Value Microcaps Motherboard

[whyme2005]

SIMC $4.1..LOOKING STRONG GOING INTO EARNINGS...

I brought you this one last week at $3.4. My target is $6+ within 2 weeks.

SIMC (1.8M share float) is starting to move up ahead of its 3Q 2005 earnings release in early November. 3Q financial results from SIMC are likely to be very strong as discussed in more detail later in this post.

SIMC is explosive around earnings time. Take a look at the weekly chart (bottom chart) to see the big spikes every quarter.


http://stockcharts.com/gallery/?simc


+++++SIMC INVESTMENT HIGHLIGHTS:

* 1.8 Million Shares in Float
* Profitable in 9 of 10 years (2001 was the exception)
* 2004 most profitable year - EPS=$0.36
* Revenues of over $50million/year
* Added two new plants early this year
* 48% Revenue Growth. From $36M in 2003
* Market Cap only $24 million
* P/E = 15
* P/S = 0.45
* Insiders own 75% of the company.


Last quarter (2Q 2005) earnings were disappointing when compared to the year ago quarter. The reasons for that have been identified and promtly corrected by the company as discussed below. I believe 3Q results will be a surprise to the upside and should beat 2Q 2005 and 3Q 2004 handily.

SIMC Chairman Sam Russell commented upon the release of 2Q 2005 financial results on August 12:

"It is disappointing to report a decrease in sales in the quarter compared to the same period in 2004; however, this is caused by two of our plants in particular. One of these plants generated significant sales in the second quarter of last year due to above average demand from two of its customers. Unfortunately, there has been no such similar demand in the current year, with the result that sales for that plant have decreased by $707,000 (53%) in the second quarter of 2005.

We are continually monitoring the performance of that plant to ensure that all possible actions are being taken to increase its levels of business... and are pleased to note that it has now returned to profit and we expect it to remain profitable throughout the third quarter.

..."The other plant in question has experienced a general decrease in business levels in the quarter, with the result that its sales are down by $808,000 (29%) in the second quarter of 2005. I'm pleased to say that, since the end of the second quarter, that plant has been successful in winning a significant order which will result in significant sales growth in the remainder of 2005 and on into subsequent years..."

...."The sales reductions at these plants decreased our profitability in the quarter..."


In other words, the two plants responsible for the drop to 3c/share net income in 2Q 2005, returned to profitability early in 3Q.

More importantly, the second plant mentioned in the report won "a significant order which will result in significant sales growth in the remainder of 2005 and on into subsequent years.." Obviously, the company won a lucrative multi-year contract and hopefully some details will be provided in the earnings release.


Worldwide, SIMC operates 11 manufacturing plants including China, Mexico, Scottland, and six plants in the United States.


About Simclar:

Simclar, Inc. (Nasdaq: SIMC) is a contract manufacturer of electronic and electro-mechanical products. The Company's products are manufactured to customer specifications and designed for original equipment manufacturers (OEMs) and distributors in the data processing, telecommunications, instrumentation and food preparation equipment industries. Simclar's principal custom-designed products include complex printed circuit boards (PCBs), conventional and molded cables, wire harnesses and electro-mechanical assemblies. In addition, the Company provides OEMs with value-added, turnkey contract manufacturing services and total systems assembly and integration. It also delivers manufacturing and test engineering services and materials management, with flexible and service-oriented manufacturing and assembly services for its customers' high-tech and rapidly changing products. ..


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