Cimatron Ltd. (NASDAQ-CIMT)

Cimatron Ltd, (NASDAQ–CIMT)
Valuation-$7.53
Price August 10, 2007-$2.12

With some trepidation, we are recommending CIMT for purchase. We bought this stock several years ago at about the same price and ending up selling it for about a 50% loss for taxes. It has been a “value-trap” for years.

Q2 results (6/30/2007) showed sales up 9% to $5.5 million, gross margin was up to 85%, and the company made $291,000 or $.04 per share (un-taxed). The stock has traded as high as $4.73 and as low as $1.12 over the last year.

The catalyst, aside from new products that will hopefully continue to drive sales and profits, is that they have exercised an option in early July to purchase a 51% share in their Italian distributor that did over $10 million in sales in 2006. The purchase price is cheap (under $1 million) and the company is supposedly profitable. At a 51% ownership level (previously owned 27.5%), they will have to consolidate Microsystems sales and operations results (less 49% of any profit or loss). Aside from growing fundamentals, this should boost their reported revenues by a substantial percentage beginning in the September quarter (Q3).

Our hope here is that the sales increase will get more attention for Cimatron, and investors will realize how undervalued it is.

With $1.16 a share in cash (55% of the market cap), 85% margins, making money and a publicly announced catalyst that has not been reflected in the stock price, we think this is a good bet.

The daily trading volume has been nearly 35,000 shares.

We think anything under $2.25 is a good price.

CIMT is trading at a measley 28% of our valuation.

About Cimatron
With more than 20,000 installations worldwide, Cimatron is a leading provider of integrated, CAD/CAM solutions for mold, tool and die makers as well as manufacturers of discrete parts. Cimatron is committed to providing comprehensive, cost-effective solutions that streamline manufacturing cycles, enable collaboration with outside vendors, and ultimately shorten product delivery time. Cimatron’s cutting-edge CAD/CAM solutions are widely used in the automotive, medical, consumer plastics, electronics, and other industries.
Founded in 1982, Cimatron is publicly traded on the NASDAQ exchange under the symbol CIMT. Cimatron’s subsidiaries and extensive distributor network are located in over 35 countries to serve customers worldwide with complete pre- and post-sales support. For more information, please visit http://www.cimatron.com.

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