{ "docId": "019dd923-622c-750b-8b96-a068dbd6ba32", "docSlug": "7b9732353f21", "documentTitle": "OSI Systems, Inc. (OSIS)", "authorId": "51_Muddy_Waters", "authorName": "Carson C. Block", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2018-01-31 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 4, "pageCount": 5, "prevPage": 3, "nextPage": 5, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 6, "notes": "This is a page from a research report (short-seller style). It uses investigative narrative to expose potential malfeasance.", "elementsJson": [ "paragraph", "quote_block", "footnote" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b96-a068dbd6ba32/4", "deckHref": "/decks/019dd923-622c-750b-8b96-a068dbd6ba32", "deckJsonHref": "/decks/019dd923-622c-750b-8b96-a068dbd6ba32.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b96-a068dbd6ba32#slide-4", "components": [ { "bbox": null, "kind": "callout", "text": "We therefore conclude that ICMS's 49% share of S2 Albania was entirely unjustified, and is a conduit for corruption.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-0f20-71ed-bddd-2e80cc94ac80", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "operating margin: 46.3%", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd953-0f20-71ed-bddd-3794478fcf3f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.22, "w": 0.78, "x": 0.11, "y": 0.54 }, "kind": "paragraph", "text": "ICMS was not an established construction company in Albania, and its construction affiliate, ICMS Construction (100% owned by the doctor who owns ICMS) was formed by a single shareholder on January 29, 2013, only eight months before the award of the concession. When formed, it was called Bledi Construction and had capital of $850. Approximately one and one-half months after formation (March 11, 2013), it changed its registration status from \"active\" to \"suspended\", during which time it would not have been permitted to conduct business. On June 21, 2013, Bledi changed its status back to \"active\". The next day – only two months before the award of the concession – it was sold to ICMS...for $850. A few days after that, the name was changed to ICMS Construction. (In 2016, the shares were transferred from ICMS to Dr. Olti Peçini again for $850.)", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "1f08ec46-7b71-4c35-b344-78ae18309965", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.78, "x": 0.11, "y": 0.46 }, "kind": "paragraph", "text": "OSIS seems to state this is because construction is commoditized and is not nearly as important as the scanners and services. Given our above analysis on S2 Albania's assets and capitalization, we strongly agree with this proposition. We therefore conclude that ICMS's 49% share of S2 Albania was entirely unjustified, and is a conduit for corruption.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "76e0734b-2e25-4f4a-9f9b-ad6514f275e7", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.07, "w": 0.78, "x": 0.11, "y": 0.22 }, "kind": "paragraph", "text": "We struggle to understand how OSIS can justify a construction contractor having half of the concession economics. Note that the approximately $1.55 million in revenue at an at least 46.3% operating margin ICMS recorded in 2016 could mean that ICMS's economics even exceed half the concession value.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8fba6b78-6ad0-49bc-bb4d-87ff2e1a861f", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.78, "x": 0.11, "y": 0.09 }, "kind": "paragraph", "text": "before the publication of our initial report to provide details on turnkey contract partnerships in Puerto Rico and Albania, OSIS refused to provide any information. A former key executive of OSIS told our investigators he was unaware that OSIS had sold half of S2 Albania for $4.50. Regardless of whether he was telling the truth, his professed lack of awareness is telling. ICMS clearly seems to be a joint venture partner OSIS wanted to keep hidden.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f41537a2-ee70-4337-8b81-255b4acad29d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.7, "x": 0.15, "y": 0.31 }, "kind": "quote", "text": "Under the program, Rapiscan Systems intends to provide a comprehensive X-ray screening program, which will incorporate technology, staffing, systems integration, and maintenance support at sites throughout Albania.", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "58b7c860-17c2-49cf-a6ad-e90a90486bbd", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.7, "x": 0.15, "y": 0.38 }, "kind": "quote", "text": "The Company will provide a comprehensive X-ray screening program, including staffing, training, systems integration, operations and maintenance utilizing Rapiscan's high energy X-ray screening equipment at sites throughout Albania.", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c1ade141-ead9-46da-9cad-398d5e2ac9ca", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "Under the program, Rapiscan Systems intends to provide a comprehensive X-ray screening program, which will incorporate technology, staffing, systems integration, and maintenance support at sites throughout Albania. — Rapiscan Systems", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-0f20-71ed-bddd-331b6508e155", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.78, "x": 0.11, "y": 0.85 }, "kind": "source-note", "text": "8 CY2016 revenue and expenses converted at USD/ALL 124.1. 9 http://investors.osi-systems.com/releasedetail.cfm?releaseid=786552 10 https://www.businesswire.com/news/home/20151013005793/en/OSI-Systems-Commences-Operations-Albania-Turnkey-Screening", "attrs": { "numbered": true }, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "086c0dcf-b98c-4c7e-98e6-3aec2414e1ca", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 4, "from": 3, "beatId": "7203553a-9c7c-447b-93f4-e883ff78b0aa", "arcName": "Overcoming the Monster", "arcSlug": "overcoming-monster", "beatName": "The Struggle", "beatSlug": "overcoming-monster-the-struggle", "evidence": "The exposure of contradictions in OSI Systems' claims", "position": 1, "confidence": 0.8, "parentBeatName": "Development", "parentBeatSlug": "development" } ], "loops": [ { "to": 5, "from": 3, "name": "The Reveal", "slug": "05-the-reveal", "bestFor": "Product launches, strategic pivots, unexpected findings", "matchId": "3b3d5496-8489-43ab-b9f9-2356aec5965c", "evidence": "The document presents evidence to contradict OSI Systems' claims", "position": 0, "objective": "To reveal the inconsistency in OSI Systems' claims", "structure": "Setup the Question -> Build Suspense -> The Big Reveal", "confidence": 0.7, "description": "Build mystery and anticipation, then deliver a surprising or powerful conclusion" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }