SIMC.PK

[setravis]

Due to spexculito's inability to use the search and follow instructions given .
SIMC Threads have been merged once again ! 


"SIMC" Threads have been Merged.
Please use the search before starting new threads on a Stock Pick.
Chances are a thread already exist.
So why not post whatever you have to comment about on that pick to that thread.
"Simplicity" My fellow traders.                            
All history on a stock pick in 1 thread is awesome.                           
Just trying to get threads together,so we don't have a numerous amount floating around on the same stock.                   
Thank You....and good luck with all your trades....make some $$$         

[BigSully1]

Ugly ER last night.

[David Randolph]

The following analysis was written on October 18th, 2007:

David,

Please at least take a look at SIMC sometime soon.  It has been rising rapidly lately and will probably continue to do so for a while.  As I said earlier:

trading at a forward P/E of about 8 and a P/S of less than 0.5.

1. Profile

Simclar, Inc. (SIMC) operates as a contract manufacturer of electronic and electro-mechanical products primarily in the United States. It provides electronics manufacturing services to original equipment manufacturers in the data processing, telecommunications, instrumentation, and food preparation equipment industries. The company offers printed circuit boards (PCBs), finished products, subassemblies, molded and nonmolded cable assemblies, wire harnesses, injection molded, and electronic assembly products. Simclar provides a range of PCB products, such as pin-through-hole assemblies, and low and medium volume surface mount technology assemblies; and mixed technology PCBs, which include multilayer PCBs. It also offers cable and harness assemblies, such as multiconductor, ribbon, coaxial cable, and discrete wire harness assemblies. In addition, Simclar offers contract manufacturing, and systems assembly and integration services, as well as delivers test engineering and materials management services. Further, it provides reworking and refurbishing services, which comprise redesign, rework, refurbish, and repair of materials and subassemblies; backplane interconnect solutions to customers in the markets as such as network, wireline and wireless infrastructure, and defense and electronic data processing; and manufacturing services that includes computer integrated manufacturing and engineering services, quick-turnaround manufacturing and prototype development, materials procurement, inventory management, developing customer oriented manufacturing processes, and tooling and test sequences. The company was founded in 1976. It was formerly known as Techdyne, Inc. and changed its name to Simclar, Inc. in 2003. Simclar is based in Hialeah, Florida. Simclar, Inc. is a subsidiary of Simclar Group Limited.

2. Stock's History



It's curious to note that SIMC went down in the 1996-2000 period, while the general market was booming. I guess this happened because EPS went down from $0.27 in 1995 to ($0.43) in 2001.

Since 2001, even though not in a linear way, fundamentals improved substantially, with revenues rising from $36 M to about $136 M expected for 2007, and EPS rising to $0.44 in 2006 and about $0.62 expected for 2007 (this estimate was made just by doubling what the company achieved in the 1st half, there are no analysts covering the stock - later in the analysis I've changed this expectation).

The current market cap is $72 M.

3. Short Term Chart



We can see on this short term chart that the all time high around $13.85 has been a tough resistance. But let's study what happened in the pivotal points marked with numbers:

1) On May 15, 2006, SIMC rose 19.7% on volume above average of 439,300 shares. This happened because the company filed its 10-Q for the 1st quarter, showing revenue rising 78% from the year ago level and EPS rising to $0.11 from $0.05. With $0.11 in one quarter investors thought $0.44 for a full year (which later proved to be accurate), so the stock closed at $5.7/$0.44 = 13 times earnings on that day, which was attractive.

Eventually it went as high as $13.85, or 31.5 times earnings, which was somewhat expensive.

2) On August 15, 2006, the stock plunged 35% due to the following news:

«Simclar, Inc. is unable to file on a timely basis its Form 10-Q for the
quarter ended June 30, 2006 due to the discovery of accounting errors in its
Mexican operations during 2005 and the first quarter of 2006. The Company has
not yet been able to conclude whether these errors had a material effect on its
financial statements included in the Company's quarterly report on Form 10-Q for
the quarter ended March 31, 2006 or its annual report on Form 10-K for 2005.
The Company's efforts to identify and correct those errors necessarily affect
its ability to prepare and file on a timely basis its quarterly report on Form
10-Q for the quarter ended June 30, 2006, both because of the diversion of the
time and effort of its accounting staff to the identification and correction of
the errors, and also because such corrections may affect the preparation of its
financial statements for the second quarter.»

The previous rise was put into question and the stock came off to the previous level.

