This report is for information purposes only. It is not intended as an offer or a solicitation with respect to the purchase or sale of a security, and it should not be interpreted as such. This report does not take into account the investment objective, financial situation or particular needs of any particular investor. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision based on the recommendations in this report. In the United Kingdom, this document is intended only to be directed at market counterparties and intermediate customers. It is not intended to be directed at private customers, and it may not and is not intended to be distributed to or passed on, directly or indirectly, to private customers. The investments and/or services detailed in this document axe available only to market counterparties and intermediate customers. Only market counterparties and intermediate customers may rely on this document. Private customers should not rely on the contents of this document. Thomas Weisel Partners International Limited, authorized by the FSA, has approved this document for the sole purpose of the financial promotion regime under Section 21 of the Financial Services and Markets Act of 2000. 0 Thomas Weisel Partners LLC, 2007. All rights reserved. Any unauthorized use, duplication or disdosure is prohibited by law and will result in prosecution.
September 25, 2007 3
Thomas Weisel International Vishal Sharma 415.262.6355
TWPL00001430
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Discovery Reseaich
September 27, 2007
aslikilsel International
TECHNOLOGY Electrical Components and Equipment Girish Nair 415.262.6351 [email protected]
ASTRONICS CORPORATION --ATRO RAISING PRICE TARGET ON RECENT PROGRAM WINS AND APPROVALS FOR NEW PRODUCTS
Overweight NASDAQ: $42.80 as of 9/26/07 Company Update · Incrementally positive as Astronics extends its dominance in the market for its VUJ exterior and cockpit lighting products: Astronics was selected by Embraer recently to provide exterior
lighting, flood lighting and cockpit lighting controllers for its Phenom 300 light jet platform--a larger version of the Phenom 100 Very Light Jet (VU) to which Astronks already supplies the same products. The Phenom 100 is scheduled for certification in mid-2008, while the Phenom 300 is scheduled for certification in mid-2009. As of June 30, 2007, the combined order backlog for the Phenom 100 and 300 was 460. The first Phenom 100 is scheduled for delivery by the end of FY08. Astronics already supplies a significant amount of content for other VLJs such as the Eclipse 500 and the Cessna Mustang. We expect the recent program win from Embraer to help Astronics extend its dominance in the market for VUJ exterior and cockpit lighting products. The program win also reinforces our confidence in our FY08 lighting products sales estimates, which we expect to grow by 19.2% y/y in FY08.
· Cessna CJ4 program win augurs well for the company's long-term prospects, in our view:
Astronics was also selected by Cessna to provide exterior lighting and cockpit control panels for the Cessna Citation CJ4, which has a backlog of 120 and is expected to enter services in F1H10.
· FAA approval for new exterior lighting products is a testament of Astronics' continued focus on new product development: Astronics received the Federal Aviation Association's
(FAA) approval for a tail position light and a wingtip lighting assembly. The new light-emitting diode (LED) tail position light offers lasts longer than conventional lighting products. The new LED wing-tip anti-collision and position lighting assembly needs no external power supply and reduces weight, drag and power consumption of the aircraft and lasts longer than conventional lighting products. We expect these products to replace lighting systems on older business jets and find acceptance in next generation business jets. We believe that Astronics' focus on new product development has been critical to its success in the aviation market.
· Valuation: We reiterate our Overweight rating on shares of ATRO, which currently trades at a
P/E of 20.48x our CY08 EPS estimate versus the peer group median of 15.54x. We are raising our price target from $42 to $45 based on a P/E multiple of 21.50x applied to our CY08 EPS estimate of $2.09. We are raising our PE multiple from 20.00x to 21.50x as the recent contract wins gives us increased confidence about the long-term growth prospects for Astronics. The stock has appreciated in the last three weeks based upon management presentations at recent conferences, which we believe may not be sustainable in the near term. Key risks to our price target include a downturn in the aviation market, a loss of business from key customers, a failure of new aircraft launches by Astronics' customers, especially Eclipse Aviation, and an increase in R&D expenses to support any new program wins.
Please see analyst certification and other important disclosures starting on page 2 and continuing through page 3.
Thomas Weisel Partners and its affiliates do and seek to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Customers of Thomas Weisel Partners in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.tweisel.com or can call (877) 921-3900 to request a copy of this research. Investors should consider this report as only a single factor in making their investment decision.
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ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES: The Research Analyst(s) principally responsible for the analysis of any security or issuer included in this report certifies that the views expressed accurately reflect the personal views of the Research Analyst(s) about the subject securities or issuers and certifies that no part of his or her compensation was or is or will be, directly or indirectly, related to the specific recommendations or views expressed by the Research Analyst(s) in this report.
Notes: Price chart updated as of 9/24/2007.Al1 price targets displayed in the chart above represent either a specific price target or the midpoint of a range. Source: First Call, FactSet and Thomas Weisel International Private Ltd.
Thomas Weisel Partners LLC makes a market in the securities of the following company or companies mentioned in this report and may sell any of the securities to or buy them from customers on a principal basis: Astronics Corporation
September 26, 2007 9
Thomas Weisel International
Girish Nair 415.262.6351
TWPL00001432
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The following grid outlines the Thomas Weisel Partners LLC stock rating system, along with the relevant definitions, effective November 16, 2006.
