| An SI Board Since February 2007 |
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SIMC |
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Here's an interesting play. This is a small-cap contract manufacturer of electronics and electromechanical parts. $101M in revenue, $2.1M net income, EPS $0.33 per share, 6.5M shares outstanding with a float of only 1.7M. $2.5M cash. Excluding the effects of acquisitions, its underlying business is growing at 20%.
And it's only $6.37 a share, with a market cap of $41M. Why so cheap? Well, it was a $13 stock in mid-2006 but had to restate earnings due to accounting errors in its Mexican facility. Then the company loaded itself with debt, currently at $26.5M, in an acquisition spree and is facing debt repayments up the wazoo for the near future that will eat up cash flow. But that's the distinction. Starting in Q1 2007, they will be paying down debt (as opposed to paying interest) to the tune of $2M a year - a good thing. Also, much of the interest is based on the relatively inexpensive LIBOR.
Why do I like it? Well, barring any major calamity or downturn in the tech sector (which is a real risk), the business is pretty robust with profitability and enough cash flow to finance the acquisitions while the underlying business grows. This in turn should allow cash flow to turn positive. The float is ridiculously small, amplifying any positive progress. Also the chart looks very constructive.
Don't say I didn't tell you! In at $6.37.
Tom
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