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Shore Capital have today issued a new 11 page note on SUR, calling the valuation "compelling" on a P/E for the current year of just 8.8.
Of course even that P/E reduces markedly if you strip out the forecast £21.2m cash pile - over 15% of the m/cap.
It's interesting that they're confident enough to issue this just prior to the year end trading statement.
They've raised their forecast for this year to 30/9/23 to 9.2p EPS due to the cut in corporation tax to 19%.
There was also apparently a very nice paragraph in Kwasi's mini-Budget which I was unaware of and Shore Capital point out has been largely ignored/not seen in the furore about everything else, which should benefit SUR nicely:
"£1.5bn boost to energy efficiency drive
Although somewhat overshadowed by the furore following Chancellor Kwasi Karteng's Groeth Plan, or mini-budget of 23 September, the Government announced funding of up to £1.5bn to improve the energy efficiency of around 130,000 social housing and low-income properties in England. The Help to Heat funding is being made available through the Social Housing Decarbonisation Fund and Home Upgrade Grant schemes and is expected to save households £400 - £700 pa from their energy bills.
It will fund the installation of measures such as external wall and loft insulation, energy efficient doors and windows, heat pumps and solar panels, with multiple measures often being installed in a single home to improve the energy performance. Local authorities and social housing providers will be able to submit bids for funding and will deliver upgrades from early next year until March 2025. This builds on the more than 30,000 homes already being upgraded under the Social Housing Decarbonisation Fund and Home Upgrade Grant schemes."
Shore Capital's update note sees today's contract as "encouraging on a number of fronts":
- it "could open further opportunites across its (the MOD's) vast estate"
- it's an example of how the two merged entities operate more effectively together"
- it takes SUR "further up the value chain", as "both a consultant and principal contractor" for decarbonisation solutions
Topped up today but the market response so far is lasklustre. Looks like CorEnergy could be a real winner for Sureserve. It's in the popular sustainability sector. But it's a small company and therefor perceived as more risky.
Trading statement in a couple of days may lift the SP.
Good luck to all.
Just added to my holdings, but a lacklustre response from the market so far.
CorEnergy sounds a brilliant investment to me.
Guess small companies are just not in vogue at the moment, but results in a day or so might produce a more positive response.
Good news all round!
for SUR to provide solar power installations for the UK MOD:
Https://uk.advfn.com/stock-market/london/sureserve-SUR/share-news/Sureserve-Group-PLC-GBP5-4m-Contract-Completion/89222078
Good to see the newly acquired CorEnergy coming to the fore too. Hopefully there's more to come with a continued roll out of Solar PV as indicated by the MOD here:
"Brigadier Richard Brown, Ministry of Defence, commented:
"The Army is committed to the roll out of Solar PV across the estate to reduce energy bills and support its sustainability strategy. This successful procurement of Solar PV is an important part of our investment in sustainable initiatives that will help to achieve our ambition to be carbon net zero by 2050."
There's also a new three year contract win for Everwarm:
Https://www.scottishhousingnews.com/articles/maryhill-housing-awards-reactive-repairs-contract-to-everwarm-limited
Nice interview with a Project Manager at SUR about their Solar Energy installations, including these nice snippets:
Https://www.sureservegroup.co.uk/plc/media/press-releases/quality-and-knowledge-push-our-renewables-teams-forward/
"In this case Gary is capturing a series of Solar Car Port installations delivered to York St John University, part of a wide-scale decarbonisation project they are undertaking across their campus. It is one of several measures either already delivered or planned by them, including Solar PV panels, battery storage and Air Source Heat Pumps (ASHPs), which will all help the University towards its 2030 target of an 80% reduction in emissions over 25 years.
Gary has worked in the Solar PV market for over 13 years, delivering projects for a number of industry leading businesses and advancing the scope of his knowledge and experience in the wider renewables market.
“The market has certainly come on leaps and bounds since I started. There was a strong period of growth around the introduction of the feed-in tariff scheme in 2010, which flattened when it ended in 2019. But more recently business is really booming across a wider range of low carbon measures. The number of surveys I have lined up for potential projects means I’m on the go all the time. I’m just back from a week in Wales looking at a series of renewables projects, and today I’m in York with three separate visits, two solar PV installations and decarbonising a boiler.”
