Small cap power: CIMT

[BigSully1]

I've just listened to CIMT's 4th quarter conference call and I believe it went exceptionally well.

I would like to highlight just the following three issues:

1 - CIMT and Microsystems together sell 89% outside of North America. Gibbs sells almost everything in North America:

«Moreover, the combined distribution networks of Cimatron and Gibbs complement each other and provide excellent coverage of all target markets worldwide, including a strong presence in North America, Europe and Asia Pacific. It is expected that synergies could be quickly realized by selling the combined product portfolio through the merged distribution channels.»

A lot of cross selling is expected in the future and CIMT's CEO gave some examples.

2 - Gibbs is in business since 1984 and said the 4th quarter 2007 was their best year ever and December was their best month ever. He said January and February are doing well.

3 - CIMT's CEO said he didn't see any impact of the so called "economic crisis" in CIMT's business, at least not so far.

CIMT earned $0.24 EPS in 2007 and I was glad to know that they kept they're R&D expenses at $1.1 M for the quarter (which is about average). This tells me results were not achieved at the cost of lower R&D investments.

I believe CIMT will earn something like 40 cents EPS in 2008 and the stock will close the year in the $8-$10 range.

I'll keep holding CIMT for the long term.

I'm glad you were more impressed with the CC than me. Disappointing price action after it. I guess we will have to wait for the "Bowser" boys to finish taking their quick little profits before we can rise again. I'll also keep holding for the LT.

[pinoleropuro]

I am afraid you're right BigSully1. If as some follow the stochastics it looks like the daily stochastics are pointing downward and there is resistance at around $3.01/share right now. 
At that level it would also be meeting with the 25 and 50 day moving averages.
but it could be a great oportunity to get some more shares.

[Garoh]

Well , must not close below 3.80 otherwise it's gonna be ugly 

Below $3 is good for LT buyers

[David Randolph]

I'm glad you were more impressed with the CC than me. Disappointing price action after it. I guess we will have to wait for the "Bowser" boys to finish taking their quick little profits before we can rise again. I'll also keep holding for the LT.

Yes, I feel quite sad about CIMT's reaction to what were spectacular results. It made me wonder about the value of fundamental analysis, the value of patience and investing for the long term.

But at yesterday's close I'm winning 19% on my CIMT investment in about one year, which is just a bit shy from my long term objectives. But it would have been so easy to take higher profits on the news ... and now perhaps having to wait another year for another great quarter and another 19% gain ... it makes me wonder.

Nevermind, I guess that the most relevant phrase coming out of the conference call was when Gibbs said: "You know, we're mature businesses".

Because developing and selling CAD/CAM software is a mature industry, maybe I shouldn't expect CIMT to trade at the Technical & System Software industry average valuation of 24.57 times earnings. Maybe 15 times earnings is more appropriate. And if I consider a multiple of 15, then CIMT's current fair value is $3.6, just a bit higher than the current market value.

But I still don't get it how a business that grows EPS 243% from one year to the next can be called "mature" or valued below average, when the industry is growing just 14% a year.

My take is CIMT will earn 40 cents per share in 2008 and this, using the very conservative valuation of 15 times earnings will mean at least $6 a share one year from now. At least that.

I'll keep holding CIMT for the long term. 

[pinoleropuro]

Stochastics are forming what looks like a rounding bottom and price is getting closer to the $3.01/share resistance

I am afraid you're right BigSully1. If as some follow the stochastics it looks like the daily stochastics are pointing downward and there is resistance at around $3.01/share right now. 
At that level it would also be meeting with the 25 and 50 day moving averages.
but it could be a great oportunity to get some more shares.

[notbeln]

Transcription of Q4 conference call is out:

http://www.cimatron.com/Main/download.aspx?FolderID=2744&lang=en

[David Randolph]

CIMT is a $25 M market cap Israeli company. I believe its long term value will depend more on management's ability to integrate acquisitions and develop better products than the state of the US or global economy.

Fundamentally the company has been doing even better than I expected, however, due to the general market downturn, an earnings multiple contraction didn't allow it to run up and keep up with the fundamental improvement.

For example, EPS grew 71% in the 4th quarter and the stock is just 2 cents higher, or 0.65%.

