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SOM are still barely on a double-digit P/E based on Finncap's 18.33p EPS forecast for the coming year (which may be increased substantially following the dollar's strength against the pound). Given what we can assume is now reasonable certainty for the next 4 years about increased infrastructure spending in the core USA market - plus the likelihood of further inroads in the vast markets of China and India - it might now be a very interesting ride going forward for SOM.
A report in the Mail this morning emphasises that Trump's focus on infrastructure spending should be good news for SOM: "Initially the clear winners appear to be US infrastructure and US businesses. Trump has already pledged to rebuild America's roads, rail, hospitals and schools"
Nice tip for SOM on Investors Champion as a dollar earner: Http://www.investorschampion.com/blog/entry/us-dollar-earners-on-aim-listed-over-here-but-doing-very-nicely-over-there "With the pound struggling at a near three decade low against the US dollar we thought it was appropriate to cast a glance at a few ‘fast growing’ US businesses with lots of lovely US dollar earnings that have found their way across the water onto AIM." "Somero Enterprises Inc. (AIM:SOM) has its HQ in Fort Myers, Florida and manufactures laser-guided machinery used in horizontal concrete placement, to “advance the productivity, concrete flatness and efficiency of the jobsite�. We last covered the Group in our Blog on 4th March 2016 (‘Where is the value in small caps’) since when the shares have climbed modestly higher to a current 170p having been as high as 188p in September 2016. Key end markets for the Group’s products are distribution warehouses which, due to automation and very high racking, demand perfectly flat concrete surfaces. Much has been made of the potential growth in China and Europe for its products but, as we commented previously and reflected in the most recent interim results, for us this remains largely a play on the US economy, for the next few years at least. Interim results for the six months ending June 30, 2016 saw revenue rise 18% to US$39.7m, pre-tax profit up 26% to US$ 10.4m and earnings per share up 33.3% to 12 cents. There are lots of horrible EBITDA references in the numbers but we like to focus on simple cash flow which rarely disappoints with this business with net cash provided by operating activities a commendable US$5.7m in the 6 months and free cash flow US$1.95m after significant investment in their new Fort Myers facility. Net cash at June 30, 2016 was US$ 11.1m. North American sales represented 75% of the total at US$29.8m having increased 24% in the 6 months. Having disappointed previously, sales to China rose 15% but remain modest at US$3.8m, however this is evidently plenty to go for there. Management commented how the positive trading momentum in North America has continued into 2nd half of 2016 reflecting a healthy non-residential construction market in the United States driven by demand for new products, replacement equipment, fleet additions, and technology upgrades. The ongoing construction growth and project backlogs their customers are experiencing point to continued solid performance in the North American market for the remainder of 2016. With most of the big capital expenditure out of the way, free cash should start to flow gloriously again over the next few years. Free cash flow averaged US$9.6m for the 3 years to December 2015 and by our reckoning could be well above US$13m per annum going forward, equivalent to approximately £10.6m
A bit grim, but Hurricane Matthew has caused billions of dollars worth of damage in the USA - which is likely to bring about more work/sales for SOM's products for rebuilding etc: Http://kwbe.com/abc_national/hurricane-matthew-leaves-trail-of-devastation-with-at-least-28-dead-abcid35788053/
Share.com now has much higher forecasts than Hemscott, which I suspect are the analyst forecasts in dollars translated at more recent rates. These are: this year : 18.45p EPS, 6.18p divi next year : 19.61p EPS, 6.52p divi At 182p that makes SOM pretty good value. News of a new trademark applied for by SOM: Https://trademarks.justia.com/871/90/sky-87190370.html Interesting to see all the various trademarks now owned by SOM, including some computer systems and software programmes: Https://trademarks.justia.com/owners/somero-enterprises-inc-2553857/
SOM have been noted as having one of the 10 best dividend yields on AIM in terms of earnings cover, sustainability etc (along with XLM and WJG which I also own): Http://www.moneyobserver.com/our-analysis/10-best-quality-dividend-yields-aim?utm_source=Newsletter2016-09-19&utm_medium=Email&utm_campaign=ContentPromotion
Rising again - nice start to the week.
Yet still on an ex-cash single figure P/E, with global growth potential beginning to be realised in China, India etc.
