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Shore forecast historic 6.6p EPS to 30/9/21, rising this year to 7.8p EPS - a P/E of only 11.7. With 1.5p and 2p dividends respectively.
They conclude:
"Compelling mix of growth and sustainability:
The Group’s two divisions offer, in our view, high revenue visibility from typically three-five-year contracts: Compliance, underpinned by the regulatory necessity to monitor safety of gas and other utilities in social housing; and Energy Services, supported by national and local government commitments to carbon reduction, given huge global prominence during the ongoing COP26 summit in Glasgow. (See Shore Capital note, Energy Supplement, 9 March.)
Undemanding valuation:
Despite the shares rising by 90% Y/Y, we believe the valuation looks undemanding given the Group’s growth prospects, low risk profile and estimated FY21F net cash of £16m. For FY22F: PER, 11.7x; EV/EBITDA, 7.7x; FCF yield of 5.0%. Dividend yield is 2.2%, rising to 2.7% for FY23F."
The CEO has been announced as a promotion for the interim CEO/CFO. This is good news imo. Not only is he obviously already very knowledgeable about the business, but presumably he would have impressed SUR's institutional shareholder base, with whom SUR would undoubtedly have consulted before finalising his appointment:
Https://uk.advfn.com/stock-market/london/sureserve-SUR/share-news/Sureserve-Group-PLC-Appointment-of-Chief-Executive/86457332
Thanks for sharing all your research on this Rivaldo. Bought some today. Should be an interesting ride.
SUR are featured in a new article on i.i.i as one of "10 of the most exciting ESG stocks on AIM" (along with GTC, which I also hold):
Https://www.ii.co.uk/analysis-commentary/10-most-exciting-esg-stocks-aim-ii521837
"Another company that is set to benefit from the move to reduce carbon is Sureserve Group SUR. The Everwarm energy saving subsidiary is in a good position to benefit from investment in insulation, air and ground source heat pumps, solar and battery storage. The Providor subsidiary is a smart meter installer. Covid-19 restrictions, particularly in Scotland, have held back the progress and profit of this part of Sureserve, although it continues to win new contracts. The division provides a good base from which to grow in the energy saving market, but most of the profit currently comes from compliance activities."
The Naked Trader is bullish about SUR in his new column just out a few minutes ago:
"Sureserve has risen nicely after the market caught on that the future looks bright - the green revolution push will really help this company and it keeps winning contracts"
Https://www.nakedtrader.co.uk/
Per igoe104 elsewhere, SUR's Aaron Services are one of the suppliers that have been awarded 11 tenders in different parts of Lincolnshire, totalling over £20 million.
Here is the biggest award...
£7 million
hTTps://bidstats.uk/tenders/2021/W43/761724989
Interesting article in today's Mail on Sunday about finding stocks benefiting from the "green revolution" in housing. The only problem is it omits to mention SUR, which delivers both insulation AND heat pump installation/maintenance.....
Https://www.thisismoney.co.uk/money/investing/article-10123119/Back-winners-PM-Boris-Johnsons-1trillion-green-gamble.html
Very bullish - Peter Smith (acting CEO and CFO) outlines everything from the update, including all the green/ESG involvement:
Note that the new CEO will likely be announced this week or next, which should act as a further catalyst for the share price:
https://www.youtube.com/watch?v=4ak5SzKRe10
The other key point to make here is that there is shortage of qualified companies that are able to install heat pumps. So not only the government wants to encourage cleaner heating systems and put them in use very quickly on a large scale, this is also a huge opportunity for a company like Sureserve to jump in and grab a market share and grow.
News overnight of £5k grants for houses to replace old gas boilers with low-carbon heat pumps.
And "No new gas boilers will be sold after 2035, and there is £3.9bn of new funding to decarbonise heating, including in social housing".
All great news for SUR :
Https://www.bbc.co.uk/news/business-58959045
Capital Access Group have today initiated coverage on SUR with a 12 page note.
They conclude that the current multiples "make it look cheap to us":
Https://www.capitalaccessgroup.co.uk/research-portal#/portal/capital-access-group/research/23_2021101503273457610
Not read it in full yet, but looks like there's a lot of good detail in there about the business. The only problem is that on the front page they've got the wrong year end (December instead of September)...not very professional. They do at least use the correct September year end in the financial info at the back.
They have a now historic 6.5p consensus EPS for the year just ended, and 7.7p EPS with a 2p dividend for the current year - a P/E of just 11.4.
