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"I noted some interest coming back into Sureserve and decided to add some on the strength especially as there is a lot of support at anything under 70p.
On the face of it it does look dull which is why you won't see people telling you to "fill your boots".
But it could have an interesting future especially as governments are looking at spending more money in its area of the market and the hydrogen route could pay some dividends.
Sureserve is also going up on bad down days which is a good sign, I think it's worth nearer 100p."
The new issue of Momentum Investor is out, so it should be OK to paste their Buy recommendation on SUR from the prior December issue:
"Sureserve (SUR)
Sureserve expects full year results for the year ended September to be in line demonstrating solid operational performance despite inflationary pressures, which are being mitigated. The order book rose 16% to £585m while net cash was also higher at £23m versus £16.5m in FY'21.
Two non-core businesses held for sale are performing well "providing the opportunity to find the right price".
Shore Capital says the decision to move from two divisions - Compliance and Energy Services - to one could improve cross-selling opportunities for tackling fuel poverty while performing regulated gas safety audits. For example the recent completion of a solar PV project for the MOD could open up opportunities across the latter's vast estate of military housing and other buildings.
After a year of flat performance the shares look cheap on a prospective PE of 8.0 ( FY'23 eps forecast: 9.2p), enterprise value/EBITDA of just 5.3 and free cash flow yield of 7%. I am a buyer."
Good to see the Harwood Capital CEO, Christopher Mills, talking SUR up in this Vox Markets video from last week, where he says he's "no idea" why the share price drifted.
I'm pretty uninterested in most of the other companies mentioned except EKF, but SUR stands out a mile as "rock solid" as Paul Hill states - listen from 59 mins 30 secs:
Https://www.youtube.com/watch?v=hTrEvXGbeNs
Another Pipe dream ! Throw some money at the idea and the "experts" will jump onboard.
Lots more work for SUR - the government is considering mandating that all domestic boilers in Great Britain be “hydrogen-ready” from 2026:
Https://www.insidehousing.co.uk/news/news/government-considering-mandating-hydrogen-ready-boilers-from-2026-79420
and up again today. Hopefully any sellers have now departed the building.
Up 3.5p already after a sudden burst of buying. Ridiculously undervalued at 71.5p imho given the forecast of 9.2p EPS for the current year.
Plus the current cash pile at £23.2m is forecast to rise to £32.3m at Sept'23, i.e over 25% of the m/cap! Which implies a crazy ex-cash P/E of around 5.8....
Excellent coverage on the BBC overnight of this news:
Https://www.bbc.co.uk/news/business-63776183
"Insulation: £1bn funding for least efficient homes
4 hours ago
An extra £1bn will be spent to insulate the UK's least energy efficient homes, the business secretary has said.
Grant Shapps said the new funding was part of a strategy of working towards "an energy independent future" for the UK and would save those who benefitted around £310 a year.
etc"
News today that the Government is to set up a £1billion fund to distribute grants to households to enable cavity wall and loft insulation and smart heating controls such as advanced thermostats and thermostatic valves - all of which are provided by SUR:
Https://www.dailymail.co.uk/news/article-11467573/Middle-income-households-15-000-Government-grants-make-homes-energy-efficient.html
Shore Capital issued an update on SUR following last week's Budget as follows:
"Sureserve Group + (SUR, House Stock, 72p)
Hunt s £6bn pledge extends energy efficiency push
Jeremy Hunt yesterday pledged in his Autumn Statement another £6bn to improve energy efficiency in homes and industry from 2025. This is on top of the £6.6bn current ongoing programme. The details are still to be set out, but we see this as a potential major positive for the social housing energy services group s long-term pipeline. Valuation: FY23 PER 7.7x. House stock.
• The combined impact of the two programmes are aimed at reducing energy consumption by 15% by 2030 and improving energy security. Full details are expected soon.
• It is not clear whether there will be any changes to the current programme, such as grants to homes, but it extends the commitment.
• We see the group benefiting from protected long-term contracts in protected sectors of gas safety compliance and energy efficiency that is not reflected in the valuation: FY23F (Sep YE) 7.7x, PER; 4.6x EV/EBITDA."