STOCK RATING
PCT. OF SECURITIES RATED IN
STOCK RATINGS DEFINITIONS When an analyst rates a stock Overweight, he/she is advising our clients to carry a position in the stock that is in excess of its weighting relative to the stocks either in that analyses coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst. When an analyst rates a stock Market Weight, he/she is advising our clients to carry a position in the stock that is in line with its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst. When an analyst rates a stock Underweight, he/she is advising our clients to carry a position in the stock that is below its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered b y that analyst.
EACH CATEGORY
47.7%
PCT. FOR WHICH IB SERVICES HAVE BEEN PROVIDED 33.8%
Overweight (0)
Total Buy
47.7% 49.2%
7.8%
Market Weight (M)
Tk54.11-1( ,i(i
32%
6.7%
Underweight (U)
T.qtat Sell
3.2%
6.7%
Suspended Rating (S)
Not Rated (NR.) Not Covered (NC)
The stock rating has been suspended. The stock is not rated, but it is covered by a Thomas Weisel Partners LLC analyst The stock is not covered by a Thomas Weisel Partners LLC analyst.
Notes: The percentage of investment banking services is calculated as of 6/30/2007. The percentage of securities rated in each category is calculated as of 9/27/2007. An analyses coverage universe is defined as all of the stocks within the analyst's industry that reasonably are part of his/her potential coverage, not necessarily the stocks specifically covered. "Buy", "Hold" and "Sell" are not ratings categories defined by Thomas Weisel International and should not be interpreted as investment opinions. We show these categories for illustrative purposes in accordance with NASD and NYSE regulations. The above table includes Thomas Weisel International stocks. Source: FactSet and Thomas Weisel Partners LLC
This report contains statements of fact relating to economic conditions generally and to parties other than Thomas Weisel International. Although these statements of fact have been obtained from and are based on sources that Thomas Weisel International believes to be reliable, we do not guarantee their accuracy and any such information might be incomplete or condensed. All opinions and estimates included in this report constitute Thomas Weisel International's judgment as of the date of this report and are subject to change without notice. This report is for information purposes only. It is not intended as an offer or a solicitation with respect to the purchase or sale of a security, and it should not be interpreted as such. This report does not take into account the investment objective, financial situation or particular needs of any particular investor. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision based on the recommendations in this report. In the United Kingdom, this document is intended only to be directed at market counterparties and intermediate customers. It is not intended to be directed at private customers, and it may not and is not intended to be distributed to or passed on, directly or indirectly, to private customers. The investments and/or services detailed in this document are available only to market counterparties and intermediate customers. Only market counterpardes and intermediate customers may rely on this document. Private customers should not rely on the contents of this document. Thomas Weisel Partners International Limited, authorized by the FSA, has approved this document for the sole purpose of the financial promotion regime under Section 21 of the Financial Services and Markets Act of 2000. C Thomas Weisel Partners LLC, 2007. All rights reserved. Any unauthorized use, duplication or disclosure is prohibited by law and will result in prosecution.
September 26, 2007 3
Thomas Weisel International
Girish Nair 415.262.6351
TWPL00001433
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·D sco ery Re.search
August 16; 20p7 IYIEDIA AND TELECOM Telecom Services: Wireless, Cable and DBS MoirasYlreisal inketriatiartal
GTL LTD. --GTS IN
INITIATING COVERAGE WITH A MARKET WEIGHT RATING
Market Weight BSE: Rs232.85 as of 8/14/07
FY EPS (INR) 1Q 2Q 3Q 4Q Year PIE
Revenue (INR
Vijay Sarathi, CFA 415.262.6366 vsarathi@tweiselcom
Initiation Report
52-Week Range (INR): 114-245 Market Cap. (INR rm): 22,660.2 Shares Outstanding (tin) 97.3 Average Daily Volume: 243,868 Free Float (nil) 64.8 Short ht. (% Free Float) NA Fiscal Year Bid: 3/31 Total Debt/Equity TBIITTM Sales: Net Cash/Share: Book Value/Share: Price/Book Value: Price Target
Key Data
2007 NA 1.92 A 2.18 A 2.92 A 6.55 A 35.55x m n) NA 2,355.6Q A 2,934.70 A 3,964.00 A 9,254.28 A 2.2x
2008 3.30 A 4.10 E 4.10 E 4.20 E 15.70 E 14.83x 4,073.20 A 3,854.41 E 3,854.41 E 3,950.26 E 15,732.28 E 1.3x
2009 4.47 E 4.88 E 5.28 E 5.69 E 20.31 E
11.46x
76% 1Q 1.5x 2Q INR 28.28 34 INR 114.08 4Q 2.0x Year INR 300.00 TEV/Sales
4,153.32 E 4,530.90E 4,908.47 E 5,286.04 E 18,878.73 E 1.1x
Note: P rice is as of the close on the date indicated. Any price target displayed in the data box above represents either a specific price target or the midpoint of a range. EP S are pro forma for stock-based compensation expense and one-time items. NA= Not Available Source: Company reports, Thomson Financial and Thomas VVeisel International estimates
· We are initiating research coverage of GTL Ltd (GTS IN) with a Market Weight rating. GTL is India's largest telecom network services provider. · Revenue CAGE, of 43% backed by 100% growth in wireless towers: We estimate that India's wireless subscriber base of 172.15mn will grow at a CAGR of 41% over the next three years, creating demand for an additional 300,000 towers by 2010. We expect GTL's network engineering business, backed by strong order backlogs, to grow at a C.AGR of 43% for the next two years. · INR11bn strong cash balance and global footprint to drive inorganic growth: GTL's presence in the United States, Europe, Asia Pacific, and the Middle East through acquisitions and joint ventures and cash balance of INR1 lbn put it on course for significant inorganic growth. The company also intends to grow by an inorganic route and has set aside $250mn for this purpose. · Why Market Weight? We believe GTL's strong franchise in the wireless telecom network services space is offset equally by the strong competition the company is likely to face from the wireless telecom majors in India and the resulting margin pressures it is likely to encounter. · Estimates and Valuation: Our revenue and diluted EPS (net of ESOP) estimates for FY09 are INR18,878.73mn and INR20.31, respectively. There are no Street estimates. GTL IN shares currently trade at 14.83x our FY08 EPS estimate relative to the peer group median of 12.61x. Our 12-18 month price target of INR300 is based on a P/E multiple of 13x our FY09 EPS estimate of INR20.31 plus the value of the company's investment in Gil Infrastructure Ltd. The key risks to achieving our price target include possible consolidation in the Indian telecommunications sector and GTL's inability to successfully integrate future acquisitions.
