How RAE Sniffs Out Security Leaks

SENSING PROMISE
Investors scouting undiscovered plays in homeland and industrial security are snapping up RAE Systems (RAE ) (RAE). It makes sensors to detect trace levels of lethal gas and radiation. Julie Chen of New York Global Securities rates the stock, now at 3.80, a buy. Tian Hou of investment bank C.E. Unterberg, Towbin says: "RAE is one of the most important plays in homeland security." In 2004, RAE introduced the world's smallest portable chemical detection device and has since produced a multisensor detector, a wireless chemical sensor network, and a combined chemical and radiological detector. Products to screen cargo and containers have been tested at some U.S. ports, says Chen: "What's unusual is that RAE has captured a big share of the market in both the U.S. and China," she adds. Two U.S. plants generate 52% of sales, and two in China 33%. Chen expects RAE to earn 3 cents a share on sales of $70 million, vs. 1 cents on $60 million in 2005.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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