TAT Technologies Comes at a Steal

TAT Technologies (TATTF) is an Israeli-based company that engineers and manufactures products for civil and military applications. The company's product line includes heat exchangers, cooling systems, cold plates, air conditioning systems, and fuel systems. Customers include Lockheed-Martin (LMT), Boeing Co. (BA), Cessna Aircraft Co., and Liebherr Aerospace.

Many investors however are still weary of investing in Israel due to the Palestinian conflict. It seems as though every time Hezbollah or Hamas launches a new attack, investor confidence in this emerging market is lost. What investors need to realize is that the conflict is well contained. Geographically the majority of conflict takes up only a small corner of the country. Also, the Israeli military is one of the most effective and efficient in the world. Not to mention, the company we are speaking of here manufactures products for military applications. And since it seems that Israel is continually in some state of conflict, TAT Technologies should be a safe bet.

The stock comes at a steal with a current share price of $7.77. In addition, the stock paid out a cash dividend in March of 2.29 giving a projected yield of 29.5%. Not bad for a small-cap Israeli-based company. Historically, dividends have not been paid on a regular basis. Over the past couple of years revenue has grown approximately 25% and current assets have nearly doubled. On August 18, the company reported its second quarter 2009 results. North America accounts for TATTF's largest source of revenue, followed by Europe and Israel, respectively. Total revenues from the three month period decreased 7.6% from the second quarter 2008. Cost of revenues decreased only 3.77%. Considering the economic downfall that occurred late 2008 and also the fact that the economy is in large still recovering, one cannot evaluate the company based on these numbers alone.

Just this past July TAT completed a merger with Limco-Piedmont Inc. and following the merger appointed a new director and CEO for the subsidiary. TAT, which previously owned 61.8% of Limco's common stock, acquired all of the shares of Limco's common stock held by the public. Pursuant to the merger agreement, Limco's common stock was converted into one half of an ordinary share of TAT. Since the merger the stock's growth pattern has been extremely consistent.

One of TAT's major competitors is Honeywell International Inc. (HON). The two stocks seem to be sharing the same moving average over the past three months, completely in line with one another.
Most analysts are bullish on Honeywell. So carrying that over to TAT Technologies, it seems only wise to take a bullish stance here as well. Still, it is difficult comparing a large cap company to a small-cap company.

TAT's largest revenue sources come from North American customers such as Lockheed-Martin and Boeing. Lockheed's revenue and cash from operations has grown consistently over the past three years. And they are still a leader in the defense industry with important government contracts. Lockheed needs TAT's products in order to fulfill these contracts. Though Boeing's revenue decreased in 2008, the second quarter numbers for 2009 are already remarkably better than this time last year. All in all, TAT Technologies is a strong buy for a long-term holding.

Disclosure: No Positions

Comments

[anarchist:]

Thanks for the article Mary. I usually invest in companies that have options but I will keep an eye on TATTF as I am always open to any stock that might be a winner.

Sep 10 09:58 PM

[manya05:]

I do not think investors avoid Israel because they think the Palestinian conflict is not well contained (it is) or will affect the Israeli economy (it will not). They avoid investing based on a human rights principle (as it was the case with South Africa many years ago). Which takes as to the next step...as an investor, even if the Palestinian conflict is irrelevant, if too many investors around the world stop doing business with Israel and the boycott spreads, your investment is in danger...thus, you avoid. That is how boycotts work.

Not agreeing or disagreeing with the boycott on Israel investment, but as an investor, you cannot ignore it.

Sep 11 09:41 AM

[Socionarcio...:]

People pay less attention to companies that dont have at least one analyst following it. Additionally, TATTF is nearly void of publishing their financials or providing any insight to what is going on. Lastly, you have a company controlled by a very large individual. You can bet shareholder interest come second.

Sep 11 12:23 PM

[cowlady:]

Boycotting Israeli companies is a losing proposition. First, you'd have to boycott every important innovation of the last 30 or so years. Even the latest revolution in gaming, Natal, was developed by Israeli company acquired by Microsoft-- a game system with no hardware at all. Motion detection, voice recognition. This is only the beginning. So, if you want to diss Israel, then you are discounting their contributions in medicine, telecommunications, biotechnology, and every progressive innovation that has made life better, healthier and easier for all mankind. What have the Palestinians, Hamas and Hezbollah given us except terror and death?

Sep 11 10:57 PM

[cowlady:]

PS. Mary, thanks for this article. I've owned this stock for awhile and just keep taking profit off the table.

Sep 11 10:59 PM

[User 111511:]

Hi Mary. Thanks for this article. Can you please elaborate on TATTF's competitive position? Why does Lockheed need TAT's products in order to fulfill its contracts? Can't Lockheed use another supplier? Perhaps bigger than TAT?

Sep 12 10:38 AM

[Paul Harper:]

Point of note, Hezbollah is a Lebanese based terrorist group, not Palestinian.

Sep 29 03:47 AM

[Alex T:]

Dittos and Amen brother. The Jews are very smart people. They have turned a desert into a paradise. I just 200 shares today of TATF. I hope it becomes another Ebit Systems.


On Sep 11 10:57 PM cowlady wrote:

> Boycotting Israeli companies is a losing proposition. First, you'd
> have to boycott every important innovation of the last 30 or so years.
> Even the latest revolution in gaming, Natal, was developed by Israeli
> company acquired by Microsoft-- a game system with no hardware at
> all. Motion detection, voice recognition. This is only the beginning.
> So, if you want to diss Israel, then you are discounting their contributions
> in medicine, telecommunications, biotechnology, and every progressive
> innovation that has made life better, healthier and easier for all
> mankind. What have the Palestinians, Hamas and Hezbollah given us
> except terror and death?

Oct 20 01:13 PM

[Alex T:]

I believe that one of the reasons that Lockheed usese TAT is because they are very competive. I read that the UAV built by Ebit are not only the best but the least expensive, but I could be wrong.


On Sep 12 10:38 AM User 111511 wrote:

> Hi Mary. Thanks for this article. Can you please elaborate on TATTF's
> competitive position? Why does Lockheed need TAT's products in order
> to fulfill its contracts? Can't Lockheed use another supplier? Perhaps
> bigger than TAT?

Oct 20 01:16 PM