There has been a constant drip of sells into SUR, everything about the company reports and figures looks good. Any good news they RNS doesn't lift SUR.
Feel something not right so will be moving on with my money but will keep on my watch list.
Very good point you raise Rivaldo. I have stuck to this one through and thin, largely because it was highly recommended by Robbie the Trader, his largest single investment at the time though he appears to have sold out now.
I think after your point I shall ad a few now since the SP is at it's lowest point of the year. Seems a good opportunity.
Amidst all the tax rises/allowance reductions etc yesterday, one of the few major spending commitments was "a further £6bn from 2025 to insulate homes and upgrade boilers, as it targets a massive 15 per cent cut in energy demand this decade".
SUR specialises in boiler replacements, heat pumps, system upgrades, loft and cavity wall insulation etc etc.
So as a sector leader this has to be great news for SUR:
Https://www.cityam.com/government-commits-6bn-for-energy-efficiency-drive-to-ease-record-bills/
Extracts:
"The Government will also announce a new Energy Efficiency Taskforce shortly, to push through the plans.
This is on top of £6.6bn the Government has allocated to boosting energy efficiency across UK households since the start of this Parliament in 2019.
Earlier this year, Government also announced £1.5bn in funding to boost energy efficiency and cut bills for low income households across the country.
The spending commitment was announced at the Autumn Statement alongside the ramp up of the windfall tax and the extension of the support package."
"Currently just one third of UK homes have an energy performance certificate rating of C or above – the minimum standards the Government has set for domestic households by 2035.
This means an estimated 19m homes need retrofitting – with a study from EDF and Sprift earlier thuys year revealing the insulation age of UK homes to be at least 46 years old."
"Richard Neudegg, director of regulation at Uswitch.com, added: “Doubling the £6 billion investment in energy efficiency and insulation will be vital in cutting household energy costs and bringing bills down in the long term. It’s right that the Government is focusing on supporting those who need it the most, with vulnerable households more at risk of being forced into dangerous situations by high energy costs.”
There was a post trading update group investor call with SUR via Capital Access this morning.
SUR came across very well imo.
The business itself is obviously in excellent shape, is on very cheap fundamentals and has a large cash pile. Plus defensively it has inflation protection in its contracts, huge forward revenue visibility and many multi-year contracts which are getting longer in duration as a matter of policy from local authorities.
As for the points which I and others raised:
- the directors would "love" to buy more shares, but have been in a permanent closed peiod due to a combination of results dates and both business disposal and acquisition negotiations. I can completely understand this (I used to be in a similar position when I worked in the City)
- SUR have rejected a number of offers for the businesses for sale, due to either price or unsuitable buyers. They're under no pressure to sell as these are highly profitable businesses, and SUR already have a large cash pile as we know
- the dividend will be reviewed annually (as previously stated), i.e before January's Board meeting. So a resumed divi looks a strong possibility imho.
I'll be adding soon. This is looking like a great opportunity to top up. This isn't a sexy share but it's come a long way since Lakehouse and has 23 million cash plus a fat order book. I got mine in the mid 30's
i also been in a year.its been a dog of a share really,been up few pence,then down,all the positives and its went nowhere,very frustrating to be here.would have made more money in a bank!!!
The same is happening with a number of other companies operating in a similar space. Slow supply chains and constantly rising costs will be hitting everyone. Also threats of spending cuts will potentially have impact on infrastructure spends. e.g. a school might have to choose now between teachers in classrooms or new heating systems?
Also I'm guessing a lot of service/maintenance contracts entered into with local authorities, Housing Associations etc will all be fixed price (fixed at time of tender) 3 or 5 year contracts. Some customers will be sympathetic and allow increases in costs others will not and contracts tendered at low double digit margins (10%-15%) will be barely break even now.
Long term I think this and others are still a good bet, but I dont see any quick wins around in this sector.....(hope I'm proved wrong)
Been in SUR for the last year, keep reading positive trading updates and contract wins etc, but share price being slowly chipped away like there is a seller in the wings. Anybody got thought on this........