Please see analyst certification and other important disclosures starting on page 12 and continuing through page 13.
Thomas Weisel Partners and its affiliates do and seek to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Customers of Thomas Weisel Partners in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.rweisel.com or can call (877) 921-3900 to request a copy of this research. Investors should consider this report as only a single factor in making their investment decision.
TWPL00.001434
Case 3:07-cv-06198-MHP
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Page 21 of 43
COMPANY DESCRIPTION
GTL Limited (GTS IN) is India's largest telecom network service provider. Gil provides network design and planning, network deployment, network operations and maintenance, infrastructure management, professional services, and application management to telecom operators. GT'L is headquartered in Mumbai, India. The company has deployed more than 16,000 cell sites in more than 25 countries to more than 35 operators.
GTL's Evolution
1987 Incorporated as a private limited company. Initial Public Offer
1992 2000 2001
Stock based acquisitions -- Them= Systems & Software and Fut, Infotech. Stock based :uquisitions -- Global Electronic Commercia/ Senices Ltd.
2005
Business restructuring -- creation of Network Services and Infrastructure divisions. Infenstructurc division hived off as a 40% subsidiary --GU Infrastructure Ltd. Acquired Genesis Consulting Sell Network business to Orange.
2006
2007
Source: Company reports
GTL's portfolio of services is illustrated in the chart below. The company has strong partnerships with various OEMs such as Oracle, Ericsson, Nokia, Nortel, AlcatelLucent, Huawei, ZTE, and Motorola. The company has some of the ma* telecommunications operators of India as its clients such as Bharat Sanchar Nigam Limited (BSNL), Bharti Airtel, Reliance Communication, and Idea Cellular.
GTL's Portfolio of Services
Instaldation, Integtation & Testing Application Maintenance RE' Engineering 2G & 3G Access vAg \ Application Management and Pmfessional
Wireless Network Nlaintenance Transmission & Access Network Maintenance Remote Maintenance / Equipment Repair and Logistics Services Network 08rNI
Cell Pbnning 00 Survey Network Optimization Rada, Nomad: Design & Planning Network Audit & Benchmarking
Network
Planning
and Design
Network Development
Site Engineering Site Implementation Site alanagement& Auxiliary Services
Infrastructure Management
Engineering Senices Integration Services Multi-Vendor Testing
Source: Company reports
August 16, 2007 2
Thomas Weisel International Vijay Sarathi, CFA 415.262.6366
TWPL00001435
Case 3:07-cv-06198-MHP
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Page 22 of 43
INVESTMENT THESIS CAGR of 41% in the Indian wireless telecom market; 100% growth in wireless towers anticipated: India is one of the fastest-growing wireless telecom markets in the world. Currently, India has approximately 180mn wireless subscribers, and COAI projects that this will grow at a C.A.GR of 41% over the next three years. COAI projects that, to sustain this strong subscriber growth, the telecommunications industry in India will add another 300,000 towers by 2010. We estimate that, as of March 2007, the tower base is around 120,000. TRAI is currently emphasizing tower sharing to reduce the infrastructure cost for individual operators and to accelerate the growth in teledensity. After factoring in the potential infrastructure sharing, we estimate that the total tower base will double to 240,000 towers by the end of 2010. Upside to our model from inorganic growth; backed by a $250irm cash chest: In FY07, the company acquired Genesis Consultancy, which has a presence in Europe, the United States and Asia Pacific. The company also has a joint venture with Al-Nasser LLC in the Middle East. GTI, has earmarked INR1Obn, or $250mn, for acquisitions. It is keen on further inorganic growth in the United States, Europe and the APAC region, and we believe it has already made some non-binding offers to potential targets in these regions. Although we have not factored any inorganic growth in our model, we believe GTL could report strong top-line growth led by acquisitions. Order backlog growth of 66%; good revenue visibility for FY08: For the period ending March 2007, Gil reported a strong order backlog of INR15.60bn compared to INR9.40bn in FY06. This is strong growth of 66% on y/y basis. Network deployment (76.9%) accounts for the bulk of the backlog. The strong capital expenditure plans and the y/y increase in capital expenditure by some of the leading telecom operators of India also give strong visibility to the future order flow for Gil. Federal fund of $3.6bn to boost the addressable market: In a recent move, the Department of Telecommunications in India (DoT) invited bids from various telecom operators for active and passive infrastructure and from nearly 20 stand-alone tower companies for setting up passive infrastructure. DoT intends to set up 8,000 telecom towers across the country at an estimated cost of $900mn, or INR3.6bn. The government will provide the capital to set up these towers from the Universal Service Obligation Fund (USOF) through a bidding process. This project would cover nearly 212,000 villages, thereby increasing the teledensity in the country. Successful bidders would be required to complete 50% of the project within eight months and the balance in the subsequent four months. In our view, this could provide further upside for the company in the current year. Strong balance sheet with cash and investments--cash per share of INR120: The company had cash and cash equivalents of INR11.24bn as of FY07, amounting to INR114.45 per share. Apart from this, as of March 2007, the company had investments of INR0.86bn and another INR1.374bn in a listed associate GTE, infrastructure. As of FY07, GTL owned 40.04% of the outstanding shares of Gm Infrastructure.
