The Offering ( can be change at last moment, subject to demand )

Common stock offered :-  11,833,334 shares of common stock par value $0.01

Common stock outstanding after this offering :-  28,694,610 shares of common stock par value $0.01

Offer price range :- $14.00 and $16.00 per share

Valuations

This section contains the final estimate about company's valuations

For details about Business/outlook check Business Overview, For offer/objects of issue check Offer/Objects.

"CrossMatch" is a leading provider of biometric technologies designed to protect people, property and privacy. Its products include fingerprint, palm and full-hand scanning devices, commonly known in the industry as Livescan devices, document readers and proprietary software, such as criminal booking, civil identification and facial recognition applications.

Revenue

Company earns most of its revenue from;

• Sale of its biometric products.

• By providing services related to its products like installation, maintenance and training etc

In FY 2006 company earns most of its revenue from 

• Finger print scanning devices (mainly from ten figure print scanning devices introduced in 2006.)

• Less than 1% of its revenue come from document reader.

• Less then 1% from facial recognition software.

Company sell its products through its internal sales team, system  integrators and other strategic alliances, it many times also work as a subcontractor for large Govt. projects and some time handles projects in partnership with others.

Customers

It's customers mainly includes various Govt. agencies world over and currently company depends on various Govt. contracts for its revenue. Although in future company expect corporate sector to play a bigger role in its revenue particularly company's related to Travel, Financial, critical infrastructure and healthcare sectors.

Market opportunity

International biometrics market is large, growing and evolving rapidly. According to estimates, the biometrics market is estimated to be $3.0 billion in 2007, with the fingerprint-related segment representing a majority of this market. Overall biometrics market projected to grow to approximately $7.4 billion by 2012, representing a compound annual growth rate, or CAGR, of approximately 20%.

Company is expected to capitalize on this opportunity due to;

• Its existing relationship with various customers.

• Global presence.

• Rich R&D.

• Vast range of offering.

• Past strategic acquisitions.

• Establish acceptance of its products particularly with various Govt. agencies.

Competition

The biometrics industry is a highly fragmented and rapidly evolving industry with many different product offerings. Some of company's competitors offer fingerprint image capture devices, while others offer other methods of biometric identification, such as face, retinal blood vessel or iris pattern, signature recognition, hand geometry, vein-mapping and voice recognition.

It's primary competitors include Cogent, Inc., Cognitec Systems GmbH, L-1 Identity Solutions, Inc., Precise Biometrics AB, SafLink Corporation and Secugen Corporation, 3M Company and Rochford Thompson Equipment Limited.

Offer & Objects of issue

For Offer & Objects of issue Click here......

Industry details and outlook

For Industry details/outlook Click here......

Company Outlook

Company outlook is positive due to;

• Expected growth of industry in which it work.

• Recent win of new orders from various Govt. agencies worldwide.

• Rising sale of high margin products.

• Its existing relationship with various customers.

• Global presence.

• Rich R&D.

• Range of offering.

• Past strategic acquisitions.

• Establish acceptance of its products, particularly with various Govt. agencies.

Financials  ($ in million)

Company's financial year ends on December 31.

*Quarter ended March 31

Company's revenue show's a steady growth since FY 2004 and risen from $32 million in FY 2004 to $77 million in FY 2006. Although nearly half of FY 2006 revenues was contributed by acquired entities. ("Smiths Heimann Biometrics GmbH"  acquired on August 1, 2005 and "C-Vis Computer Vision and Automation GmbH" acquired in May 2006.)

With growth in revenue company also has been able to bring down its operating losses and has turn profitable in Q1 FY 2007 due to increase sale of higher margin products and also due to favorable Euro- Dollar exchange difference.

Company's balance sheet is just ok but is cash flows are weak. (Although if this offering got through the company's cash position will be very comfortable)

Valuation/Offer value ($ In million)

(Company may not be able to perform this well, chances of company performing this well is, two out of five)

Assume that company shows (assuming that, nothing negative happen with company and company perform exceptionally well. Without considering any acquisition)

1. 30% rise in revenue year on year

Revenue rise is assumed at above industry rate (20%) due to orders that company has win recently and it's global reach. This leaves company with revenues of $100 million in FY 2007 and $130 million in FY 2008

2. Gross margins rise by 1% from Q1 FY 2007

Company is already earning most of its revenue by selling high margin products and this 1% margin rise can be achieved due to economy of scale, due to higher sales.

3. Operating margins rise to 8% in FY 2007 and to 10% in FY 2008

Due to reduction in R&D, sales and marketing and administrative expenses in % term as compare to revenues.

This leave company with operating profit of $8 million and $13 million in FY 2007 and FY 2008 respectively and after deducting interest cost of nearly $0 and $0 and income tax cost of $3 & $5 million, this leave company with net profit of $5 million and $8 million, that is EPS of $.17 and $.28  for FY 07 and FY 08 respectively.

This means even if company perform exceptionally well, at offer price of $15 company's share is available at one year forward PE of nearly 89 and two year forward PE of nearly 54.

We rate this IPO 1 on scale of "1 to 5" (5 for best)

Negatives

• Offer price is too high.

• Companies loss making history.

• Introduction of any alternative and better technologies.

• High dependence on Govt. contracts for revenues.

• Competition is rising.

• Any inability of company to develop and introduce new products.

Positives

• Expected growth of industry in which it work.

• Recent win of new orders from various Govt. agencies worldwide.

• Rising sale of high margin products.

• Its existing relationship with various customers.

• Global presence.

• Rich R&D.

• Range of offering.

• Past strategic acquisitions.

• Establish acceptance of its products, particularly with various Govt. agencies.

This article reflects personal view of the author about the company and one must read offer prospectus and consult its financial adviser before making any investment decision