TAT Technologies Flies Ahead

TAT Technologies (TATTF) once again, published an excellent report this week. TAT specializes in the repair and installation of heat exchangers for aircraft, and the manufacture and marketing of aircraft components. Israeli history in this field is not such that would cause investors to look at TAT, since we had similar instances in the past Rada Electronic Industries (Nasdaq: RADI), among others.

Companies of this kind and in this particular field encounter several problems when it comes to investors. Firstly, this is a business in which, according to most people, the giants exercise absolute control. This may be true, but even with the domination by companies such as Pratt & Whitney, or General Motors Company (NYSE: GM), professional entrepreneurs can earn a fairly good livelihood from spare components.

A small company like TAT can certainly maneuver its way to much larger sales than it has at present without disturbing the giants. The company posted a net profit of $2.7 million on sales of $34.8 million in the first half of 2006, which represents a 100% increase in sales and a 62% rise in net profit. TAT’s second quarter profit was around $1.4 million, up 65% on sales of $18.4 million, which were up 105%.

This sharp rise in sales and profit is the outcome of the acquisition by TAT of Piedmont Aviation Component Services. Since TAT is not covered by analysts, I am willing to bet that it will end the year with earnings per share of $0.90. Even without Piedmont, the company has managed to increase its sales and profit in recent years. Sales rose from $30 million in 2003, to $50 million in 2005 and $70 million this year. TAT also has an outstanding record in dividend distribution over a number of years.

I have been talking about this stock for a long time and I am pleased that the management is continuing to justify the hopes I have pinned on them. Incidentally, I read an announcement from New York which claims that institutional investors are starting to take an interest. The first of these is Bjurman, Barry & Associates, a fund which specialized in small stocks, and which has already announced the acquisition of TAT shares.

TATTF 1-yr Chart

Published originally by Globes [online], Israel business news - www.globes.co.il © Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

Comments

[PA:]

I dont understand the massive pullback on TATTF....The deal values the 2 subs around $77m--equivalent to current market cap....what about the rest of TAT's bussiness'?

2006 Oct 25 01:44 AM