"The projects that we’re working on here and in other places are a small slice of what’s to come"
Yes 2 good articles putting forward a strong case for Sureserve in IC
Https://www.investorschronicle.co.uk/ideas/2022/08/25/business-is-heating-up-at-sureserve/
" investment ideas
Business is heating up at Sureserve
The energy support group has the tools to tackle fuel poverty
August 25, 2022
By Jemma Slingo
Very few companies will benefit from soaring energy prices. Sureserve (SUR) looks better placed than most, however. The Aim-traded group has reinvented itself in recent years, shifting from construction and property maintenance into heating and energy, with a focus on social housing. As fuel poverty spreads this winter, the contractor’s services – which include installing insulation, smart meters, heat pumps and solar panels – are likely to be in high demand. "
etc"
Has been going sideways for some months now. Thought it got some momentum a week or so ago but has since drifted back. Seems there is a seller at 83ish.
A good contract win or trade update in the next month or so would help. More than happy to hold and top up when I can at these levels.
Momentum Investor updated on SUR in their July issue after the interims. They noted "excellent momentum" and that "Encouragingly the order book increased 50% to £512m and covers 96% of FY'22 expected revenue". They concluded:
"Shore Capital has left forecasts unchanged with eps of 8.1p for the year to September '22, rising to 8.9p in '23, leaving the prospective PE on just 9.4. I am a buyer."
The IC has released its latest AlphaScreens update researching all listed companies for the quest for quality:
"The holy grail for buy-and-hold investors is to find a business that is capable of generating a high return on capital and sustaining it while reinvesting profits. This screen looks for sharesthat display these quality characteristics and can potentially deliver significant compounded returns over time."
The 9 screening criteria cover RoE, operating margins, P/E, PEG, free cash flow, interest cover etc.
Of all the AIM stocks above £35m m/cap, only around 30 companies pass 8 or all 9 tests. SUR are one of them (they only fail on margin growth).
Tipped as a Buy in today's Sunday Times!
Https://www.thetimes.co.uk/article/sureserve-has-the-energy-for-growth-dq537pjtn
And here's a new £6.5m contract win for Aaron Services won on Friday as sole supplier of solar panels to specified MoD UK sites through the rest of this year:
Https://bidstats.uk/tenders/?ntype=tender#780337151-780140739-48
after the MM's were bidding 84.1p for up to 150,000 shares in the early afternoon. Someone was after stock!
SUR's Everwarm have been winning lots of new contracts on Bidstats, including only 3 days ago a £5m energy efficiency contract in Yorkshire:
Https://bidstats.uk/tenders/2022/W29/778960982
Been away on hols, so pleased to see SUR's share price so stable - it's certainly outperforming the market by some margin at present.
On such a low rating, yet with excellent prospects and high recurring income I'm happy to hold for significant upside. I'd rather management bide their time and wait for the right acquisition(s), and the current environment should be working in their favour as vendors reduce their expectations - and prices.
Https://www.ii.co.uk/analysis-commentary/five-aim-share-tips-2022-brutal-first-half-ii524547
"Sureserve (SUR)
84.5p
Compliance and energy-saving services provider Sureserve Group SUR is trading strongly. Although costs are rising and hitting margins, growth in revenues is faster than expected.
Management plans to sell the fire and lift businesses and concentrate on the core social housing energy services businesses. Demand for gas and other compliance-based maintenance services is steady. While energy efficiency and smart meter installation businesses have strong long-term growth prospects.
The order book is 50% higher at £512 million, with £400 million due after this financial year, and it covers most of the forecast second half revenues.
Interim revenues from continuing operations increased by 24% to £126.2 million, while pre-tax profit was one-third higher at £4.3 million.
The non-core fire and lift businesses are profitable, and they made a slightly higher pre-tax profit of £1.24 million on revenues of £17.3 million. Those non-core businesses have net assets of £13.1 million.
Forecasts currently include the non-core operations because they have not been sold yet. Pre-tax profit is set to improve from £13.6 million to £16 million this year. The timing of any disposals will affect earnings until the cash is reinvested.
There was £8.86 million in the bank at the end of March 2022. This, and any disposal proceeds, will help to finance more acquisitions. There has been a 1p a share dividend paid this year.
There have been no nasty surprises from Sureserve and the prospective multiple of around 10 is low for a company with such good growth prospects. Buy."
Feel like this could be a takeover target in current market with its stable cashflows & low valuation.
Very cheap imo - hopefully this will grab some more attention:
Https://www.dailymail.co.uk/money/investing/article-10957265/SMALL-CAP-SHARE-IDEAS-Sureserve-set-benefit-UK-going-green.html
Conclusion:
"Only two brokers follow the stock – Peel Hunt and house broker Shore Capital – and both rate the shares a 'buy', with a mid-range target price of 121p compared to the current share price of around 82.5p.
'Given Sureserve's earnings quality and long-term growth prospects – enhanced by the recent growth strategy – we believe the valuation is compelling,' Shore Cap said, citing a price that is barely more than 10 times projected earnings per share for the current financial year.
