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Finncap's increased 465p target price is summarised as follows FYI: "Full-year results � dividend turbo boosted Full-year results were slightly above expectations and point to being on track to exceed our previous FY 2018 forecasts slightly. Market conditions remain robust in its main US market, with significant growth seen in Europe. A revised dividend policy gives new clarity to cash returns, (backed by $19m of net cash), and triggers a strong uplift in ordinary dividend plus a supplementary dividend. The shares remain attractive on an earnings basis but also have premium yield attractions. Our raised 465p TP is based on a P/E of 17.0x in 2018 and 16.0x in 2019 and offers strong upside scope to the shares. Market conditions remain favourable and cash returns underwrite our positive stance. Results Results were slightly better than the year-end update, with a strong December. Revenue increased by 8% to $85.6m, with EBITDA at $28.0m, an increase of 14%. Adjusted PBT was $26.2m up 19% and following a lower tax rate adjusted EPS at 33.3ȼ, was up 27%. A final dividend of 12.75ȼ was declared, making 15.5ȼ in total � a 40% increase. A supplementary dividend was declared at 3.6ȼ � tobe paid alongside the final. Net cash of $19.0m, was down $1.1m on the prior year with $19.8m of operating cash flow and $13.9m paid on dividends. Operations Four out of six regions saw growth. The US was up 2% with a strong H2 following a weaker H1, with a strong outlook. Europe was the star performer, seeing 54% growth, helped by strengthening economies. China was down 14%, but is responding to marketing measures instigated later in the year. LATAM was up 35%, offsetting a weaker Mid-East. New product introductions continue to boost sales growth. Ride on screeds were up 29%, with stronger 3D profilers and accessories & spares also strong. Remanufactured sales were down 5% and in part reflect the Chinese experience. Forecasts We slightly upgrade our 2018 forecasts, with a $0.7m increase in adjusted PBT to $27.7m, boosting EPS by 2.5% to 37.7ȼ. We introduce new 2019 forecasts based on modest sales growth of 4.4% and EBITDA margins of 32.1%, giving YoY EPS growth of 6%. Cash conversion remains strong, allowing a 39% upgrade to annual dividend in 2018 and significant further scope for supplemental dividends. Valuation The shares have been strong performers over the past year, reflecting robust market conditions and the gain from US tax changes. We increase our price target from 450p to 465p pointing to a P/E of 17.0x in 2018 followed by 16.0x in 2019. Cash returns and a 5.4% yield are key features of the investment case. We therefore still see upside to the shares and remain positive on the group�s prospects."
Https://www.investorschronicle.co.uk/tips-ideas/2018/03/15/somero-winches-up-dividend/ "Tip Update: Buy at 370p Record full-year revenue took Somero (SOM) within striking distance of its $90m (�65m) sales target. The concrete levelling specialist�s adjusted cash profit also reached a new high, rising 14 per cent to $28m. In somewhat of a hat-trick, operating cash flow simultaneously rose to an unprecedented $19.8m from $17m year on year. Topping off an excellent set of results, Somero has updated its dividend policy: management now targets a year-end net cash balance of $15m, whereby 50 per cent of any surplus cash will be distributed to investors � for 2017, this meant a special dividend of 3.6� a share. The proportion of non-US revenue rose to 32 per cent, reflecting an increasingly diversified top line. Europe was the star performer with eye-catching growth of 53 per cent to $12.2m. Management says the company's European equipment fleet is relatively old so technological upgrades could breed new opportunities. China endured a 14 per cent decline in sales to $5.5m, largely driven by a sluggish first half. Somero still sees a strong opportunity to expand its market presence here, albeit over a longer timeframe. Middle Eastern sales also fell 28 per cent to $2.1m, although activity levels were maintained. Analysts at finnCap forecast adjusted pre-tax profit of $27.7m and EPS of 37.7� for 2018, up from $26.2m and 36.5� in 2017. IC View Trading on an undemanding forward multiple of 14, the shares still represent good value � particularly given management�s confidence in US growth prospects. The new dividend policy is an added bonus. Buy."
today, from 450p: https://ledgergazette.com/2018/03/14/somero-enterprises-som-price-target-increased-to-gbx-465-by-analysts-at-finncap.html
Excellent results - well ahead of forecasts for sales, EBITDA, PBT and EPS. PBT of $25.7m compares to just $24m forecast by Finncap. And 0.31c EPS compares to forecast 27.4c. Upgrades coming for this year? Plus there's a 3.6c special divi on top of the 15.5c normal divi. Most importantly, current trading for both the USA and Europe is very strong indeed: "Current Trading and Outlook The high level of activity in North America during the latter part of 2017 has continued in 2018. We continue to see strong interest in our equipment and remain encouraged by the positive non-residential construction outlook in the US for 2018. The expected positive impact from US corporate tax reform is an additional factor reinforcing our confidence in North American growth prospects. In Europe, the strong performance of 2017 is also expected to carry forward into 2018. Similar to conditions we see in the North American market, European interest in our equipment remains strong driven by demand for replacement equipment, technology upgrades, and new products. Our confidence in the growth prospects in Europe is supported by improved economic conditions across the territory."