RNS yesterday showing Hargreave Hale increasing to above 12% with almost 7m shares: Http://www.investegate.co.uk/somero-enterprises--som-/rns/holding-s--in-company/201609121715156121J/ Good to see shares being top-sliced by other institutional holders being picked up by HH.
Here's the full tip in the IC (cheers mate): 'This week's interim results for Somero Enterprises (SOM) feature the sort of numbers investors dream about. As prefaced in a July trading update, almost every key measure of financial health was up in the first half of 2016, as the specialist in laser-guided concrete levelling equipment benefited from a surge in demand for its smaller and medium-sized product line and excellent conditions in its core North American market, which increased its share of total sales from 68 to 75 per cent. The region's 24 per cent sales growth can be partly explained by what chief executive Jack Cooney described as a "tremendous build-up in pent-up demand". Mr Cooney also told us that while the growth profile was not unusual, demand remains "very, very good". This is despite a decline in sales of pricier large line machines from $13.7m (�10.2m) to $11.1m year on year, although the larger 23 per cent drop in units sold suggests Somero did not give away much ground on pricing. It is this sometimes lumpy order profile that means July's earnings forecast upgrade for the year is still likely to be cautious. A delay in three large line machines from one period to the next can have a huge hit on reported earnings, and also explains why sales in some of the company's smaller markets - including Korea and Latin America - declined dramatically. These drops were offset by strong performances in Europe, Australia and China, where combined sales were up by a quarter, the latter partly supported by a long-term financing programme, which accounts for just over a third of sales. Although the timing of tax payments and an increase in working capital caused operating cash flow to fall a fifth to $5.8m, management found sufficient headroom to increase the interim dividend by nearly a third to 2.5� a share. As management is keen to balance the weighting of shareholder returns, investors should expect a smaller increase in the final dividend. FinnCap expects full-year adjusted pre-tax profit of $20.3m and a marginally increased EPS of 22.7�, against $17.6m and 23.3� in 2015. Somero holds a decent cash pile, comes with a solid yield, well-covered dividend, and yet remains priced at 10 times this year's forecast earnings, dropping to a PE of nine in 2017. With management reporting a continuation in the strong North American sales momentum, we see little reason for changing our original buy recommendation (152p, 10 March 2016). Buy.'
This share ranks quite highly on Stockopedia . ( I do recommend a good look). As a company it is selling something that people want, it's protected by patents, it mostly earns in dollars and reports in pounds and it has got good solid growth! Personally, I'm worried that we are at the top of a bull market otherwise I might have a larger exposure here. Certainly, if there is a correction this is one of the shares on my list to subsequently invest in. Rivaldo you must feel like a prophet in the wilderness. Keep up the good work!
Anyone got the full article please? Http://www.investorschronicle.co.uk/2016/09/07/tips-and-ideas/share-tips/somero-boosted-by-north-american-construction-w5HW33zdjJVzZKwEAzf7PJ/article.html "Somero boosted by North American construction This week's interim results for Somero Enterprises (SOM) feature the sort of numbers investors dream about. As prefaced in a July trading update, almost every key measure of financial health was up in the first half of 2016, as the specialist in laser-guided concrete levelling equipment benefited from a surge in demand for its smaller and medium-sized product line and excellent conditions in its core North American market, which increased its share of total sales from 68 to 75 per cent."
depends if you are in it for the longer term or not, I see Blackrock are selling down and I am ever suspicious of some of these share tips being issued to help out their 'mates' in order to hold the price up while ii's sell down their position, all imo of course
Shares Mag today remain buyers of SOM in their "Plays Update" section: "SOMERO ENTERPRISES (SOM:AIM) OUR POSITIVE CALL on US specialist machinery manufacturer Somero Enterprises (SOM:AIM) continues to pay off as it delivers a better than expected 32% increase in the dividend alongside interim results (6 Sep). The numbers show a 26% increase in pre-tax profit to $10.4 million with robust demand from the US (its main market), Europe and China. As a reminder Somero manufactures patented laser-guided equipment which automates the spreading and levelling of concrete for commercial flooring. As such it can benefit from the requirement for the almost perfectly flat concrete floors required in online retailers� warehousing facilities. Sales growth has been driven by new product lines � mid-line and small-line machines and 3D profiler systems which support slope and elevation changes for the likes of service ramps and loading dock areas. House broker FinnCap comments: �The results place the group comfortably on track to achieve current forecasts, recently upgraded in July, with strong US trading conditions providing good momentum for the second half.� Based on its forecasts the company trades on an undemanding 2017 price to earnings ratio of 9.2 times. SHARES SAYS:  We see no reason to shift from our positive stance. FinnCap has a price target of 205p."