Good to see Robbie Burns - the Naked Trader - getting behind SUR in a recent update whilst I was on hols:
"Sureserve, a long-term hold had a reassuring statement - a very packed order book. It has decent net cash and plenty of bank leeway, two segments are up for sale, be interesting to see what it does with the cash.
Looks very decent value in the 70s area and pretty defensive too."
A good trading update and all the sp has done since is go down?!?
Here's the summary from Shore Capital's note today, forecasting 9.2p EPS and £32.3m net cash this year:
"Sureserve Group
FY22F outlook confirmed with stronger cash
Social Housing Energy Services Group
Sureserve confirmed in today's trading update that it expects results for FY22F to be in line with management's expectations, with slightly better net cash than we
were forecasting and a strong uplift in orders. This reflects "Sureserve's resilient business model and...solid operational performance despite inflationary pressures". We are not changing our estimates for FY22F and FY23F other than to nudge up our net cash from £21m to £23m, in line with guidance. The shares have marked time for a year but now look compelling at 8.7x FY23F PER. House stock.
Solid performance in face of inflation pressure: In the FY results to September, Sureserve continued to experience growth in revenue, earnings and cash flow. This reflects solid operational performance despite inflationary pressures, against which the company has taken action, and remains confident it can continue to mitigate going forwards . The order book for continuing businesses rose 16% YoY to £585m. Pre-IFRS16 net cash was in excess of £23m (FY21, £16.5m).
Estimates maintained: Other than FY22F net cash, we are not changing any of our estimates for the combined business, which includes the two non-core businesses, Sureserve Fire and Electrical and Precision Lift Services. They are classified as businesses held for sale. These are both performing well, thereby providing the opportunity to achieve the right price and the right buyer for each business A full breakdown of our estimates for the continuing business and those held for sale is given in last week's note, "Better together on the home energy front, 6 September.
Fighting on an united front: The note argues that the decision to move from two divisions Compliance and Energy Services to one more effectively addresses the growth opportunities for both by concentrating on the huge social housing market. The new structure aims to increase cross-selling opportunities for tackling fuel poverty while performing regulated gas safety audits.
An example was the £5m solar PV contract for the Ministry of Defence, announced last week which could, in our view, open further opportunities across its vast estate of military housing and other buildings. The outlook could be further boosted by a new £1.5bn spend on energy retrofits of social housing in the "mini-budget'. The note also discussed the potential for a return to paying dividends.
Valuation: After a year of flat price performance and modest uplift versus the FTSE All Share, we believe the potential for long-term market growth and the visibility of revenue from increasingly long contracts, of up to 15 years, make the shares attractive at 8.7x PER, 5.3x EV/EBITDA and 7.0% FCF yield for FY23F."
Bizarre initial reaction to the encouraging trading statement and huge rise in the order books - it can only be short-term traders who were in for the trading statement.
Anyway, bouncing back now and will surely recover to opening levels and better given the ex-cash P/E of only around 7 and the excellent prospects.
Shore Capital have reiterated their forecasts of 8.1p historic EPS and 9.2p EPS for the current year.
They've also raised their forecasts for the cash pile to the current £23.2m - and this now rises to £32.3m at Sept'23, i.e almost 25% of the m/cap!
With the defensive charecteristics of SUR's revenues, and the large increase in the order books in the last few months, it can surely only be traders who were in for a short-term bump on the trading statement who are selling now, as the value and security here looks tremendous imho.
The year end trading update is out and is very encouraging.
SUR are nicely in line with expectations of 8.1p historic EPS despite market conditions.
Above all, the order book has jumped up materially - it's now £585m, which the RNS notes compares to £503m a year ago, but perhaps more interestingly compares to £512m only six months ago.
Plus the cash pile is now above £23m - approaching 20% of the m/cap! This is well above Shore Capital's £21.2m forecast.
With 9.2p EPS forecast this year, if you strip out the cash SUR are on a current year P/E of only just over 7.
Which is crazy considering the forward visibility and SUR's green tech credentials.
Nice one Rivaldo. Can't wait for the trading statement.