Cimatron's Connection: Stock Soared Following Foray into China

Cimatron Technologies (CIMT) has gained 132% since the beginning of the month. Its current price, $3.20, represents a new high since the low it reached in 2002. The stock had actually been holding steady at $1.40 recently, and then it suddenly soared at the end of the first week of March. Cimatron, which specializes in industrial instrumentation, is one of the oldest Israeli companies on the stock exchanges in New York. The company develops and produces software for the manufacturing of devices used in the metalwork industries, from dies to numerical control software for machines.

Since I last wrote about this company, the stock has continued to rise strongly. What caused this surge? The reason apparently does not lie in the company's fantastic performance or anything like that. 2006 and its final quarter were "responsible" for the stock's initial climb at the end of the first week of the month, but after the initial excitement following the company's move from losses to an operating profit (it is still losing), it fell again to $2.60 from $3 at the beginning of the week. It then suddenly soared 27% to $3.30 following the announcement of the opening of two new offices in China.

At the beginning of the month Cimatron announced that it would be launching the new version of its CimatronE software for tool manufacturing, Version 8. From what I have read, this really is an advanced version which has won the company much praise on Main Street. Todd DeMint, lead designer at toolmaker Eimo Americas in Michigan said that "Version 8 gives us new tools in design and manufacturing," while industry analyst Alan Christman of CIMdata said that the release of the new software would change Cimatron's situation, for the better obviously.

The truth is that anyone who read the company's fourth quarter and 2006 reports would have seen that China is indeed the company's center of activity, and from what the company president said, it is obvious that the entry into China in order to grow together with the market there was a strategic decision. China, as it happens, has become the world leader in industrial tool design and production, and Cimatron's idea to operate there is perfectly logical.

Cimatron is a fairly small company by any criteria, and it has to exploit its technological edge (if indeed it has one) and rely on it in order to continue growing. The company's performance and the behavior of its stock since 1996 have not been exceptional to date, but perhaps everything is now beginning to happen. It's definitely worth checking out.

CIMT 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.