Peel Hunt says the stock continues to offer 'significant value given potential for double-digit organic growth in our view, supplemented by M&A [mergers & acquisitions] given the company's cash resources and FCF [free cash flow]'.
The company has high revenue visibility from long-term, regulatory-led local authority and housing association contracts.
Leadership positions in non-volatile markets with recurring, predictable revenues should ensure long-term sustainable growth while the sizzle should come from consolidation opportunities in what is a highly fragmented and regional market."
Https://masterinvestor.co.uk/equities/quick-small-cap-catch-ups-bms-sur-and-saa/
"Sureserve Group – building up its forward order book is great business
Last week’s interim results from this social housing energy services group were well received.
However, the group’s shares have not reacted to the upside that I believe is now very evident.
The group is building up its revenue account quite strongly, with its forward order book looking ever more expansive.
Some 96% of this year’s revenue is already covered.
The consensus now for the current year to end September suggests that revenues will increase from £216.5m to £282.5m, with adjusted pre-tax profits of £16.5m, worth some 8.1p per share in earnings.
For the coming year £300m plus is possible, generating £18.5m profits and 8.8p in earnings.
That make the shares at 83.5p look very good value, especially considering its almost continual sales and profits growth.
I was encouraged to see that the group’s recently appointed Chairman has added more shares to his holding, now up at 150,000 shares, following his purchase of 25,000 @ 83.75p each.
Remember that they touched 106p in January, so they could well do that again very soon."
Capital Access have issued a new 6 page report this morning. They have consensus forecasts of 8.1p EPS this year, rising to 8.8p EPS next year.
And of course there's also the £11.8m cash pile.
Further extracts:
Https://www.capitalaccessgroup.co.uk/research-portal#/portal/capital-access-group
"The outlook is promising, with growth underpinned by a significantly larger order book from blue chip clients, which now exceeds £500m, mostly in FY23 and beyond - although 96% of management’s expected revenue for FY22 is now covered. This is testament to the revenue visibility of this highquality business.
Growth looks set to continue with market drivers including long term contracts and the need for housing associations and local authorities to meet ever-stricter regulatory targets for energy efficiency in their housing stock."
"Earnings momentum is positive, with the new consensus estimates being universally higher than after the last update in January 2022. Most consensus numbers are up between 0.4% and 2.6% for FY22 e and FY23 e."
"Outlook & Evaluation of Consensus
Management’s outlook for the full year was positive, with some, limited, reservations about cost increases in fuel, labour, and certain materials – like much of the rest of the reporting we’ve seen this earnings season. We believe that the business can mitigate this, and no new guidance was issued.
The outlook shouldn’t be volatile due to the high quality and length of the contracts with its blue-chip client base of predominantly local authorities and housing associations and the ongoing trend towards improving the energy efficiency of their housing stock.
The £512m order book, up 50.2% YoY, suggests that organic growth will continue. Of this, nearly £400m relates to FY23 and beyond, showcasing the predictability of revenues in this business. Additionally, there is the potential for further bolt-on and larger strategic acquisitions, with a focus on the Social Housing Energy Services sector where its client base is strongest.
As a result of this order book growth, 96% of management’s expected revenue is now covered for FY22."
We can all see the continuing great results and the flow of updates on contract wins/renewals, but we are stuck at these levels probably due to a seller / order at 82 ish. Once cleared / filled up up and away.
News here that Downing Street are "considering investing billions of pounds a year in improving the energy efficiency of low-value homes to help households cope with the rising energy bills and reduce carbon emissions"...SUR as the UK market leader in gas would be at the forefront of this:
Https://www.thetimes.co.uk/article/housing-chiefs-want-billions-for-retrofit-revolution-to-improve-energy-efficiency-of-low-value-homes-g82dkz3pr
"Housing chiefs want billions for ‘retrofit revolution’ to improve energy efficiency of low-value homes
May 20 2022
Downing Street is considering investing billions of pounds a year in improving the energy efficiency of low-value homes to help households cope with the rising energy bills and reduce carbon emissions.
Officials in No 10 and the Treasury are understood to be receptive to recommendations made by some of Britain’s biggest housing bosses, who have called for a “retrofit revolution”.
A report by the Building Back Britain Commission, an independent group which includes Sir Nigel Wilson, chief executive of Legal & General, and David Thomas, chief executive of Barratt Developments, says that 2.8 million homes across Britain are valued at less than £162,000 and have an energy performance certificate rating below band C.
etc"
Cheers Troajan. The huge forward revenue visibility is terrific, but it's also great to hear about the mitigation of costs, particularly that their contracts with local authorities etc are inflation-proofed.