Wed: Through a lens brightly
Shamir Optical Industries may well a worthwhile buy, but don’t rush.
Shamir Optical Industries Ltd. (Nasdaq: SHMR; TASE: SHMR) has not delivered the goods for investors. The company was floated less than two years ago, in an IPO underwritten by William Blair & Co., at $14. Its share price peaked at $18 two months later, and has been falling ever since.
Last week, Shamir Optical published its results for the first quarter of 2006, which were a pleasant surprise. The company develops, manufactures, and markets spectacles lens that are considered to be top quality and state-of-the-art technology. The financial report showed that the company beat analysts’ forecasts.
CIBC World Markets analysts consider Shamir Optical’s first quarter to be “a good start”. First, they were very pleased by the increase in sales worldwide. The establishment of a US marketing company was shown to be a great success, and the analysts believe that the company has begun to consolidate its markets in France and Turkey. CIBC raised its 2006 sales forecast for the company to $94.8 million, while keeping its earning per share forecast at $0.61. CIBC predicts that the company’s sales will grow 12% in 2007, and that its earnings per share will rise by 20% to $0.73.
CIBC gives Shamir Optical a “Sector Outperform” recommendation, i.e. a “Buy” recommendation, because it thinks that the company’s performance will be better than the industry average. The company’s competitors, such as Germany’s Carl Zeiss AG and Bausch & Lomb Inc. (NYSE:BOL) of the US, have much more experience in the sector, , which is why Shamir Optical focuses on specialized lenses.
It is important for an investor in Shamir Optical’s shares to understand precisely what he or she is investing in. An observer of the company and its development cannot but be impressed by its professionalism and thoroughness. The company was founded in 1972 to manufacture bifocal lenses. In 1997, the company, which is based on manufacturing excellence and investment in new technologies, entered into partnership with Eyal Optical Industries Ltd., which was later merged into Shamir Optical. Eyal Optical is the division that develops technologies, and makes it possible for the company to maintain its technological leadership in lens production.
The man who founded and still runs the company is president and CEO Giora Ben-Zeev, a member of Kibbutz Shamir. Although he is listed as a member of the kibbutz, I am sure that in addition to membership, he has two other advantages: managerial skills (after all, founding and running this dream company is no simple matter, certainly not for a mere “kibbutz member”). And if he is not a graduate of the engineering faculty at Technion - Israel Institute of Technology, or has an MBA from some other university, he must be a yekke (of German descent), otherwise I cannot explain this phenomenon.
Is it worthwhile buying Shamir Optical at $9.60? If the first quarter results are a sign of things to come, then definitely, but it’s more important to repeat my mantra: “Put limits in place, and don’t rush. These are days for flight, not fight.”
Published by Globes [online], Israel business news - www.globes.co.il - on May 24, 2006 http://www.globes.co.il/serveen/globes/docview.asp?did=1000095582&fid=1052