Small cap power: CIMT

[tokyopua]

Absolutely nothing happened in CIMT today. I prefer it this way, as the stock waits for a catalyst to move it one way or the other. From my fundamental study I believe Q2, but especially Q3 2007 will be quite positive quarters.

So if CIMT makes even just $180K in net income in Q2, then the headline can look something like "CIMT posts 1000% increase in Q2 net income".  Then we get another huge spike up on high volume.  No guarantees, but certainly seems quite possible they do at least 180K or more in Q2 with the new products.  I wouldnt be surprised to see a much larger increase.  Still holding here quite comfortably 

[terainvestment]

Today I wrote an e/m to Cimatron CFO asking for some clarifications on MicroSystem acquiring, hopefully it will reply.

Cheers,

tera

[David Randolph]

Applaud Tokyopua and terainvestment

The two major owners of CIMT bought 64.3% of the company for $9.9 M in 2002:



Today their investment is worth $11.27 M. The compound annual return on their investment was 2.63%. They might as well put it in a savings account

As for the future, I believe the company has been taking the right steps for a big surge in its market value. That will take some quarters to unfold.

Technically we had our first "zero volume day".

I'll patiently keep holding CIMT.

[Se7en]

CIMATRON LTD Financials

http://finance.yahoo.com/q/is?s=cimt&annual

[terainvestment]

When the earnings will be released for this quarter?
Anyone knows the date?

[garyaross]

IT IS "NOT CONFIRMED", BUT THE DATE IS 8/20

[terainvestment]

Generally, if earnings are good stock begins moving 3/4 weeks before earning release.
uhmmm...keep waiting...
David what do you think?

[David Randolph]

Generally, if earnings are good stock begins moving 3/4 weeks before earning release.
uhmmm...keep waiting...
David what do you think?

CIMT doesn't seem to be the type of stock that anticipates anything. It just reacts to the news. I expect CIMT to make a huge shot to the upside after Q2 earnings release but certainly after Q3 earnings release, because obviously, due to the Microstrategy acquisition (but also the new product release in March that doubled the market reach of CIMT), revenues and profits will rise. I expect CIMT to be a big contributor to the Main's performance by the end of the year. But between now and then the stock may very well drift lower due to the lack of interest and the technical trend, which is bearish.

As I was writing somebody sold some shares and the stock is down 11.9% now. Not easy to be a long term investor in micro caps, especially when one has to look at them everyday ...

Let me quickly tell you a story. Somewhere in 2002 I bought shares of a company, it was called NetZero at the time. I bought it at $1. It then fell to $0.7 and $0.5. I didn't have a lot of money in it, so I just forgot it. I mean it literally, I had it in an account I didn't use anymore, so I completely forgot about those shares.

About 1 year later I received a letter from e-Trade saying I was the owner of shares of UNTD, which had merged with NetZero in early 2003, or something. The stock I bought at $1 was at $40 (pre-split).

It was the most incredible investment I ever made in percentage terms. But between my buying and the end result of a 40 fold return, I had been losing 50% on my investment.

Got to pick up my kids, see ya

[tokyopua]

There is one poster on the YMB who has recently started an all out campaign against CIMT, even created an account called "dollar_thirty" just for the purpose of claiming CIMT will go to $1.30.  Posts multiple times per day.  Actually makes himself sound knowledgeable, so its possible this is causing the low volume weak hands.  Here is a post from him today:

--------------------
dollar vs yen and euro.

Read their 10K

Sales.

1. 8.0 released in May. People cut back buying V 7.1 starting in Jan.
2. Dec 06 quarter sales were high because they offered clearance prices on the old release.
3. It takes 9 - 12 months companies to analyze and buy new CAD/CAM software, in some cases only 6, but rarely if ever less.
4. Purchased upgrades take 6 - 9 months from the start of the process until the contract is signed.
5. Sales effort on 8.0 did not commence until the end of May see section below so very little of 8.0 would have been bought in the June quarter.

Now how do I know the above. I worked in manufacturing with engineers buying and installing ERP and CAD/CAM systems for close to 30 years. That is how I know.

Operating expenses will be higher because they started an extensive dog and pony marketing campaign on v8.0 in May. My guess is that Marketing expenses, not sales but Marketing expenses will be up at least $200K in the June quarter vs the March quarter. How do I know that they started an extensive marketing campaign? Because it was plastered all over the websites of their subsidiaries in North America, Germany and China along with the Microsystem SRL website.

