NDS Group (Nasdaq: NNDS) fell by almost 27% from a high of $56 on May 10, to $41 on September 19. The stock has since recovered and ended last week at $44.50. RBC Capital Markets analyst Daniel Meron rated NDS “Buy” and set a target price of $64, 44% above its current price. While I wholeheartedly support Meron’s rating, the target price has no rational basis. So, unfortunately, I cannot support Meron on this point although I agree that this is how it should be. The interesting point about NDS is that the slump of October 2002, was not why the stock fell to its lowest point even though it happened in that period.
NDS hit a low of $4.6 on October 10, 2002, largely as result of a well-planned attack on it as a company. Companies such as Vivendi, DirecTV Group Inc. (NYSE: DTV), now NDS’s leading business partner, and others, sued NDS left, right and center, in the battle for control of the market for satellite-based data transmission services between News Corp (NYSE: NWS; ASX: NCP, NCPDP), Vivendi, and even EchoStar Communications Corp. (Nasdaq: DISH), which did everything it could to stop News Corp acquiring DirecTV.
I predicted that nothing would come of all the attacks and lawsuits, and that’s just what happened, and anyone who held on to NDS shares as I have since then should realize that the stock’s success to date will continue. This is because the company has the winning trio of an outstanding management, a leading position in a technological niche, and the ownership and backing of the world’s leading media corporation, News Corp. So I agree with Meron. NDS engages in wide range of activity related to payment-based secure information transmission, such as Pay TV. In its latest deal with Romania’s national telecommunications carrier, Romtelecom, NDS will supply a full end-to-end solution for the company’s satellite information systems.
At the global level, NDS is the leading provider of conditional information transfer (primarily imaging), whether by cable, wireless or satellite. It has two main competitors. One is Swiss company Kudelski Group (SWX: KUD.VX), which recently bought control of Californian company OpenTV (Nasdaq: OPTV) Corporation from Liberty Media Corporation (NASDAQ: LINTA, LCAPA), (which is owned by Rupert Murdoch’s competitor and partner, John Malone). The deal was transacted through Nagrastar, a joint venture between Kudelski and EchoStar Communications Corp. (Nasdaq: DISH).
The other competitor is Motorola Inc. (NYSE: MOT), although I can’t as yet determine whether the competition is direct or indirect. Another player is, of course, TiVo Inc. (Nasdaq: TIVO), which NDS replaced in DirecTV’s business system, but it is a competitor in a fairly small and specific sector. Microsoft Corp (Nasdaq: MSFT) is another company that provides information security. As I understand it, NDS’s technological edge is in the comprehensiveness of its system, which is considered impenetrable. Meron believes that NDS will post excellent third quarter results. Its growth engine for the future lies in the entry to new markets and the development of new products and complementary items for existing ones.
Given Imaging (Nasdaq: GIVN; TASE: GIVN), and Pharmos Corp. (Nasdaq: PARSD) are two healthcare stocks that took ill recently, each with its own sickness. They appear to have now recovered so it would be well worth following them once again. Each went through a different recovery process. Given Imaging has climbed 53% since mid-July, that is to say within three months.
The strong gains that we saw last week were due, to a large extent, to a string of announcements. The first of these said that Given Imaging expected to win US Food and Drug Administration (FDA) approval for its PillCam Colon, the third in its range of capsule cameras, all of which are its own inventions. The newest capsule, which many analysts have been waiting for, can produce images of the colon. The sales of such capsules in the US, combined with the company’s potential, can lead Given Imaging to even greater success that it had before.
Given Imaging CEO and president Homi Shamir was right when he said that “today begins a new chapter for our company.” If the new capsule does indeed live up to expectations, the sky is the limit. According to two studies conducted separately at the Rambam and Bikur Holim medical hospitals, and at the Université Libre de Bruxelles Erasme Medical Center, Belgium, it certainly does deliver the goods. Both studies found that the colon capsule was a success. Of course, more trials will be needed. However, as Rambam hospital research director Dr. Rami Elyakim put it, “If future trials produce the same results as the last one, the PillCam Colon will constitute a good and friendly method that will help patients.”
While it is true that doctors still prefer all the external methods of imaging, the capsule is a genuine alternative, despite having only just been launched. The second announcement was the one that unveiled the successful results of the studies, and it brought buyers for Given Imaging’s stock. There were also complimentary reports from the financial news sites, “Bellwetherreport”, and “Marketgainer”, which track medium and small cap stocks that are consolidating their position on the market. Both sites recommended Given Imaging. Naturally, one cannot forget Elron Electronic Industries (Nasdaq: ELRN; TASE: ELRN) which owns 16.9% of the company.
Pharmos has climbed 35% since mid-August, less than Given Imaging, but a respectable achievement nonetheless. The interesting thing here is that the gain has been quite consistent and the mavens would tell you that this is the work of a professional picking up shares. I believe that now that the problem over the controlling interest has been resolved and the company is now focusing again on its business, an ever increasing number of investors are taking a look at what Pharmos has to offer, and, despite the anger of some investors, it certainly has something to offer at current values.
This is highlighted by two recent events. Firstly, the positive settling of the “control battles,” has provided the company with considerable experience, both managerially and in its dealings on Wall Street. The company closed the acquisition of Vela Pharm for $6 million in cash, one million more than the original offer but the number of Pharmos shares issued to Vela Pharm was reduced to 6.5 million from 11.5 million. This indicates that someone over there managed to save some cheap shares. Both the shares and cash payment are contingent on Vela Pharm meeting various performance targets.
The other event was the appointment at the beginning of October of S. Collin Neil as senior VP, CFO, secretary, and treasurer. This, combined with the fact that the composition of the board has been changed is a development that investors also welcomed, rightly or not. Like Given Imaging, Pharmos is making a fresh start, this time under the leadership of Alan L. Rubino as president and COO, who has 24 years experience with Hoffman La Roche Inc. He has the help of veteran Prof. Haim Aviv, who has experience and professional knowledge that few other managers like them can boast. With the situation as it as present, there is no reason not to put some money on this veteran horse.
Published by Globes [online], Israel business news - www.globes.co.il - on October 24, 2006
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