Morgan Keegan Reiterates Market Perform Rating on Simpson Manufacturing (SSD)

Morgan Keegan is out with a research report this morning, where it reiterates its Market Perform rating on Simpson Manufacturing Co. SSD; it has a $27 to $29 price target on the stock. The MK analysts said, “SSD announced that it has reached an agreement to sell its DuraVent operations to M&G Holdings (based in the Netherlands) for $20 million in cash plus/minus adjustments at the time of closing. This transaction is expected to close in September 2010 and SSD will incur a $25 million to $30 million non-cash impairment charge in 2Q10. Once this operation is sold SSD will be solely focused on structural connectors, which is its primary business. SSD ended 1Q10 with $202 million of cash and no debt.” They noted, “We believe that this is a good outcome for SSD. Performance in this segment had declined over the past several years from peak operating income of $11.1 million in 2003 as residential construction slowed and customers began producing their own gas venting products. SSD had closed one DuraVent facility in Vicksburg, MS and moved production to the only remaining facility in California in an effort to improve performance of the business. We believe that SSD had been evaluating additional options for this segment over the last year.” The MK analysts closed by saying, “The recent pull back in the stock does make SSD more interesting, but near-term conditions remains challenging as the US housing market adjust to expiration of government stimulus (at April end) and continued economic concerns. For investors with a longer time horizon, SSD may be attractive in this price range as it is the leading manufacturer of structural connectors in the US (70-75% market share) and Europe (35% market share). It has approximately $4/share of cash on the balance sheet and no debt. As residential construction (50%-60% of revenue) improves, SSD is well positioned to benefit.”