I'll keep holding this one for the long term. At some point in time CIMT will be at least $100 M market cap as it captures a larger share of the $900 M CAD/CAM annual market.

[buddjas1]

Will you protect the capital buy selling if CIMT drops below the trendline?

[David Randolph]

Will you protect the capital buy selling if CIMT drops below the trendline?

Hi buddjas1, thanks for your question

The answer is no, CIMT is a very long term holding of the Main Portfolio. I've been holding this stock for roughly one year now (anniversary is next Thursday) and I'm prepared to own it three years more, regardless of the share price.

I say this because even if CIMT goes down to, say, $2 again, it still could rise up to $10-$20 in just a few months.

CIMT now trades at 12.7 times 2007 earnings, while it grew them by 243% in 2007 vs 2006. The market cap is just $24 M.

I'm sure you know all about CIMT's fundamentals. I'll keep holding CIMT.

[David Randolph]

CIMT reacted positively to the ascending long term support on the chart below. Maybe the stock will rise at just that slow rate over the long term, as the fundamentals keep improving (or the valuation expands).

If CIMT keeps respecting that ascending support, in three years time it will be around $8.5. This would represent a 41% annual return on investment over the next three years. It wouldn't be bad ...

Anyway, I have been reading some new stuff and believe I'm understanding better where my strategic mistakes were. I'll write an article with my thoughts soon.

[la-onda]

CIMT: Partnership with Cadenas to Integrate PARTsolutions with Version 8.5
Tuesday , March 18, 2008 09:44ET

By Michael Cavallaro, [email protected]

Cimatron Limited (NasdaqSC: CIMT) is announcing a new partnership with leading part catalog provider CADENAS. The integration of CADENAS PARTsolutions into version 8.5 of Cimatron enables tool makers to shorten design cycles by incorporating ready-made CADENAS catalog parts into their mold and die assemblies. While powerful catalog functionality has long been available in Cimatron's software, the CADENAS catalogs place thousands of additional standard components at the disposal of Cimatron's users, eliminating many of the manual and time consuming steps in the tool design process. "Whether through our own research and development or by partnering with best-of-breed solution providers, our mission is to help toolmakers be more competitive by reducing costs and shortening delivery times," said Ira Bareket, Cimatron's VP Sales and Marketing. "The addition of the CADENAS catalog interface is another step in this ongoing effort. We are excited to make the rich collection of their catalogs readily available to our customers."


chart: 

[David Randolph]

CIMT's revenues and EPS numbers over the past three quarters have been better than I expected and yet that didn't make the stock rise in a meaningful way, at least, not yet.

The company earned $0.24 per share in 2007, up sharply from 2006:

«For 2007, net income increased 274% to $1.9 million, or $0.24 per diluted share, compared to a net income of $514 thousand, or $0.07 per diluted share in 2006.»

It's hard to understand why CIMT trades at 10.7 times earnings, while it's growing so fast. And I think 2008 can be even better, considering the Gibbs acquisition.

Investors sold everything, even more so illiquid micro caps ... regardless of the fundamentals.

I'll keep holding CIMT for the long term.

[David Randolph]

One month later, I received the Bowser Report, remember that?

It has a very superficial analysis of CIMT, it's more of a presentation of the company. The report also talks about 30 or so other companies. The $12 I paid weren't very well spent.

So probably this report wasn't moving the stock at the time.

There aren't any analysts covering the company at Yahoo, but let me check on this new service that I have ... also nothing there.

CIMT's market cap is $24.8 M (already counting with the new shares coming from the Gibbs acquisition). I remain confident that the company will be worth at least $100 M sometime in the future, but I don't know when ...

In the meantime I believe $2.5, or about 10 times earnings, is the floor for this stock.

[David Randolph]

It would have been easy to take profits in the $4 area if I were using the technimental approach. Just "buy the rumor, sell the news".

But I was obsessed with "investing for the long term".

Anyway, even at technimental I would find CIMT a bargain at current levels. And I'll remain a long term investor in CIMT.

[David Randolph]

CIMT is starting to execute on its strategy of using GibbsCam's distributors to sell more of CIMT's products:

• Cimatron Appoints GibbsCAM Reseller T-Support as Distributor for Czech Republic and Slovakia
PR Newswire (Mon 11:32am)

Someday CIMT will be a $100 M market cap company.