August 16, 2007 3
Thomas Weisel International
Vijay Sarathi, CFA 415.262.6366
TWPL00001436
Case 3:07-cv-06198-MHP
Document 54-2
Filed 07/10/2008
Page 23 of 43
INVESTMENT RISKS
Consolidation in the wireless industry: Currently, there are nine telecommunications
operators in India, and we estimate there are another 10 passive tower companies. Any further consolidation in the industry could put further pressure on GTL's operating margin. The volatility in revenue and earnings (as illustrated in the charts on the next page) could be further exacerbated by this trend.
GTL's Fallin Mar· 'ns
80.0% 7004. 600141
F1(03
FY04
FY05
FY06°
FY07·
EBITDA Margin --4-- Gross Margin
*FY06 and FY07 numbers are annualized for comparison Source: Company reports
Competing with clients: The biggest paradox for GTL is its having to compete with its own clients (telecom operators) for business. Any curb on network deployment and network operations outsourcing by its clients could adversely affect the company. Also, GTL derived 46% of its revenue from five customers as of FY07. Any loss of these key accounts would have a significant impact on the top line. GTL's Unstable Revenue Growth Pattern
14,000 12,000 10,000
E
, g
8,000
6,000 4,000 2,000
o
*FY06 and FY07 numbers are annualized for comparison Source: Company reports
August 16, 2007 4
Thomas Weisel International Vijay Sarathi, CFA 415.262.6366
TWPL00001437
Case 3:07-cv-06198-MHP
Document 54-2
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Page 24 of 43
GTL's Volatile EPS Growth Rate
16.00 14.00 -· 1Z00 10.00 8.00 6.00 -- 4.00 200.0%
0.00 FY03 FY04
III-11111 EPS 111
FY05
FY06°
FY07.
Yo'71
*FY06 and FY07 numbers are annualized for comparison Source: Company reports
Successful integration of acquisitions: The company has shown a keen interest in acquisitions and has already allocated $250mn for acquisitions. Management does not have a lot of prior experience in integrating companies, and a failure to successfully integrate and gain expected synergies could adversely affect the company.
INVESTIBILITY--SUFFICIENT HEAD ROOM FOR FII INVESTMENT
Foreign holdings: The Central Government has put a cap of 74% on composite foreign
holdings in the telecom and electronic media sector, which includes foreign direct investment (P1)I), foreign institutional investors (FIIs), non resident Indians (NRIs), and overseas corporate bodies (OCBs).
Foreign Holding Status
Holder Caterrorv as on 30th Tune 2007) (%)Stake Foreign. Institutional Investors ...,........... Foreign Financial Institutions / Banks ..... 0,11 .. 0.44 Overseas Corporate Bodies 10 Foreign. Corporate Bodies 0.8 Non Resident Indians
Total Foreign FIColclin
39.37
Foreign Holding .Cap
Balance
74
_34.63
Source: Bombay Stock Exchange
Free float of 67% and ample liquidity: The free float shareholding for the company is
66.6% of the total outstanding shares. The average 30-day trading volume for the company is 260,000 shares, which indicates a good level of liquidity in the stock.
The company also trades in the derivative segment of the market: The following
table summarizes its performance parameters over the past 30 trading days.
August 16, 2007 5
Thomas Weisel International Vijay Sarathi, CFA 415.262.6366
TWPL00001438
Case 3:07-cv-06198-MHP
Document 54-2
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Page 25 of 43
Future and Options Details "14111MINIMIN
nin) _ 764.19_ Aver3c Turnover Axerage, ppen Interesyrnn) 7.18 Contract size 1,500 Put Average. Turnover (lNR mn). _ Average Open Interest (mn) Call Average Turnover (INIt tnn) . Average Open Interest (ran). Put .call Ratio , _ -- Volatility .(annualized) Source: National Stock Exchange
(4l
035 0.02 11.41 6.50% 32,78
CORPORATE GOVERNANCE AND MANAGEMENT BACKGROUND
Chairman and managing director Manoj Tirodkar, 43, has conceived and developed Gil for the past 20 years. He is also the chairman of Gil Infrastructure Limited, a listed company pioneering the concept of shared user telecom infrastructure in India. COO Chamdutta Naik has an overall experience of 20 years in the network services space and has held several key positions in various telecom and system integration companies such as Crompton Greaves and Unitel Communications. In the corporate governance section, we have captured a set of metrics that reflect the corporate governance profile of GM. We have adapted our framework to fit with the level of information disclosure in publicly available company documents and regulatory filings. Although we will continue to refine and redefine this framework, we present a summary comparison of Gil with an internally developed benchmark on this set of corporate governance metrics. With respect to our benchmark, we find that GTL could improve -with respect to the percentage of insider ownership and loans to group companies.
