Automodular (TSE: AM)

[AnimeEd]

Most of his shares were brought below $1. I bet he's pretty comfortable dumping them at this price.
http://www.quotemedia.com/results.ph...m_symbol=AM:CA

3M is a lot to sell...

[AnimeEd]

Crazy volume today. Company probably started the repurchase.

[Jungle]

Just wondering where some people have put their buy limit orders on this one. Also would you hold this one or sell if given a good gain?

[PMREdmonton]

The thing about this stock is if it is successful you will be well rewarded buying anywhere in its recent range which is 1.60 to 2.15. They have an EV/EBITDA of close to 1, no debt, about 1/3rd of the market cap is cash. They can maintain a 12% yield with a sustainable 40% payout ratio.

The question is more do you want to own the stock. It is a very efficient and profitable microcap but it has risk because most of its earnings come from a single contract with Ford which ends in 2014. If you think that is not an issue or they'll find alternative business contracts then you are buying this stock at a super-discount. I really think that anywhere from 1.60 to 2.00 is a fine entry point. If you really want to get in cheap try to get in at 1.70 as there won't be much more downside but there is a lot of upside.

You have to remember that most of the selling done recently is the ex-CEO divesting himself of 1/3rd of the company. He had about 5M shares and has about 3M left and he has been liquidating. His liquidations drove this stock down from 3.00 to 1.60. If he continues to sell it would be a buying opportunity. If he doesn't and it doesn't dip you could miss out on a buying opportunity if you maintain low limit bids.

The new twist right now is the share buyback program. This company is loaded with cash and can buy back lots of shares with their cash if they want to do so. The share buyback may entirely counteract Blair's selling and result in a much more stable stock price. Only time will tell.

[riseofamillionaire]

It is a very efficient and profitable microcap but it has risk because most of its earnings come from a single contract with Ford which ends in 2014.

This kept me away, yet the stock is still very attractive on a valuation basis. If they extend that contract or gain more customers and business, this could be a huge winner - or it goes to 0 after the Ford contract expires. Tough call.

[AnimeEd]

This kept me away, yet the stock is still very attractive on a valuation basis. If they extend that contract or gain more customers and business, this could be a huge winner - or it goes to 0 after the Ford contract expires. Tough call.

The contract is until June 2014 so almost 2 years out. They are already starting to quote the next project. Hopefully the Ford renews way before it is set to expire so the price won't go south too quickly.
From the components that AM is being asked to manufacture, it looks Ford is passing them the low volume models. These are not cost-effective for Ford to manufacture themselves. In cases like this where the sub-contractor is already setup to do similar parts (fixture and tooling investment), the sub-contractor's quote can be quite competitive. Engineers who work works on these parts will also prefer that there is no vendor changes because it will mean they will have to build working relationships with a new vendor. Unless AM's quote is very high, I see their chances of winning the next project quite likely. AM has shown that they are willing to provide Ford with retroactive savings which is a huge plus from the buyer's prospective.

I'm more concerned with the car models that AM is being asked to work on.
Ford Edge, Ford Flex, Lincoln MKX and Lincoln MKT
Of course there is a market for these but these are not models which I find will take off.

[riseofamillionaire]

The contract is until June 2014 so almost 2 years out. They are already starting to quote the next project. Hopefully the Ford renews way before it is set to expire so the price won't go south too quickly.
From the components that AM is being asked to manufacture, it looks Ford is passing them the low volume models. These are not cost-effective for Ford to manufacture themselves. In cases like this where the sub-contractor is already setup to do similar parts (fixture and tooling investment), the sub-contractor's quote can be quite competitive. Engineers who work works on these parts will also prefer that there is no vendor changes because it will mean they will have to build working relationships with a new vendor. Unless AM's quote is very high, I see their chances of winning the next project quite likely. AM has shown that they are willing to provide Ford with retroactive savings which is a huge plus from the buyer's prospective.

I'm more concerned with the car models that AM is being asked to work on.
Ford Edge, Ford Flex, Lincoln MKX and Lincoln MKT
Of course there is a market for these but these are not models which I find will take off.

I can see Ford extending the contract, especially if the service AM provides has been good, which all indications says it is. Like you said, would be costly for Ford to form new relationships with other manufacturers and suppliers.

If it was a long term contract, say 10 years, i think the stock could be much higher.

Does anyone know if they are pursuing other customers, or have the compacity to accomodate more customers? (Chrysler, GM etc.)

[AnimeEd]

I can see Ford extending the contract, especially if the service AM provides has been good, which all indications says it is. Like you said, would be costly for Ford to form new relationships with other manufacturers and suppliers.

If it was a long term contract, say 10 years, i think the stock could be much higher.

Does anyone know if they are pursuing other customers, or have the compacity to accomodate more customers? (Chrysler, GM etc.)

I was wondering the same thing. The renewable stuff is great but I don't think it will materialize very quickly. It is also not their core competence. It would help their stock a lot if they have other auto plants on board. Would this be something that their investor relation could answer?

[paidtowait]

I can see Ford extending the contract, especially if the service AM provides has been good, which all indications says it is. Like you said, would be costly for Ford to form new relationships with other manufacturers and suppliers.

If it was a long term contract, say 10 years, i think the stock could be much higher.

Does anyone know if they are pursuing other customers, or have the compacity to accomodate more customers? (Chrysler, GM etc.)

The efficiency in Ford being supplied by AM is the minute by minute ability for parts to be ordered and delivered to the assembly line as needed, for this to work with other auto plants would require an AM plant in close proximity. If Chrysler or GM do not also have plants in Oakville, which I don't believe they do, Automodular would need to set up a new facility to service them.

As for a new long term contract, while it will again lead to future stability it will certainly come with concessions probably more than that of the last extension in which AM saw a not insignificant reduction of margin both ongoing and retroactively.

[Ethan]

This kept me away, yet the stock is still very attractive on a valuation basis. If they extend that contract or gain more customers and business, this could be a huge winner - or it goes to 0 after the Ford contract expires. Tough call.

The stock is trading at a price-to-book ratio of 1 (net assets of $39M, market cap of $39M), so in the event that the contract is not renewed and the company is liquidated, the stock would likely not fall to $0. That's the value I see in the company, it is highly profitable, yet could be liquidated for its current market price.