Hope so. Bought in a couple of tranches yesterday below 370.
I'm assuming the 75,000 share trade at 360p reported late cleared an overhang today. New highs today hopefully.
Many thanks. Looks very positive and still be low the radar for many but should react to results and positive commentary. Maybe Artemis felt that had become a little overweight as the sp marched up. Now to decide what to sell, before buying in!
Hi cm45. I often find the quieter the thread the higher quality the company :o)) Looking good again here. Results will be on 14th March. With a booming US economy, huge potential in China and India and this outlook from January, there's every reason to believe SOM's upswing will continue for some time yet: "Outlook Following record results in 2017, the Board is confident in the Company's ability to deliver another year of profitable growth in 2018 as the underlying market conditions in our core markets remain positive and as the Board continues to see significant growth opportunities in our other territories. The Board's confidence is further supported by recently enacted pro-growth US corporate tax law changes which are expected to stimulate increased economic activity in the Company's largest market."
Bit lonely on here Rivaldo! Looks like you are the sole poster. I have watched them on and off and just see that Artemis have sold a few but still have a significant holding. Brokers have a tp of 450p and suggest div increase. I held off until more certainty in Trumps infrastructure spend, but maybe now is time to jump on board. You still a holder? How do you read it now please?
Tipped in Shares Magazine this week - notes Finncap's increased 450p target and concludes "keep buying": Https://www.pressreader.com/uk/shares/20180118/281767039636899
Paul Scott is a SOM holder - he's commented as follows this morning on Stockopedia: "Positive update from Somero Enterprises Inc (LON:SOM) today (disclosure: I have a long position)- a very nice, niche business, which makes the laser-guided machines used to lay perfectly flat concrete floors (very important for warehouses). Being based in USA, it should hopefully benefit from tax reductions. Paul. EDIT: I've just seen a broker note, upgrading 2017 EPS forecast by 7.7% to 29.5c, and 2018 by 7.0% to 36.8c. That translates into 21.8p and 27.2p, giving a 2017 PER (based on share price now of 360p) of 16.5 times, and a 2018 PER of 13.2. Conclusion - it still looks cheap, based on 2018 forecasts. Also note that it has a strong balance sheet, and reports net cash today of $18.5m. Positive outlook comments too. Very nice."
Finncap have raised their target price to 450p (from 420p), so still plenty of upside: Http://investing.thisismoney.co.uk/broker-views/
Beautiful stuff...yet again. EBITDA to be "comfortably ahead" of expectations. And "net cash at 31 December 2017 is expected to be not less than $18.5m, well ahead of market expectations of $16.5m". America and Europe are storming ahead - and encouragingly India and China are both beginning to motor. And looking ahead, we can expect another special dividend, plus: Https://www.investegate.co.uk/somero-enterprises--som-/rns/trading-update/201801120700026762B/ "Following record results in 2017, the Board is confident in the Company's ability to deliver another year of profitable growth in 2018 as the underlying market conditions in our core markets remain positive and as the Board continues to see significant growth opportunities in our other territories. The Board's confidence is further supported by recently enacted pro-growth US corporate tax law changes which are expected to stimulate increased economic activity in the Company's largest market."
Finncap's note yesterday supporting their increased 420p target succinctly summarises the US tax reforms I've been banging on about as follows: "Tax changes. The US tax reforms proposed by the US President passed into law just before Christmas. The main change is to reduce the headline corporation tax rate from 35% to 21%, effective 1 January 2018. Profits made overseas are also allowed to be repatriated back to the US tax free, and a partial amnesty on historic profits at reduced rates. A readjustment of the company�s deferred tax assets is expected, which will be a one-off non cash item. In addition, the reforms allow a more generous, immediate expensing of capital equipment purchases, which is expected to result in customers accelerating their purchasing of equipment in the short term, while also potentially stimulating longer-term investment plans by manufacturers." They've increased EPS for this year by almost 20% to 34.4c, and the forecast cash pile rises to $26.8m - potentially bringing another special dividend.
Nice - Finncap have today increased their target price to 420p (from 350p). A hefty increase: Http://investing.thisismoney.co.uk/broker-views/
The Telegraph's tip for SOM finally appeared in this Saturday's print edition of the Telegraph, so hopefully that will attract some further buying interest this week.
hTtp://www.telegraph.co.uk/investing/shares/four-top-fund-managers-pick-stocks-expect-soar-2018/ "Somero Enterprises Market value: £162m Turnover (2016): £59m Pre-tax profit (2016): £16m Somero Enterprises is a £160m business that designs and manufactures laser-guided machines involved in laying concrete. Simon Moon and Fraser Mackersie, managers of the £660m Unicorn UK Income fund, said: “Despite its modest size, Somero is the clear global market leader in this specialist niche, with a strong presence in North America and growth in developing countries. “The shares are not expensive, trading on 15 times earnings for 2017, with a dividend yield of 3pc and cash available.” They said the growth in Somero’s business was organic as opposed to derived from acquisitions so it didn't require major expenditure, enabling the company to pay special dividends when it had built up excess cash. “With significant US earnings, American tax reforms could also provide a meaningful boost to future earnings – Somero paid an effective corporate tax rate of 30pc in 2016,” they added."