August 16, 2007 6
Thomas Weisel International Vijay Sarathi, CFA 415.262.6366
TWPL00001439
Case 3:07-cv-06198-MHP
Document 54-2
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Corporate Governance Report
GTL Benchmarlt Audit % attendance at Audit Committee meetings 100% 89% 3 times annually., 4 time annually_ Fregnency of Audit Committee meetings Board CEO representation on other boards 2 2 _ -- Director attendence at-- board meetings -- 84% 85% _ yo of independent directors on._the board. 75% 55% -- CEO / MD & Chairman role seperation. Yes , No % of promoter . directors on board. 11% 35% Size of theboard 15 -- _ çoati.. %of independent directors in compensation committee . _ _ _ _100% __ _200% Availability and % of promoter director compensation through stock options 0% 00,4 Availability and % of non-promoterthreetor ,cornoensation through_ stock options Yes -- yes _ _ Stock option expensing Yes Yes InsiderOwners hip . . % ownership of insiders in the total stock outstanding 33.4% 20.0% Cross holding across group companies Yes No _ _ Other Loans to group com_panies Yes No Notes: Only non-executive and independent directors considered independent % attendance calculated on the basis of cumulative meeting opportunities available Source: All data as per the latest available annual report/companypresentation as applicable.
SHARE HOLDING PATTERN
Share Holding--June 30, 2007
Promoters: Global Assets Holding Corppration Pvt Ltd Makan Investments Tradlng Company. Ltd Finny Securities Pvt Ltd Manoj.. G.. Tirodkar _ Gajanan R. Tirodkar,, Snehlata G Tirodkar . . Pramod Gajanan_Tirodkar _ Non Promoters: Citigro.up Global Markets Mauritius P. 11, Ltd _ UBS Securities Asia Ltd Somerset India Fund yulpes Strategic Merrill Lynch Capirat . Markets Espana SASy .Mavi_Invesiment, Fund . Ltd ... BSMA Ltd Bennett Colernan 8c Company Ltd Deutsche Securities Mauritius Ltd Morgan Stanley & Company International Ltd Goldman Sachs Investments Mauritius I Ltd LIC of India .2228322l 5,771,035 4,055,381 2462500 ... 156,883 _24,416 .1074 32 539 510 _7,485,331_ 5,063,501 4,415,468 __. 2,359,847 2,225 419 _2,050,000_ 1,954,798 1,37;160 1,178,356 1,007,259 31,737,458
-- 22.87
.
5.92 4.16 0,25 0.16 0.03 33.39
Source: Capital Line-- August 16, 2007 7
7,68 520 4.53 2,70 2,42_ 228 _ 2,10 .__. .2.01 1.41 1.21 1.03 32.57
Thomas Weisel International Vijay Sarathi, CFA 415.262.6366
TVVPL00001440
Case 3:07-cv-06198-MHP
Document 54-2
Filed 07/10/2008
Page 27 of 43
ESTIMATES
Our revenue estimates for FY08 and FY09 are INR15,732.28mn and INR18,878.73mn, respectively. Our diluted EPS estimates net of stock options expense for FY08 and FY09 are INR15.70 and INR20.31, respectively. There are no Street estimates available for GIL
VALUATION
GTL Ltd. shares are currently trading at 14.83x our FY08 EPS estimate relative to the peer group median of 12.61x. On an FY08E TEV/revenue basis, GTL currently trades at 1.3x versus the peer group median of 0.6x. Comparable Company Valuations
Company Ticker NE Price TEVI EBITDA 2009 E TEV I Rev FY07-FY090 Market Cap Avg Daily Vol) 000) 811412007 FY07A FYOSE P1090 FYOSE FY07A FY080 FY09E Growth (mn)
911_43),, INR 232.85 35.55x 14.83x 11.46x 0.15 , TL G_Lirn_ited_* 1.3x 16.98x 8.50x 7.08x 244 ._. _ ..._ -- --. 76.1%.... INR 22,660.24 ...,, _ ....__ . .., LCC International, Iric.+ x -LCC-.1-$3.70- -23,13- _12:7_6X- _ - -M_T_NA4N __--0,8x _ NM NM NM kb $94.-88 152 - rated"-- WI3CS - $ 10- - 15.24x 12.47x .VVPCS Inte- 'ational Inc o .rporn .97 NM NM 0.6x 6.15rr 4.91x -- IIVI '-- $7-6.5858 MEDIAN (ex GTL-BY) 19.18x 12.61x 0.6x MEAN (ex GTL-BY) 19.18x 12.61x 0.6x Note:EPS data represents Proforma diluted [SF'S, net of stock options expense and excluding one time charges, hi* Not Meaningful, NA = Not Available, + FY ending in December FY07 figures are estimates," FY ending in April, Net cash figures are from the latest balance sheet available Source: Corrpany reports, lhon-son Financial and (*) Thomas Weisel International estimates
Our 12-18 month price target of INR300 is based on a PIE multiple of 13x our FY09 EPS estimate of INR20.31 plus the value of the company's investment in GTL Infrastructure Ltd. of INR38 per share of GTL. We arrive at the value of GTL infrastructure Ltd. by valuing each of its 6,700 towers at INR2.4mn. There always are risks that the target price for any security will not be realized. In addition to general market and macroeconomic risks, for GTS IN, these risks include, among other things, consolidation of telecommunications players in the Indian market and a failure to successfully integrate future acquisitions.
