Mark: You're right about the post to "all." Maybe I was hoping to pick up some other interested parties.
I have gone through the recently filed 10-K, and found some good news and some bad news. Here are my comments:
(1) Adjusted book value is $5.36 per share. I adjust the actual book value as stated in the 10-K (which is $4.43 per share) for the actual market value of Sigmatron stock. CSYI still owns 488,413 shares of SGMA, which at today's close price for SGMA of 15 1/2, is worth $7,570,402. This asset is carried on CSYI's books at a value of only $2,841,193, however, a difference of $4,729,209, or 93 cents per share. Adding this .93 to $4.43 gives adjusted book of $5.36.
It is possible this book value is still understated. Land is carried on the books at $2,800,000, which is undoubtedly carried at historical cost. The true market value of this land is unknown to me. But this is often an area where book value understates true value, when the land in question has appreciated a lot since it's purchase.
(2) CSYI is quite dependent on a few big customers. In 1996 26% of sales were to Lucent Technologies, and 20% to American Power Conversion. It also looks like last year's #2, U.S Robotics (now 3Com) has dropped off the list, leaving me to wonder if they lost this account.
(3) Backlog is 9.4 million, vs 12.6 million last year. This is in line with the CEO's prediction of a slow quarter.
(4) Earnings for the past few years shows no progress. For the past 5 years, they have been 3.06, 4.99, 2.24, 3.08 and 2.12 million, for years 1993 thru 1997.
(5) On the other hand, cash flow from operations was huge in 1997, and is showing good progress for the last few years. Cash flow for 1995, 96, and 97 was 1.86, 3.25 and 7.55 million. The 7.55 million cash flow in 1997 is $1.49 per share, putting CSYI stock (at 5 1/8) at about 3.5 times cash flow. This is very cheap.
This large cash flow enables CSYI to do such things as buy assets, or buy in it's shares, which it is doing.
(6) CSYI paid $10 Million for Phillips printed circuit board business. This is for a business CSYI has stated is expected to generate $20 to $25 million in sales. Thus they paid .4 to .5 times sales. This is in line with CSYI's own price to sales ratio, which is about .41 times sales.
(7) Last quarter CSYI acutally lost money operationally. The reported .16 per share included a one time gain of about .21 per share from the sale of SGMA stock , for which they booked a $1,092,215 gain. So without the SGMA stock sale, CSYI would have posted a loss of about .05 per share.
RR |