http://www.cambridge-news.co.uk/concrete-evidence-that-somero-is-a-good-bet-private-punter/story-29690172-detail/story.html Extract: "Given that the company has already delivered adjusted Eps of 12.7c in the first half, then the 22.7c (17.1p)earmarked by FinnCap would appear to be a comfortable target, particularly in light of the positive tone emerging from the company. That puts the stock on a forward PER of 10 at today's price, falling to 9 next year, based on consensus forecasts for adjusted pre-tax profits of £22.5m. Speaking with CEO Jack Cooney alongside CFO John Yuncza this afternoon it is clear there is plenty of optimism across the business as they expanded on a number of points for me. “Commenting on the The US, Cooney said, It's very nicely placed with a constant demand booked up to a year ahead where a number of new entrants are coming into the market". Going on, Cooney added that following the last recession there was a considerable pent up demand that has provided the company with a good floor on which to build and is continuing to provide positive momentum. China, although an as yet relatively small market in percentage terms nevertheless features prominently for the company in terms of ongoing growth potential, the directors sounding a note of cautious optimism. “We put in place a long-term finance programme to support growth in China which has produced positive results" says Cooney, Whilst Yuncza points out that the creation of a lower cost machine specifically for the region targeting consistent production levels is bringing more customers on board and where local assembly being used is resulting in reduced costs and increased competitiveness. In the past, China had been earmarked for generating a target figure of $20m in revenue for Somero, but having seemingly encountered a set back or two, perhaps understandably the CEO would not be drawn on specifics and timing. However, there clearly appears to be plenty of scope for growth within the region, alongside other emerging territories which has seen Somero providing investment and support. Although Europe's wider economical prospects have been muted, both men appear happy enough with the progress being made by Somero and view the region as key going forward, particularly as the company is now seeing an increasing spread of business across an expanding number of countries. The progressive dividend policy is also a prominent feature, with Yuncza confident on further progress being maintained, which will no doubt cheer shareholders. “We have a sound balance sheet and feel very good as we are generating cash which gives us confidence moving forward on dividend payments, while retaining at least $10m on the balance sheet. Although investors can be wary of overseas company's that list here in the UK as opposed to their domicile, Somero enjoys an impressive list of long standing institutional hold
SOM tipped as a Buy on T.M.F: Https://www.fool.co.uk/investing/2016/09/06/should-dividend-investors-look-abroad-after-todays-results/ "Is Somero still cheap? Shares in equipment firm Somero Enterprises have risen by 40% so far this year. The firm’s operating profit rose by 24% to $10.3m during the first half, lifting adjusted earnings by 30% to $0.13 per share. Somero makes equipment that’s used to produce perfectly flat concrete floors for warehouses and distribution centres. A flat floor is essential for the very high racking that’s used in modern ‘big box’ warehouses. Somero’s growth is heavily linked to the construction market, principally in the US, where the business is based. Sales in North America rose by 24% to $29.8m during the first half, accounting for 75% of the group’s total sales. Somero also operates in a number of other territories, but the company’s big hope for long-term growth is China. Flat floors of the kind produced by Somero equipment are relatively new in China, and the group’s market share is low. The potential for expansion into the Chinese market is significant, in my opinion. Somero has no debt and net cash of $11m. The shares trade on 9 times forecast earnings and offer a well-covered forward dividend yield of about 3.6%. I believe that Somero remains a buy, as long as investors keep a close eye on the health of the US property market."
Paul Scott keen on this. Strong balance sheet, low PE as you say.
