The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
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Good to see a tick up today after some large share volumes going through. Finncap's forecast EPS per Paul Scott is 22.5c, i.e 17p EPS. With around 17p per share of cash, if you strip out that cash pile the adjusted P/E at 163p is still only 8.6 for the current year.
Shares Mag today has a "Play Update" on SOM and says "keep buying": "SOMERO ENTERPRISES (SOM:AIM) US-BASED MACHINERY manufacturer Somero Enterprises (SOM:AIM) has announced that it is trading ahead of market expectations for 2016. The company makes patented laserguided equipment which automates the spreading and levelling of concrete for commercial flooring. We added the company to the Plays portfolio as a tangential beneficiary of the e-commerce trend. We believe the continuing shift towards online shopping will drive demand for its expanding product range which can create the almost perfectly flat concrete floors required in retailers’ warehousing centres. The latest update on 12 July 2016, which follows a robust statement last month (6 Jun), suggests the first half has ended strongly with June seeing good trading volumes in the US, Europe and China. House broker FinnCap has upgraded its pre-tax profit forecast from $18.9 million to $20.3 million. Canaccord Genuity, which rates the stock a ‘buy’ and recently increased its price target to 200p, comments on the positive valuation implications of sterling weakness: ‘With numbers reported in USD and a GBP share price, the shares are now trading at an increasingly attractive multiple, with a price to earnings ratio of 7.9 for FY16E and a free cash flow yield of close to 10% in FY17E as capex normalises.’ SHARES SAYS: We are encouraged by the performance of the business. Keep buying. (TS)"
SOM have just been tipped as a "Brexit-proof small-cap with big growth potential": Http://money.aol.co.uk/2016/07/12/4-brexitproof-smallcaps-with-big-growth-potential/ ""Significantly stronger" trading Somero Enterprises (LSE: SOM) makes equipment that's used by construction firms to produce perfectly flat concrete floors for warehouses. Somero said today that trading in June was "significantly stronger" than both the previous month and the same period last year. Management now expects full-year results to be "slightly ahead of current market expectations". Most of Somero's profits come from its home market of the USA. It's also working hard to expand in China, where the high-spec floors produced by Somero's equipment are relatively new. Somero shares currently trade on about 9 times 2016 forecast earnings and offer a 3.5% forecast yield. The group has ample net cash and strong cash flow. I think further gains are likely."
Canaccord say Buy today, and have a 200p target: Http://baseballnewssource.com/markets/somero-enterprises-inc-som-earns-buy-rating-from-canaccord-genuity/33291/
Paul Scott has updated today with his views on SOM - Finncap have increased their forecasts (hope he doesn't mind me copying with the link): http://www.stockopedia.com/content/small-cap-value-report-12-jul-2016-asc-gfrd-nrr-beg-som-wjg-142184/ "Trading update - a pleasing update from this US-based global supplier of laser-guided concrete laying machinery; (extract from RNS)...trading in June was significantly stronger than both the previous month and when compared to a year ago. This was led by particularly strong activity in North America; with China, the Middle East, and Europe each contributing satisfactorily to overall growth. The strong performance in June and the continuation of the positive trading environment together with margin improvement and solid operating cash flow generation mean the Company now expects to report results slightly ahead of current market expectations for the full year ending 31 December 2016 (extract ends). Good stuff. Finncap has edged up its forecasts for 2016 from $18.9m to $20.3m at the adjusted PBT level. This translates into forecast adj. EPS rising from 21.3c to 22.5c. There's obviously a translation benefit into sterling too. So at a rate of £1 = $1.315, I make that 2016 forecast EPS of 17.1p, so the PER is only 9.6. Net cash was last reported at $12.6m, which is likely to have risen since then. There's also a translation benefit into sterling, so this is £9.6m, or 17.0p per share - quite useful. Strip that cash out, and the ex-cash PER drops to only 8.7. My opinion - we have to remind ourselves that this is a highly cyclical business. So at some point, we don't know when, earnings are likely to fall. I doubt we'll see such a dramatic fall as happened in 2008-9 though. Also the company's balance sheet is now very much stronger than it was then. It's good to see Somero making positive noises about other markets too, not just its core US market. I think there's considerable scope for Somero to grow its overseas markets, and it's that potential upside which is my main interest in the company, as the peak of the cycle this time could be a lot higher than the last peak, if they conquer new markets where they currently only have a toe hold".
