Delcam(Aim:DLC)

Delcamisonesuchopportunity。

ItisaleadingdeveloperofCAD/CAMsoftwareforthedesignandmanufactureofcomplexpartsandmachinetools–withparticularstrengthsinthe‘mouldanddie’sector。

Thesoftwareisusedbymorethan16,000organisationsworldwide–rangingfrommulti-nationalcorporationstoindependentdesignersandtoolmakers–andacrossawiderangeofindustries,includingaerospace,automotive,white-goodsandjewellery。

LastyearthecompanyalsoaddedfootweardesigntoitsproductportfoliobybuyingCrispin,asoftwarehousefortheshoeindustry。

Withregardtothenumbers,thefirmhadamixed2007。

Althoughturnoverroseby11。

2%to£29。

7m,drivenbyorganicandacquisitivegrowth,adjustedprofitbeforetaxfellto£2。

3mfrom£2。

8min2006。

Thiswasduelargelytoa£0。

5mhitfromdollarweaknessandhigheroperatingexpenses。

Butcashgenerationwasstrong,thedividendwasraised5%to5。

25p(1。

9%yield)andnetfundsattheperiodendwerearobust£5。

3m–equatingto67ppershare。

Goingforward,BrewinDolphinforecastssalesandunderlyingearningspershareof£30。

6mand29。

9prespectivelyfor2008,risingto£31。

6mand32。

1pin2009。

Assuch,thesharescurrentlytradeonmiserlyp/eratiosof9。

2and8。

6,whichtomeseemsstingyforsuchanichehi-techbusiness。

Moreover,ifthedilutiveeffectofthecashwasstrippedout,the2008earningsmultiplewouldfallbelownine。

Sofarsogood,butwhatarethepotentialpitfalls?

Well,clearlyDelcamwouldn’tbetotallyimmunetoasevererecession(especiallygivenitsexposuretotheautomotivesector)。

Reassuringly,though,chairmanPeterMilessaidlastweekthat“2008hadstartedwell”andthattodatethecompanyhadexperiencedminimalimpactfromthecreditcrisisintermsofcustomerdemand。

Moreover,27%ofrevenuesaregeneratedbyongoingmaintenancecontractsthatshouldhelpunderpinfutureperformance。

Theotherriskisthatmorethan50%ofsalesareindollars,sothereisongoingforeignexchangeexposure。

Evenso,intheunlikelyeventthatmanagementdidnotdeliver,IsuspectthateitherRenishaw–whoboughta20%stakeat400pinMarch2007–oroneofitsrivalsmightbetemptedtobidatthesedown-troddenlevels?

Recommendation:BUYat260p(marketcap£16。

1m)



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