August 16, 2007 8
Thomas Weisel International Vijay Sarathi, CFA 415.262.6366
TVVPL00001441
Case 3:07-cv-06198-MHP
Document 54-2
Filed 07/10/2008
Page 28 of 43
GTL - Reported Financials
(Amounts in INR mn, except per share data)
income Statement
2007A Income: Sales Expenditures: Cost of soles and services Cost Of Delivery Gross Profit Adninistrative Expenses Connectivity Charges Personnel Cost Selling and Distribution Expenses Other Expenses
Jun . 07
1Q°84)
Sep.07 cecu7 3QUE 20.000
1urt.08 Sup 03 ..NO,e4 .08 Mar . qp · E. 0.09 8 4Q
27
4,153.32 4,530.90 4,908.47 5,286.04
2,841.00 270.80 2232_26 9,, 1.10 223.60 0.00 0.00 131.30
2,688.40 2,688.40 2,755.25 256.25 256.25 262.63 909.76 909.76 932.38 211.59 211.59 216.85 0.00 0.00 0.00 0.00 0.00 0.00 124.25 124.25 127.34
2,896.88 3,160.24 3,423.59 3,686.94 571. 276.13 301.23 326.33 351.43 980.31 1,069.43 1,158.55 1,247.67 228.00 248.73 269.45 290.18 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 133.88 146.05 158.23 170.40
606:50 573.92 573.92 setTo 611.43 "--674:65 .736.87- · 787709 68.40 Finance Exposers 65.52 65.52 67.15 62.30 67.96 73.63 79.29 114.40 88.90 88.98 91.20 95.88 104.60 113.32 122.03 Depreciation Bother write off (82.20) Other I nconr Share of profit/(bss) M associates (ICI & GIL) 341.50414.41 s5.77 2,, Net Profit Before Tax 419:49 419.64 -%46615- 0ii2.o9--- 543:91 20.10 Provision of Taxes 19.90 19.90 20.39 27.04 29.30 31.55 a r.i.,1 I 24.79 Correction 28.20 19.90 19.90 20.39 , 29,30 31.55 ),.;-:;I. 24.79 27.04 4.10 Fringe Benefit Tax -,Vf ( ?,o9 (12.20) Deferred Tax 6 - 43C,' 321.40 554.22 ' 1,979*;,3 399.52 399.52 409.45 Net Profit After Taxes s 435.46 47504 514.63 I g':,:;4 Add/ (Less), Prior period Incomes (Expenses) u152 409.45 r, -1.5Z9. ,b9 435.46 475.04 514.63 ,21.40 399.52 39 554.22 0 1 47s: Net Profit 3 3.30 : 195 4.10 1N11 4.i& 1144.201 1 1-41 5 ) .. -1110 4.4/ I984.88 I NR 5.28 188 5.69 '.R II Basic EPS (GAAP) Itlit 3.30 190 4.10 )NR 4.l0 1612 4.20 INR , I5 70- 1011 4.47 INR4.88 190 5.08 190 5.69 iti,.:-.-, Diluted EPS (GAAP) '97,439 97439 - 97,419. 97,439 -97,439 97,439 '0,43497,439 97,439 97,439 97,439 97,439 97,439 97,439 97,439 Diluted shores outstanding MOO) otmeiierpeilEire
tairfaA
i
Comrnon Size Statements
ihse. , 07 Mar 00 3303E 4303E
FY 23005
Jun 00 Sop 00 Occ-OB /4,0? 23090 3309E 4309E 13095
FY 2009E
Income: Sales Expenditures: Cost of slobs and services Cost Of Delivery Gross Profit Administrative Expenses Connectivity Charges PersonnelCost Selling and Distribution Expenses Other Expenses EBITDA Finance Expenses Depreciation & other write off Other Intone Share of profit/ (bus) in associates (loll B GIL!) Net Profit Before Tax Provision of Taxes Current Tax Fringe Benefit Tax Deferred Tax Net Profit After Taxes
100.0%
109.5% 100.0% 100.5% 69.7% 6.6% 23.6% 5.5% 0.0% 0.0% 3.2% 0.0% 14.9% 1.7% 2.3% 0.0% 0.0% 10.9% 0.5% 0.5% 0.0% 0.0% 0.0% 10.4% 69.71. 6.60 23.6% 0.0% 3.2% 0.0% 14.9% 1.75 2.3% 0.0% 0.0% 10.9% 0.5% 0.5% OM) 0.0% 0.0% 10.4%
100.0% 100.0% 100.0% 100.0% 69.7% 6.6% 23.6% 5.5% 0.0% 0.0% 3.2% 0.0% 14.9% 1.5% 2.3% 0.0% 0.0% 11.1% 0.6% 0.6% 0.0% 0.0% 0.0% 10.5% 69.7% 6.6% 23.6% 5.50 0.0% 0.0% 3.2% 0.0% 14.9% 1.5% 2.3% 0.0% 0.0% 11.1% 0.6% 0.6% 0.0% 0.0% 0.0% 10.5% 69.7% 6.6% 23.6% 5.5% 0.0% 0.0% 3.2% 0.0% 14.9% 1.5% 2.3% 0.0% 0.0% 11.1% 0.6% 0.6% 0.0% 0.0% 0.0% 10.5% 69.7% 6. 23. 5.51 0.01. 0.0% 0.01. 14.90 1.51 2.3% 0. 0.0% 11.1% 0.6 0.6 0.0% 0.0 0.0% 10.5
69.7% 69.7% 6.6% 6.6% 23.6% 23.6% 5.5% 5.5% 0.0% 0.0% 0.0% 0.0% 3.2% 3.2% 0.0% 0.0% 14.9% 14.9% 1.7% 1.7% 2.8% 2.3% 0.0% (2.0 79 0.0% 0.0% 8.4% 10.9% 0.5% 0.5% 0.7% 0.5% 0.1% 0.0% (031%0.0% 0.0% 0.0% 7.9% 10.4%
Source: Company reports and Thomas Weisel International estimates
August 16, 2007 9
'Thomas Weisel International Vijay Sarathi, CFA 415.262.6366
TWPL00001442
Case 3:07-cv-06198-MHP
Document 54-2
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HalanCe Sheet,
+Amounts it:Ks. mi), e4
",f .JunA, 55079 igOLIA -57'727
Sep·07 7.C1OSE . 3Q001,
FY 2(080
Jun.08 SepOS Clec.OS Mar.D9 trton 2.109E 3Q090 c. 45090
20..7r,E
7,08 Data Not Rebased 11 41713 Data Not Released
14 9
Data Not Released
Data Not Released
1. 1016
,9' ,,CO ,l57. 07 '-'1·1`,
Source: Company reports and Thomas Weisel international estuaates
August 16, 2007 10
Thomas Weisel International Vijay Sarathi, CFA 415.262.6366