It augurs well that SOM are able to say this already when we're only halfway through the year. With China now contributing to growth, any further impact in that region will be a real gamechanger for SOM. And sterling's weakness will not only mean the dividend will be worth more to UK shareholders, but translation of EPS from dollars into pounds at the year end will benefit forecasts In sterling terms.
Results for 2016 are already expected to be slightly ahead of expectations :o)) Knowing this company, they're likely to report a further jump in expectations later in the year: Http://www.investegate.co.uk/somero-enterprises--som-/rns/trading-update/201607120700078733D/ "In its announcement on 6 June 2016, prior to the Company's annual general meeting, Somero highlighted overall results were tracking comfortably in-line with market expectations for the full year ending 31 December 2016 due to positive trading in the Company's core North American, European and Chinese markets. Somero is pleased to report that trading in June was significantly stronger than both the previous month and when compared to a year ago. This was led by particularly strong activity in North America; with China, the Middle East, and Europe each contributing satisfactorily to overall growth. The strong performance in June and the continuation of the positive trading environment together with margin improvement and solid operating cash flow generation mean the Company now expects to report results slightly ahead of current market expectations for the full year ending 31 December 2016."
in this portfolio review: Http://www.stockopedia.com/content/sif-portfolio-post-brexit-review-and-lessons-learned-140024/ "Somero emerged virtually unscathed from the Brexit correction. This is logical, as the business operates mainly in the USA. It isn’t heavily exposed to the UK, or indeed Europe."
Hopefully we'll get a further half-year trading update next month on top of the positive AGM trading update (this year's AGM was almost a month later than last year). I noticed that Ashtead's results a week or so ago were very well received, primarily because of the performance and outlook in their non-residential business in the USA. This should bode well for SOM. Worth remembering given the Chinese expansion that the CEO has mentioned a couple of times that China uses 30 times the amount of concrete that the US does per year.
Shares Mag are positive on SOM today, noting that "in a meeting on the day of the announcement" the CEO said China is the place where SOM have the biggest upside due to its voracious demand for concrete. The article concludes that SOM's shares are "appealing" at 160p.
Some extracts are free to view if you're not a subscriber: http://www.investorschronicle.co.uk/comment/simon-thompson/ "Somero on track for a solid year of growth 07 June 2016 The specialist in patented, laser-guided concrete levelling equipment for commercial floors has posted an upbeat trading update... .....Aim-traded Somero Enterprises (SOM:160p), a Florida-headquartered company that specialises in the design, assembly, and sale of patented, laser-guided concrete levelling equipment for commercial floors, posted a trading update at yesterday's annual meeting "comfortably in line with expectations..... .....In other words, segments that represent 85 per cent of the business are firing on all cylinders. They are likely to continue to do so given that European markets are showing a steady recovery from their recessionary low point in 2010-11, and in the US there are lengthy project backlogs for customers in the non-residential construction market that extend well into 2016.
Canaccord reiterate their Buy and 190p target: Http://www.americanbankingnews.com/2016/06/06/canaccord-genuity-reaffirms-buy-rating-for-somero-enterprises-inc-som/
Paul Scott continues to hold SOM - he liked yesterday's statement and has this to say on the current valuation: http://www.stockopedia.com/content/small-cap-value-report-6-jun-2016-som-srt-amo-swl-134306/ Extract: "Valuation - the figures look extremely attractive - a low PER, together with a strong balance sheet (with net cash), and very high quality scores too. No wonder the StockRank of 97 is so high. This looks remarkably good value to me."
