TISG: Q4 Updated Stock Research Report

Healthy Prospects for Tri-Isthmus Group

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Summary and Recommendation

TIGroup posted impressive results for fiscal year ended September 30, 2008. Revenues beat our expectations. On December 17, 2008, the company acquired the remaining 49% of RHA. The buyout simplifies the structure and allows for operational efficiencies. Realignment and integration of back office operations is expected to provide operating cost savings in excess of more than $2 million in FY 2009. In December, the company also received $8.4 million in bank financing from local lenders. This long-term financing was primarily used to recapitalize existing facilities and refinance existing indebtedness. We believe these strategic initiatives improve operational and financial capability and firmly position the operating platform for robust growth in fiscal 2009.

In spite of the difficult credit environment, TIGroup has been able to raise capital to fund its growth plans. We believe this speaks volumes about the scalability of the business model and the credibility of management. We maintain our Buy rating and have slightly stretched the upper end of both our price ranges to reflect the positive structural changes and cost containment initiatives. We expect a near-term price range of $0.56 to $1.01 and a long-term target of $1.20 to $1.61.

Key Points

1,109% year-over-year increase in revenue (FY 08)

Completed 100% acquisition of RHA (now SPMG) in Dec. 08

Completed $8.4 million of bank financings with leading local Oklahoma-based lenders in Dec. 08

Physicians in network tripled year-over-year to 36 in Dec. 08

Achieved almost $10 million in quarterly revenue run rate

Initiated cost reduction program, which is expected to create $3 to $4 million
in annual savings

Pink Sheets: TISG

About Tri-Isthmus Group, Inc.

Tri-Isthmus Group, Inc. (TIGroup) acquires and provides financial, operational and technological services to healthcare facilities primarily located in rural markets. The company promotes quality medical care by offering improved access and breadth of services. TIGroup unlocks the value of its investments by developing strong, long-term and mutually beneficial relationships with their physicians and the communities they serve.  The company operates numerous medical facilities and employs over 410 people in Oklahoma and California.  The company is building a portfolio of interests in ambulatory surgical centers, rural hospitals, surgical hospitals and other centers operating in partnership with physicians.

For more information, visit the company website at http://www.tig3.com.