Paul Scott holds and is very happy with SOM: http ://www.stockopedia.com/content/small-cap-value-report-6-sep-2016-som-itq-149475/ Extract: "Valuation - broker consensus is 25 US cents for EPS this year, or 18.7p. So at 169p per share, the PER is only 9.0 for this year. That seems a remarkably pessimistic valuation. Balance sheet - this is in terrific shape, with a very strong working capital position - the current ratio is excellent, at 3.27 - for me, anything over 1.5 is strong. There is $12.1m in cash sitting on the balance sheet, less a small mortgage of about $1m. So the company is in a smashing position overall. My opinion - this is a core long-term holding of mine, so today's results confirm my positive view of the company, and a very low valuation. I think the market was traumatised by Somero lurching into losses in the GFC in 2008. But so did loads of companies. The entire banking system collapsed, for goodness sake. Personally I think it's extremely unlikely that such a severe downturn is likely next time we have a recession. Plus SOM is now in very much stronger financial shape than back then in 2008, so it should be able to withstand anything the economy can throw at it. Essentially this share is a bet on the US economy. If you think it's going into recession, then SOM shares are probably best avoided. If you don't (and you turn out to be right), then this share could be a bargain. Overall, I really like it. This company is the global specialist in a niche market, and given that concrete sets in about an hour, then support & service will always count for a great deal in this sector. Am tempted to buy more actually."
FinnCap reiterate guidance, tweaking earnings up slightly for FY16 due to a lower tax rate, "No change to our trading forecasts that we upgraded recently in July. We have marginally reduced the tax rate from 36% to 35.5%, increasing EPS from 22.5c to 22.7c, up 0.7%. Following a better than expected interim dividend increase, we have raised the FY dividend from 7.2c to 7.6c, up 5.6%. The shares now trade on a P/E of 9.7x in 2016 followed by 9.0x, or – perhaps more importantly – an EV/EBITDA of 5.0x followed by 4.8x. This looks great absolute value for a group seeing structural and cyclical growth drivers, but also great value compared with its peer group. Our recently raised TP of 205p is based on a fair value P/E of 12.0x in the current year and 11.0x in 2017 and offers upside of 24%. The strong interim results, positive outlook and attractive rating all point to the shares being well placed to continue to outperform."
Terrific results - almost 10p EPS in H1 alone! Plus on track for a 7.5c dividend, i.e around 5.7p. And SOM have an $11m cash pile. And crucially: "the solid activity levels from H1 2016 have carried over to July and August as we continue to see significant opportunities across our broad portfolio of markets" China is improving nicely, the USA is roaring away and other weaker areas are seeing signs of growth. SOM are managing expectations nice and conservatively, but forecasts of 17.1p EPS this year look like being well beaten imo: Http://www.investegate.co.uk/somero-enterprises--som-/rns/interim-results/201609060700080090J/
Results tomorrow - remember this from July's trading statement: "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"
Yesterday the USA announced that July was "the strongest month for non-residential construction on record". This has to be good for SOM: Http://www.cnsnews.com/news/article/business-highlights-218 "The advance in July was led by a 1.7 percent increase in spending on non-residential projects which rose to an all-time high of $429.5 billion at a seasonally adjusted annual rate. Office building and shopping centers both showed solid gains."
Finncap's increased forecasts are now up on Hemscott in pence as follows: this year : 17.01p EPS, 5.44p dividend next year : 18.60p EPS, 6.12p dividend
SOM moved up yesterday and today after an earnings beat from United Rentals in the USA FYI. It shows a strong north American construction market. Ashtead was the biggest riser in the FTSE100 yesterday for the same reason.
Finncap has now increased its price target to 205p (from 185p): Http://www.risersandfallers.com/2016/07/19/somero-enterprises-inc-retained-as-corporate-by-finncap-2/ Extract: ""The group recently confirmed a strong end to its first half trading, and now expects trading for the full year to be ahead of expectations. Accordingly, we upgrade our 2016 EPS forecasts by 7.5% and in 2017 by 4%. With a strong second half expected from good momentum in underlying markets, plus better H2 cash generation, the shares continue to look great value. The shares look cheap and we continue to see strong upside over the next year." "Growth on track to 2x sales by 2018 - giving profit up 3x. China steady, new products spurring on demand - plenty of scope. Investment to scale up business continues. Rating looks too low, given the recent reassuring trading update."