Trading is "comfortably" in line, which suggests slightly above expectations. In particular, (1) the core US and European markets continue to thrive, more than offsetting reduced activity in some much smaller markets and (2) the Chinese market is improving with positive trading - if this takes off the potential is huge. Also good to see that sales of parts and services have been "particularly strong". Consensus expectations are 16.2p EPS this year and 17.55p EPS next year, so SOM still trades on a single-figure current year P/E.
Good to see buys at the full 160p offer price now, prior to next Tuesday's AGM update. Presumably as they're over here the directors will be touring the City and presenting their case, which should help interest in the shares.
The AGM - and trading update - is coming up on June 7th, and there seems to be some buying interest coming in here in the run up. Hardly surprising given the effervescent results and outlook in March.
A series of buys this morning, including £52,000 just bought at 155p - nicely above the published 154p offer price.
"Solid quality Somero’s QualityRank today is 96, a fall of just two points since December. Very little seems to have changed. The operating margin rose from 21.2% to 25.0% in 2015. Return on capital edged up from 42.5% to 44.7%. Other metrics have also improved. As Somero’s 2009 results have dropped out of the QualityRank calculation period, Somero’s five-year average net margin has risen from 3.7% to 9.1%. The long-term average return on capital has risen from 0.4% to 17%. These numbers show the severity of Somero’s previous debt problems, and the strength of its recovery since then. As management are keen to explain, a repeat of this calamity should be unlikely. The company’s policy is now to maintain a net cash buffer of $10m at all times, so that when the next recession does come, Somero will be able to ride out the storm in safety. If you’re wondering why Somero’s QualityRank has fallen at all, I suspect the reason is that the stock’s Piotroski F-Score has fallen from 8 to 7. The reason for this is that last year’s lower post-tax profits resulted in a lower return on assets last year. This is simply the result of the money being spent on new buildings and is absolutely not a concern, in my view. Big momentum gains Perhaps the biggest difference between now and December is that Somero’s momentum has improved significantly. The stock’s MomentumRank has risen from 70 to 87. Broker forecasts for 2016 earnings have risen and the outlook for 2017 suggests further progress is expected. Somero’s cash-backed dividend is also expected to rise and the forecast yield is 3.3% for 2016, rising to 3.6% for 2017. That’s quite high for a small cap. Somero’s 2015 results made it clear that the firm should be able to deliver material ongoing growth from the US market. Growth elsewhere will be a bonus. In the case of China, it’s a long-term goal where the potential rewards are vast. I’m happy to add the stock to the portfolio at this time, and look forward to the next trading update in the summer".
Excellent new article tipping SOM: Http://www.stockopedia.com/content/stock-in-focus-portfolio-double-dipping-with-glaxosmithkline-and-somero-enterprises-131015/ "Smooth operator could beat expectations Somero Enterprises is the dominant player in the market for using laser-guided screeding machines to produce perfectly flat concrete floors for industrial buildings. The firm last featured in this column in December, when I raised concerns about the cyclical risks of investing at what might be a relatively late stage in the cycle. Ironically, I’m less concerned about this now than I was then. There are several reasons for this. Firstly, I’m trying to break out of the classic value investing trap of buying too soon on the way down, and selling too soon on the way up. A second reason for my confidence in Somero is that the firm produced a stonking set of 2015 results along with very confident guidance for the year ahead: “We see 2016 as an exciting year full of opportunity. We believe we are well positioned to capitalize on expected growth in our core US and other existing markets, extend our global footprint and grow revenues from new products. Most importantly, we look forward to delivering another year of superior results for our shareholders.” I also gained confidence after reading the transcript of Small Cap Editor Paul Scott’s interview with Somero’s CEO and CFO, which took place in January. This really provides a lot more detail and colour on the firm’s competitive advantage and on how management sees the market opportunity in the US and overseas. It’s well worth a few minutes of your time (as of course is all of Paul’s small cap coverage). A fine set of figures Stockopedia continue to rank Somero highly, with a StockRank of 98. Last year’s figures have now been assimilated into the firm’s StockReport. Rather than analyse them from scratch, I’ve decided to compare them to the StockReport I used back in December. What’s changed? Back in December, Somero traded on a rolling forecast P/E of 8.9. Although the shares have risen by 22% since then, rising earnings guidance means that today’s forecast P/E is almost unchanged at 9.3. Forecast yield is also unchanged, at 3.4%. Somero’s earnings per share dipped in 2015, but it’s worth noting that operating profit rose strongly. The fall in net profit appears mainly to be the result of Somero spending around $4.2m on new building facilities. These are being funded out of free cash flow, which is currently very strong. Net cash doubled from $6m to $12.6m last year, despite this investment. Last year’s rise in capex is nothing to worry about. Somero’s ValueRank has fallen from 78 to 71 since I last looked at the firm, but I’m not concerned by this small change. The fundamentals remain solid and very appealing, in my view. "
I'm not in here (i'm in CPX), but thought i'd share a possible positive. http://www.materialist.co.uk/3-aim-share-tips-2016/
Galvan Research this weekend tipped their top 3 AIM stocks for Q2'16, and SOM was one of them - here's some extracts: "Somero Enterprises (SOM) Our third and final stock pick for Q2 is Somero Enterprises, a company which has developed a revolutionary way to lay concrete floors much quicker and flatter than ever before. Somero designs, makes and sells laser-guided flooring machines which save customers both time and money. It’s listed here in the UK on AIM, but headquartered in the States where most of its revenue is currently generated. Both sales and profits are growing quickly as Somero’s patented technology is being snapped up by floor laying companies across the world. Its machines can already be found in 93 different countries but there’s still massive growth potential, particularly in Asia - where Somero has only just begun to dip its toe in the water. Last month full-year figures for 2015 revealed forecast beating sales and the current year has got off to a solid start too. At the current price, we think the shares offer great value and should rise considerably over the next few years... Disruptive new technology These days, almost every new building in the developed world will have a concrete floor and obviously this needs to be flat. Traditionally this is achieved by raking the wet concrete and then manually smoothing it with planks of wood. It can be a very labour intensive, time consuming process and with wage costs rising quickly Somero’s technology has become very attractive indeed..... ....Huge growth potential in China Although Somero plans to continue rolling out its products right across the globe, it’s going to be focussing heavily on China over the next few years. This represents a huge potential market for its flooring machines, which could be worth around $1.2 billion in annual sales. In fact it’s such a big market the recent economic dip there shouldn’t be cause for concern. China uses around 30 times as much cement as the US each year, so even if the market halves that’s still an incredible amount of room to grow.... ....The shares look like great value Back in 2013 Somero unveiled a strategy to grow total annual sales from $45 million to more than $90 million by 2018. Things are going well so far and 2015’s full-year figures showed a forecast beating 18% rise in revenue to $70.2 million, with sales hitting an all-time high in December. There was also an impressive 40% jump in pre-tax profit to $17.4 million and 25% increase in dividend payments to 6.9 US cents (around a 3% yield). The current year has got off to a good start too, with a healthy-looking order book and some exciting new products being rolled out. At the current price Somero shares look like great value, especially considering there’s around $12 million net cash on the balance sheet to underpin future growth. We rate them a buy."
Nice RNS this morning disguised under the bland title "Change of registered address"! The new HQ and training facility have been completed on time and on budget, and in very quick time. Hopefully using SOM's own equipment :o))
Nice RNS this morning disguised under the bland title "Change of registered address"! The new HQ and training facility have been completed on time and on budget, and in very quick time. Hopefully using SOM's own equipment :o))
Buying coming in at the full 167p offer price.
Nice buying at 157p today.