TWPL00001443
Case 3:07-cv-06198-MHP
Document 54-2
Filed 07/10/2008
Page 30 of 43
CASH FLOW
tA nvun fr4rov, rept per share dry( CASH FLOWS FROM OPERATING AC Net (loss)/ profit before tax but atter exceptional Rena Adjustments for: Depreciation Interest Expenses Interest Income (Profit)/Loss on sale of Fixed Assets sold (Profft)/Loss on sale of Investments sold Debit/Credit balances and claims written off Miscellaneous Expenditure written off Provision for Bad Et Doubtftil Debts (Gain)/Loss on exchange fluctuation Employee Compensation Expenses under ESOP Provision for Tax Operating Profit before working capital changes Adjustments for changes in working c apitat(Increase)/Decrease in Sundry Debtors HnCrease)/Decrease in Inventories (Increase)/Decrease in Loans and advances fincrease)/Decrease other liabilities and provisions Increase/(Decrease) in Trade and Other Payabbs Cash generated from operations Taxes (Paid)/Received (Net of TOG) Interest Paid Financial Charges Prior Period(Expenses/Income (Net) Effect of scheme Translation adjustment ft reserve on consolidation Extraordinary/Exceptional I tem (Expenses)/Income -- Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed-assets Proceeds from sale of fixed assets Capitalwork In progress Proceeds frornsale of investments Purchase of investments Miscellaneous Expenditure written off Interest, dividend Received (Revenue) Net cash provided by (used for) Investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from fresh issue of Share Capital, including premium Net Proceeds from brig term borrowings Gain on exchange fkictuations Interest, divklend Paid FinancialCharges Dividend, indicting dividend tax Net cash (used for) provided by financing activities Difference due to total Difference due to restaterrent NET INCREASE IN CASH MD cAsii EQUIVALENTS" CASH AND CASIIEQUIVALENTSAT111E BEGINNING CASH AND CASH EQUIVALENTS AT THE END
--
Source: Company reports and Thomas Weisel International estimates
August 16, 2007 11
Thomas Weisel International Vijay Sa.rathi, CFA 415.262.6366
TVVPL00001444
Case 3:07-cv-06198-MHP
Document 54-2
Filed 07/10/2008
Page 31 of 43
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES: The Research Analyst(s) principally responsible for the analysis of any security or issuer included in this report certifies that the views expressed accurately reflect the personal views of the Research .Analyst(s) about the subject securities or issuers and certifies that no part of his or her compensation was or is or will be, directly or indirectly, related to the specific recommendations or views expressed by the Research Analyst(s) in this report.
Notes: Price chart updated as of 8/13/2007.All price targets displayed in the chart above represent either a specific price target or the midpoint of a range. Source: First Call, FactSet and Thomas Weisel International Private Ltd.
August 16, 2007 12
Thomas Weisel International Vijay Sarathi, CFA 415.262.6366
TWPL00001445
Case 3:07-cv-06198-MHP
Document 54-2
Filed 07/10/2008
Page 32 of 43
The following grid outlines the Thomas Weisel Partners LLC stock rating system, along with the relevant definitions, effective November 16, 2006. PCT. OF SECURITIES RATED IN STOCK RATINGS DEFINITIONS When an analyst rates a stock Overweight, he/she is advising our clients to carry a position in the stock that is in excess of its weighting relative to the stocks either in that analyses coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst. When an analyst rates a stock Market Weight, he/she is advising our clients to carry a position in the stock that is in line with its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst. When an analyst rates a stock Underweight, he/she is advising our clients to carry a position in the stock that is below its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst.
EACH CATEGORY
STOCK RATING
46.6%
PCT. FOR WHICH IB SERVICES HAVE BEEN PROVIDED 34.6%
Overweight (0)
Total tilt),
46.691, 49-.9%
34.6'0 7.9%
Market Weight (M)
"gu,444414.;
49.90 3.5%
6.3%
Underweight (U)
Suspended Rating (S) Not Rated (NR) Not Covered (NC)
63% The stock rating has been suspended. The stock is not rated, but it is covered by a Thomas Weisel Partners LLC analyst. The stock is not covered by a Thomas Weisel Partners LLC analyst.