3) Then, on October 12, 2006, SIMC rose 76% . The news was:

• SIMCLAR INC Files SEC form 8-K/A, Results of Operations and Financial Condition, Non-Reliance on Previous Financials,
EDGAR Online (Thu, Oct 12)

They made the following adjustments:



Because Q1 EPS was revised down from $0.11 to $0.08, expectations for the full year went down to $0.32, so at that day's close of $8.94, the stock was trading at 28 times earnings, which is expensive for a company making accounting errors and saying it has deficient internal controls. The stock came off to completely close the gap originated by the 76% one day rise.

4) On April 2, 2007, SIMC had another gap up, this one of smaller proportions, on the following news ... actually, there weren't any news on that day, at least not released by SIMC, perhaps it was some competitor's news or something. Anyway, in a few weeks time that gap was also closed.

5) The current advance phase, which took the stock from a low of $5.27 to a high of $14.14, had the following catalyst:

• Simclar, Inc. Announces Results for Second Quarter 2007
PrimeNewswire (Tue, Aug 14)

«Net income for the three months ended June 30, 2007 was $1,372,346 or $0.21 per share, compared to $709,033 or $0.12 per share in the same period in 2006.»

Naturally, with $0.21 EPS in one quarter investors immediately saw $0.84 for a full year, and with the stock trading at $6 when the news was out, inevitably it had to go higher, since the perceived earnings multiple was just 7. With the stock at $14 the multiple rose to 17, so that coupled with the $13.85 resistance level given by the previous all time high was enough to motivate bears to take the stock down to a low of $10.1 on Tuesday.

SIMC closed at $11.13 yesterday, so, with the current information of that one single quarter and extrapolating that for a full year, the current valuation is 13.25 times earnings, which is below the historical average. I guess investors, because they were bruised before, have attached a lower earnings multiple to Simclair, because of the fluctuations in revenue and earnings.

4. Conclusion

SIMC looks cheap at this point and if it can have a more stable fundamental improvement it will certainly rise. Investors have been positively and negatively surprised by this company a lot in the past, and that partially explains the low valuation of the company, despite its strong EPS growth.

Anyway, looking at SIMC's business, number of employees, revenue level and competitors I must say that it doesn't look like it's worth just $72 M. I say that with the current fundamental information the stock looks undervalued and it is bound to go higher.

Good luck if you own it Jim897

[David Randolph]

SIMC looks cheap at this point and if it can have a more stable fundamental improvement it will certainly rise. Investors have been positively and negatively surprised by this company a lot in the past, and that partially explains the low valuation of the company, despite its strong EPS growth.

Well, it seems investors were negatively surprised by SIMC (again), as the stock plunged 70% in a couple of months. I want to know what happened on November 15th, 2007, when the stock fell 38%:

• Simclar, Inc. Announces Results for Third Quarter 2007
PrimeNewswire (Wed, Nov 14)

«Net income for the three months ended September 30, 2007 was $415,330 or $0.07 per share, compared to $617,868 or $0.10 per share in the same period in 2006.»

Yep, after a $0.21 EPS in Q2, the company earned just 7 cents per share in Q3. This company's earnings are extremely volatile and this will make investors attach a lower than average earnings multiple to the stock. Say, 12 times earnings will be the norm. SIMC's fair value will be about quarterly EPS*4*12 according to historical trading patterns.

So, currently I see fair value at $0.07*4*12 = $3.36.

I guess there will be more downside action until we get another earnings release. Then it's anybody's guess, but I believe one can use "my formula" to quickly assess value.

[David Randolph]

Yep, after a $0.21 EPS in Q2, the company earned just 7 cents per share in Q3. This company's earnings are extremely volatile and this will make investors attach a lower than average earnings multiple to the stock. Say, 12 times earnings will be the norm. SIMC's fair value will be about quarterly EPS*4*12 according to historical trading patterns.

So, currently I see fair value at $0.07*4*12 = $3.36.

I guess there will be more downside action until we get another earnings release. Then it's anybody's guess, but I believe one can use "my formula" to quickly assess value.

We're about there now, with SIMC breaking down to new all time lows yesterday:

[David Randolph]

Ouch, 4th quarter results were out in March 31, they were really bad:

«For the fourth quarter of 2007, Simclar had a net loss of $64,088 or ($0.01) per share, compared to net income of $949,000 or $0.15 per share for the fourth quarter of 2006.»

With these results my "SIMC valuation formula" would return a negative value for the shares

[setravis]

ticker change
SIMC is now SIMC.PK