Finally, the stock is not going down for no reason. There is absolutely no smart money buying it.

Bottom line is that from what I have read and seen of v8.0 the Progressive DieDesign, which I have seen the software work, is a slick program, but I would not look for any benefits from it until the 4th quarter. The current quarter which is quarter #3 is summer vacation in Europe so you forget this current as to being profitable, plus it is too soon in the V8.0 cycle for it to be recording sales.

China is also a problem, in that Piracy is a humongous problem for them over there. That not only keeps there sales in China down but all over the world. Check the net. It is easy to find very cheap pirated copies of CimatronE.

If they were smart they would stop selling it on CDs or as a download and make it a web based program. This would cut down on piracy.

They will have a decent profit (for them) in Q4 of this year if the world economy holds up and the dollar stay week and the debt at Microsystem SRL, which they will pick up is not too large, which it may very well be. My sense from reading their 20-Fs, 6-Ks and PRs and surfing the next for info on the subeject is that Microsystem SRL would have gone bankrupt belly up and had to close their doors entirely, (they did shutter 1/3 of their offices) had not CIMT bought them out. That is how CIMT was able to get them so cheaply, because of Microsystem SRL's awful financial condition.

Have a nice day

See ya at $1.30.
----------------------

[Se7en]

I really like to know/find more about Microsystem SRL's financial condition... 

[stocky]

A better way of uncovering potential or otherwise of CIMT will be to do some search on the Management and Holding companies. I dont have stomach for this but maybe someone with appetite for google can do.

[David Randolph]

There is one poster on the YMB who has recently started an all out campaign against CIMT, even created an account called "dollar_thirty" just for the purpose of claiming CIMT will go to $1.30.  Posts multiple times per day.  Actually makes himself sound knowledgeable, so its possible this is causing the low volume weak hands.

Thanks for the post Tokyopua, it's nice to read a different view of the fundamentals. His basic premises are:

1) Version 8.0 will take time to get traction in the market place, usually 6-12 months.
2) Microsystem probably has a lot of debt, that's why CIMT got it so cheap.

As for 1), I say that the short term doesn't matter to where the stock will be three years from now. If CimatronE version 8.0 sells as well as it should, it will increase the company's revenues and profits over the long term.

As for 2), I say that CIMT had an option to buy Microsystem. It didn't have to. Since they exercised the option to buy an additional 23.5% of Microsystem it is because they thought it was a good business to make.

Also Microsystem was profitable in Q4 2006 and Q1 2007, that's why we have those differences between pre-tax income and net income, even without income taxes. Moreover management said over the conference call that Microsystem was profitable in 2006 and it expects the company to be profitable in 2007 and going forward.

As for the $1.30, I don't see it as impossible, the stock already printed $1.66 in yesterday's session. It is possible that the market makes everybody right, and goes down to $1.3, and will be at $15 plus in late 2009. Everything is possible.

I really like to know/find more about Microsystem SRL's financial condition... 

Me too. But I know enough to consider it a good business. CIMT bought 51% of a profitable company with annual sales of $10.5 M for a price of $1.318 M. It will be able to buy the remaining 49% for $1.25 M, so, the total price of the company is $2.568 M. The price to sales ratio is 0.24.

Of course, there are problems, Microsystem probably has a weak balance sheet and it is a low margin business. But again, management thought it was a good business, or else it wouldn't have taken the option to buy the company. Over its form 20-F recently filed with the SEC it says Microsystem went through intense restructuring and reorganization efforts over the 2005 and 2006 period.

A better way of uncovering potential or otherwise of CIMT will be to do some search on the Management and Holding companies. I dont have stomach for this but maybe someone with appetite for google can do.

That's a good idea for the next update stocky, thanks

The major owners of the company are:

«In February 2002, two private holding companies, Koonras Technologies Ltd., or Koonras, a subsidiary of Polar Communications Ltd., and DBSI Investments Ltd. or DBSI, consummated a transaction with Zeevi Computers and Technology Ltd., or ZCT, by which they acquired, for approximately $9,900,000, all of our Ordinary Shares previously held by ZCT, representing 64.3% of our share capital (including in this calculation 166,100 of our ordinary shares which we have repurchased and which, pursuant to Israeli law, cannot be voted and possess no rights other than upon liquidation). Following this transaction, each of Koonras and DBSI beneficially owned approximately 33% of our ordinary shares and each currently continues to own approximately 32% of our ordinary shares.»

They paid $9.9 M for 64.3% of the company in 2002. Today, 64.3% of the company is worth $10 M, so roughly the same.

