Automodular Update TSX:AM $1.31

Automodular announced today that Ford is insourcing the work and will not renew their contract post 2014. This is the downside case in my original post, and I'm not very excited my first stock cratered right after I started the blog. I didn't have a position at that time, but have bought today after the large drop, since the company now has $27.7 million in cash. Their other current assets are $13.7 million, which exceeds total liabilities of $7.0 million by a margin comfortable enough that it should cover wind up expenses. They should also make ~3-4 million per quarter until the end of 2014. At a current market cap of $26 million, I believe there is now a sufficient margin of safety here, as cash exceeds the market cap and cash generation should be strong until the end of the contract. Management has proven to be shareholder friendly in the past, and I believe they will liquidate promptly if they don't source replacement business soon.

Disclosure: Long AM.

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