Notes: The percentage of investment banking services is calculated as of 6/30/2007. The percentage of securities rated in each category is calculated as of 8/16/2007. An analyses coverage universe is defined as all of the stocks within the analyses industry that reasonably are part of his/her potential coverage, not necessarily the stocks specifically covered. "Buy", "Hold" and "Sell" are not ratings categories defined by Thomas Weisel International and should not be interpreted as investment opinions. We show these categories for illustrative purposes in accordance with NASD and NYSE regulations. The above table includes Thomas Weisel International stocks. Source: FactSet and Thomas Weisel Partners LLC
This report contains statements of fact relating to economic conditions generally and to parties other than Thomas Weisel International. Although these statements of fact have been obtained from and are based on sources that Thomas Weisel International believes to be reliable, we do not guarantee their accuracy and any such information might be incomplete or condensed. All opinions and estimates included in this report constitute Thomas Weisel International's judgment as of the date of this report and are subject to change without notice. This report is for information purposes only. It is not intended as an offer or a solicitation with respect to the purchase or sale of a security, and it should not be interpreted as such. This report does not take into account the investment objective, financial situation or particular needs of any particular investor. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision based on the recommendations in this report. In the United Kingdom, this document is intended only to be directed at market counterparties and intermediate customers. It is not intended to be directed at private customers, and it may not and is not intended to be distributed to or passed on, directly or indirectly, to private customers. The investments and/or services detailed in this document are available only to market counterparties and intermediate customers. Only market counterparties and intermediate customers may rely on this document. Private customers should not rely on the contents of this document. Thomas Weisel Partners International Limited, authorized by the FSA, has approved this document for the sole purpose of the financial promotion regime under Section 21 of the Financial Services and Markets Act of 2000. © Thomas Weisel Partners LLC, 2007. All rights reserved. Any unauthorized use, duplication or disclosure is prohibited by law and will result in prosecution.
August 16, 2007 13 Thomas Weisel International
Vijay Sarathi, CFA 415.262.6366
TWPL00001446
Case 3:07-cv-06198-MHP
Document 54-2
Filed 07/10/2008
Page 33 of 43
Case 3:07-cv-06198-MHP
Document 54-2
Filed 07/10/2008
Page 34 of 43
Discovery Research
Thomas Weigel Friternabortal
TECHNOLOGY Software: Applications & Communications Abhiram Eleswarapu 415.262.6361 +91.22.30214510 aeleswarapu@tweiseLcom
SUBEX AZURE LTD.
-SUBX IN
BSE: Rs344.50 as of 10/25/07
MUTED QUARTER ON RESOURCE ALLOCATION ISSUES; CUTTING PT ON LACK OF NEAR-TERM CATALYSTS
Market Weight Earnings Summary
Key Data SUBX.B0 Reuters ticker: Thomson ticker: SUBEXAZU-BY 350-803 52-Week Range (INR): 11,646 Market Cap. (INR Inn): Market Cap. ($ rm): 297 47,325 Average Daily Volume: 81.0% Free Float: 03/31 Fiscal Year End: Long Term Debt/Equity: 95% (227.35) Net CastVShare (INR): Book Value/Share(INR): 242.94 1.4x Rice/Book Value: Price Target INR 400 FY EPS (INR) 1Q 2Q 30 4Q Year PIE 2007 1.67A 5.40A 5.71A 8.24A 21.02A 16.4x 2008-Pré:ie 2008 New 2005. Preii 2009 New 5. 6.63E' . 9.99`t 12.84E 34.92E 5.14A (6.18)A 7.73E 17.25E 23.94E 14.4x 1,317A 1,030A 1,729E 2,276E 6,351E 3.1x 6 70E .12.25E 15.61E 16.50E :51.06E 9.13E 9.13E 9.78E 10.94E 38.98E 8.8x 1,941E 1,999E 2,108E 2,226E 8,274E 2.4x
Revenue (INRmn) 434A 10 1,031A 20 1,062A 3Q 882A 40 3,409A Year TEV/Sales 5.8x
" 1,317A: ` 1699t · 2;045 ·· · 2,322E: 7,38;E ·
1,714E 2,229E 2,644E: 2,842E 9,429E
Note: Price is as of the close on the date in cated. Any price target displayed in the data box above represents eaner a specific price target o r the midpoint of a range. USD market cap. based on a recent exchange rate of US$ fi1NR39234. EPS is pro forma for the conversion of FCCB s and warrants. Source: Company reports, Thomson Financial, Thomas Weisel International estimates
· Key takeaways: Subex Azure reported muted F2Q08 results on October 23, 2007, on delays in
allocating sufficient resources to its continuing business, which in turn prevented it from achieving timely revenue recognition milestones. Despite the relatively weak quarter, management reiterated its FY08 guidance of product revenue of INR5,200mn ($130mn) and profit after tax of INR1,040nui ($26mn), which leads us to believe that the company could see a strong F2H08.
· The numbers: Subex Azure reported F2Q08 revenue of INR1,030mn (flat y/y, down 21.8% q/q).
Net loss stood at INR(348mn), while BPS came in at INR(9.91). Products revenue (down 3.4% y/y), was INR716mn while service revenue (up 8.2% y/y) came in at INR314mn.
· Changes to our estimates: We are lowering our revenue estimates to INR6,351mn and
INR8,274mn for FY08 and FY09, respectively. We are modeling the EBITDA margin to improve from 14.3
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