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8 Questions Every Cimatron Holder Should Ask Himself

|Includes: Cimatron, Limited (CIMT)

While 3D printing is a real revolution, non-professional investors looking for under the radar bargains are sometimes used by professional speculators who leverages their ignorance to feed them with good story spiced with terms-dropping that sound "logical".

Cimatron seems to be one of those cases where non-professional investors that don't really know the 3D industry are jumping on the stock, which soared 400% without understanding how weak (or not existence as some may say) is Cimatron position in 3D printing.

In eyes-opening article, (Click for the article and use Goole translate) Eitan Avriel , the Chief Editor of TheMarker, one of top 2 most reputed Israeli Economic Magazine , revealed the real story how Cimatron and 3D printing were met- According to TheMarker, it turns that the CEO & Chairman didn't even know they are about to play in 3D printing before the bloggers pumped the stock a year ago.

In this mind-boggling article, TheMarker revealed how Cimatron insiders took advantage of the price hike to sell all their shares in 2 separate public offerings at March and May 2013, with almost no proceeding to company.
So within a quarter the owners managed to get rid of their 40% stake which dropped almost to 0% by June 2013.

Frankly, no one can blame them, the stock soared with no real reason, management was even honest enough to state the status of their 3D printing activities in Feb 2013, following the 300% run, they wrote in their 2012 financial results:

"Cimatron is currently exploring new opportunities in the field of additive manufacturing also known as 3D Printing….At this point, Cimatron has no revenues from additive manufacturing…"

If you were thinking that 2013 will be different, it turns that also in 2013 Cimatron had no revenues from additive manufacturing, that doesn't disturb the stock to surge following unrecognized, anonymous Seeking Alpha contributor that calls himself "3D Analytics" that published article states "Cimatron is A Potential Takeover Candidate Poised To Double - with $22 Price Target" which sounds like its some well-established investment brokerage firm.

For Example, this article brings DDD acquisition of Village Plastics as a potential trigger for CIMT acquisition:

"DDD announced the acquisition of Village Plastics Co. DDD plans to use this acquisition to accelerate development of precision thermoplastics for 3-D printing. CIMT's new product is specifically designed to create higher-quality plastic 3-D molds/parts. Therefore, CIMT could be an attractive acquisition target for 3D System"

Apparently , those who will read 3D systems (NYSE:DDD) PR will discover that DDD states explicitly that the rationale of it was to

"accelerate its development of advanced filament-based materials for its growing Cube series"

Cube series is DDD's desktop series, the machines are aimed for Prosumers and offices, hence have no realtion at all to metal production environment where Cimatron plays.

So, here are 8 questions you need to ask yourself before buying the story of Cimatron "potential acquisition":

1. Does Cimatron has presence in 3D ?
Cimatron itself admits it has no additive manufacturing (AKA 3D printing) know-how or GTM routes let alone revenues. Why shall a someone buy them to enter additive manufacturing, just because they are negligible player in the heavily crowded, commoditized CAD/CAM arena?

2. What's the added value of Cimatron to 3D printes vendors?
All 3D vendors like Stratasys (NASDAQ:SSYS) &3D systems (DDD) offer their own SW suite that suffice customers needs and provide vast amount of functionalllites:covert CAD/CAM to STL or AMF formats, estimation,quoting,imposition etc///

3. Why Cimatron growth rathe has nothing to do with other 3D venodr ?
While reported "record year" Cimatron grew only 3.2% in 2013 vs 2012, given the 30%+ organic growth rates of other 3D players like Stratasys (SSYS) and 3D Systems (DDD), or Exone (NASDAQ:XONE) what does it imply to the relation of Cimatron and 3D?

4. What's the 3D revenues CIMT expects in 2014 ?
During the Q4 conf call, management basically admitted that even in 2014 they expect negligible revenues from additive manufacturing:

"We expect to provide AMF support with no charge…. Conformal cooling is something that we could not establish yet, any solid estimates of how much we can make with that"

5. Why CIMT insiders are fire-selling ?
If CIMT has real potential in the 3D printing the owners got rid all their holdings in 2 public offerings in mid 2013 at 6$ per share?

6. Why DBSI exited the firm only 6 month ago ?
In Q3 2013, DBSI a private equity who bought major stake of Cimatron few years ago, sold all her holdings, and resigned from Board of Directors.

7. Why CIMT doesn't invest in itself - In the 2 public offering the company itself didn't enjoy the proceedings, you may assume that company faces a great potential will be required to invest heavily in R&D (which BTW exactly what SSYS & DDD are doing). Still CIMT R&D stayed relatively flat in 2013

8. Do you really think its under the radar ?
Cimatron isn't under the radar for the M&A departments (for example SSYS HQ sits only 30mins drive from CIMT HQ),they already screened Cimatron and obviously already know exactly how weak is the relation of Cimatron to 3D.

So those who holds Cimatron probably ask now, so how you explain the amount of buyers run into the company in the last year ? well just like a Poker table, just look round, if you can't spot the sucker, you're it.

Disclosure: I am short CIMT.