I note that the IC article doesn't even mention that SOM will benefit heavily from the new tax cuts in the USA - another reason for buying. And regarding those tax cuts, I also note that the new legislation provides for capital expenditure to now be written off for tax purposes in the year it's incurred, which it can't be at present. SOM should therefore benefit from this as well as the more straightforward tax cuts.
Hi Qd22 - many thanks. Worth adding the concluding paragraph too (which someone sent me)! "IC View An expansion to its Fort Myers headquarters in Florida, accommodating future growth, will cost $1.3m, with most expenditure occurring in the first three months of 2018. But, while the shares are trading on a multiple of just 13 times forecast 2018 earnings, we think a re-rating is probable. Buy."
High-tech concrete-levelling is not a business description that rolls off the tongue. But that shouldn’t detract from its commercial potential. Indeed, Somero Enterprises (SOM), which provides equipment, training and customer support for this process, reported pre-tax profits of $12m (£9m) for the six months to 30 June 2017, up from $10.4m a year earlier. And the group raised its dividend by 10 per cent to 2.75¢ while declaring a further special payment of 13.3¢. Despite these encouraging signs of progress, Somero’s shares are attractively rated. SOM:LSE Somero Enterprises Inc 1mth Today change 3.28% Price (GBP) 299.50 Somero’s undemanding valuation has a lot to do with a trading update in June that highlighted flat performance in North America due to poor weather and political uncertainty, and slow trading in China. The news prompted a share price fall, and we downgraded to sell. But the latest results and the value now on offer suggests it’s a good time to revisit the investment case. Indeed, even when faced with regional challenges, overall revenue rose from $39.7m to $42.4m in the six months to the end of June. Management also attributed higher first-half profits to cost management, price increases and better productivity. There are signs trading is now set to pick up. North American first-half sales were down 5 per cent year on year at $28.4m, but heavy rains subsided towards the end of the period. This resulted in the highest levels of trading seen all year at the end of June and positive indicators of a “solid” second half. North America constitutes around two-thirds of Somero’s overall top line. The same story played out in China – first-half sales fell from $3.8m to $2.7m, but the best trading of the year was seen at the end of June. Management expects to see further improvements and is “re-looking at China” via a strategic review. China is estimated to use half of the world’s total concrete, representing a serious opportunity for Somero even if long-running fears of slowing economic activity play out. Europe and Latin America were the group’s star performers, albeit starting at a lower base than North America. European sales rose 108 per cent to $5.4m, while Latin America’s leaped 750 per cent to £1.7m. The rest-of-the-world regions, including Australia, Southeast Asia, Korea, India, Scandinavia and Russia, also lifted revenues 79 per cent to $3.4m. New product sales contributed $1.4m, including the ‘S-158C’ model in China, the SP-16 Concrete Line Pulling and Placing System, and the ‘next generation’ 3-D Profiler System. Meanwhile, first-half cash flows from operations rose 62 per cent to $9.4m, leaving the group with $18.3m net cash at the end of June. The healthy balance sheet underpinned the decision to pay the special dividend, which is expected to take the full-year yield to nearly 7 per
Nice - a main tip of the week in today's IC. Should bring in more buying after the New Year: Https://www.investorschronicle.co.uk/tips-ideas/2017/12/28/somero-good-value-with-income-to-boot/ Anyone got the full text please?
Two nice buys totalling £1.34m at 290p yesterday, which caused a decent move up. SOM are due a trading update in early January, so not long to wait. Given September's outlook I'm pretty confident it will be solid at worst and excellent at best: "With the solid H1 2017 performance and healthy momentum carrying over into H2, the Board expects Somero to deliver another successful year of growth in line with current market expectations."
The House of Representatives is expected to clear the US tax cuts Act this afternoon after some Republicans withdrew their opposition. Looking good for SOM.
The Senate last night finally agreed the tax cuts package at 21% for corporation tax - the final vote is next week and then sent to the House for final passage: Http://thehill.com/policy/finance/364826-gop-strikes-deal-on-trump-tax-cuts I note that AHT's results this week were excellent - particularly from their Sunbelt operation, which is most relevant to SOM. There was good business resulting from clean-up operations post-hurricanes etc, but hopefully this is still a good overall pointer for SOM.
Trump's tax cuts have passed the Senate and are almost certain to be enacted quickly now, cutting corporate taxes from 35% to 20%. SOM paid $7m tax last year at an effective 33% tax rate on $21.3m net profit. Historically and simplistically, at 20% tax SOM would save around $3m of tax - and of course that saving will grow as profits increase going forward. Quite a benefit to SOM, representing around 3.5p EPS per share on 56m shares in issue - or say an additional 40p-50p on the share price: Http://www.bbc.co.uk/news/world-us-canada-42205181