But I believe the company is worth more now than what it was worth in 2002. Now CIMT is profitable and most of its heavy R&D expenses are behind us.

CIMT's market cap is $15.6 M, there's no historical dilution or the need to dilute in the future (because the balance sheet is strong, with $5.6 M in cash), annual revenues are above $20 M and to rise to over $30 M with the consolidation of Microsystem.

I'll keep holding CIMT with the strongest hands possible, that is, I won't sell the stock whatever happens. Why this stance? Because the reward/risk ratio is very attractive even considering the remote possibility that the company may go bankrupt. I see CIMT at $15 plus and not much is needed for it from a fundamental standpoint, just 20% average annual revenue growth, a 15% net profit margin which isn't much for a niche software company and a stock that trades at its industry average valuation.

[DragonAMG]

I am with you David... I am holding CIMT no matter what... no reason to sell it now.  I am looking to double my position if it hits $1.30-1.40.  I am putting in a GTC order to double  at $1.35.  Hopefully it will have an overshoot like it did yesterday (down to $1.66) and I'll be able to double my position.  The upside position / risk/reward is much to high not to double my position if it continues to trade down to $1.30 range on this low volume... it is a gift in my opinion.  Thanks as always David!!!!

[tokyopua]

I am with you David... I am holding CIMT no matter what... no reason to sell it now.  I am looking to double my position if it hits $1.30-1.40.  I am putting in a GTC order to double  at $1.35.  Hopefully it will have an overshoot like it did yesterday (down to $1.66) and I'll be able to double my position.  The upside position / risk/reward is much to high not to double my position if it continues to trade down to $1.30 range on this low volume... it is a gift in my opinion.  Thanks as always David!!!!

Yeah, I say we all put in orders somewhere above 1.30 and maybe we deny that dollar_thrity dork the opportunity to ever buy at 1.30 haha 

BTW, that print of 1.66 looked like one big market order, someone got scared and wanted out.  If you are not thinking long term, this would look a bit scary from the technical standpoint.

[la-onda]

fyi:
Cimatron Completes The Increase of its Holding in Microsystem to 51%
Thursday July 5, 3:01 am ET
Consolidated Results From Q3 2007

GIVAT SHMUEL, Israel, July 5 /PRNewswire-FirstCall/ -- Cimatron Limited (NASDAQ: CIMT - News), a leading provider of integrated CAD/CAM solutions for the toolmaking and manufacturing industries, today announced that it has completed the exercise of its previously disclosed first call option to acquire an additional 23.5% of the shares of Microsystem Srl, the company's Italian distributor, and accordingly, to increase Cimatron's holding in Microsystem from 27.5% to 51%. Cimatron will be entitled to exercise its second call option to acquire the remaining 49% of Microsystem's share capital during a thirty-day period starting July 3rd 2008 and ending August 2nd 2008, during which period Microsystem's other shareholders are also entitled to exercise a put option requiring Cimatron to purchase such shares. Microsystem's financial results will be fully consolidated into Cimatron's financial results from Q3 2007, subject to exclusion of minority interest.
Commenting on the closing, Danny Haran, President and Chief Executive Officer of Cimatron, said, "We are pleased to complete the increase of our holding in Microsystem to 51%, as we believe it would increase not only our revenues, but our profitability as well.
As we had previously announced, Cimatron's growth strategy is based on internal growth, as well as on mergers and acquisitions. We intend to keep looking for M&A opportunities in order to further enhance our product offering and distribution network.
Cimatron's strong financial position enables us to finance the Microsystem deal from internal resources and to further develop our growth. We believe that being a larger company will open new opportunities to Cimatron in the CAD/CAM industry."

&

Cimatron Reports Decision in Omega Arbitration
Thursday July 5, 3:02 am ET
Arbitration Decision Reflects No Further Expense to be Recorded on Cimatron's Financial Statements

GIVAT SHMUEL, Israel, July 5 /PRNewswire-FirstCall/ -- Cimatron Limited (NASDAQ: CIMT - News), a leading provider of integrated CAD/CAM solutions for the toolmaking and manufacturing industries, today announced the issuance of a decision in its previously disclosed arbitration with Omega - Adem Technologies Ltd. Under the arbitrator's decision, Cimatron will pay to Omega approximately $145 thousand. This amount, together with other expenses that Cimatron had on this case, are within the amounts that Cimatron already accrued in 2005, and accordingly, no further expense will be recorded on Cimatron's financial statements.