Contract news found elsewhere by igoe104 - SUR's Aaron Services and 3 other suppilers named for two contract frameworks dated 15th September for up to £68m each, one for a 5 year contract and one being a 15 year contract, plus an £8.85m Domestic and Communal Heating and Water Hygiene Contract:
hTTps://bidstats.uk/tenders/2021/W41/760742259
hTTps://bidstats.uk/tenders/2021/W37/758776102
hTTps://bidstats.uk/tenders/2021/W37/758906891
Interesting article - worth noting that it'll cost £33 billion to decarbonise heating in Scotland alone. Imagine the cost for the entire UK and then the potential work coming in for SUR....
Https://www.bbc.co.uk/news/uk-scotland-scotland-politics-58831166
"About £33bn is needed to decarbonise heating in Scotland, with homeowners expected to pick up some of the bill.
A Scottish government strategy lays out the total cost of the initiative which seeks to convert the country's building stock to zero emissions by 2045.
Up to a fifth of all greenhouse gases in Scotland come from homes and buildings.
The strategy says one million homes and more than 50,000 non-domestic buildings will need to transition by 2030.
This will reduce emissions by an estimated two-thirds.
etc"
Nice - buying coming in at the full increased 86p offer price now. At 84.5p SUR are still barely on a P/E above 10 based on 7.8p EPS forecast this year - and they have a large cash pile to spend on earnings-enhancing acquisitions too.
Not seen this yet. I'll have a watch
NT is certainly keen on SUR. He also says he hasn't been buying many stocks at all & has in fact been selling a lot of what he holds in expectation of a downturn in the markets. Good to see the Director buy yesterday. Have to say the Grenfell case is a concern to me (hadn't realised that was even going on until yesterday). I wonder if NT knew of the case?
Good to hear that there'll be news of the new CEO in the "next few weeks". Also good to hear them reiterate that they're "actively looking for acquisitions" from the £16m cash pile:
Https://www. proactiveinvestors.co.uk/companies/news/962666/sureserve-group-report-strong-growth-in-revenue-earnings-and-cash-flow-962666.html
per his update last night:
"Remember last time I talked about selling shares you have done well on the day before a statement. Because they go down on the day of the statement even if it is cracking as people bank profits.
And if you have a share that has gone down a lot buy or buy more the day before (but only if the fundamentals are decent, no warnings and you expect a reasonable statement).
I did this with Sureserve SUR which kept tanking. Couldn't figure out why. The last top up I had on it got taken out by a stop for a loss of £309.
However I bought back yesterday knowing the statement was today and could see no reason why it was going to be bad and indeed it is bouncing today on a perfectly decent statement showing there wasn't much reason for it to go down in the first place. Hope this can now stay as a long-term decent hold. No reason why it shouldn't head back up to the 100p area. I see a director has bought a decent amount today. A boring but should still be a long-term winner."
Good to see an NED buying 25,000 shares today and increasing his holding by 25%:
https://www.investegate.co.uk/sureserve-group-plc--sur-/rns/director-pdmr-shareholding/202110071124323669O/
This new contract win for Everwarm is particularly noteworthy - "an energy retrofit scheme hailed as the largest ever of its kind in the UK".
I note that Everwarm are recruiting for solar PV and battery storage installers, with "the installation of state-of-the art renewable energy generation, energy storage and smart energy management technology in almost 650 homes".
SUR are at the forefront of the new energy transformation - imagine the rewards if this is rolled out nationwide.....
Https://businessnewswales.com/contract-awarded-for-transformative-swansea-energy-retrofit-scheme/
Just read Shore Capital's update.....they say the current multiples "significantly undervalue" SUR.
They've left their forecast for this year at 7.8p EPS, but this is conservative, since the order books at 30% higher are above forecasts.
Similarly, the cash pile is well above their forecast. They now see a £21.4m cash pile at 30/9/22.
Their conclusion:
"Valuation hit by misconstrued gas price fears: The shares, which had risen strongly through most of the year, have fallen 28% since the 23 August peak of 97p, based on, as far as we can see, fears that rising gas prices could hamper the Compliance division’s activities. The Group is required by law to carry out its Compliance functions, which are not impacted by energy pricing. On this basis, the FY22F P/E of 9.0x, EV/EBITDA of 5.7x and 7.2% FCF yield, in our view, significantly undervalue the growth prospects and low risk profile".
Incidentally, SUR already have a £4.1m provision against legal and contract obligations etc as per the 30/9/20 accounts - much reduced from £7.7m a couple of years earlier due to releases of earlier provisions which would have been made after Grenfell.
****ed up. Sold some yesterday and left enough to break even. Sold today. Obviously not a done deal, as watching with interest for re-entry. A few maybes, could of and should ofs but Grenfell maybe an issue. So suggest keep eyes open and post if come across anything. Especially a summation. GLA and All the best
Thank you fleurs for posting the Grenfell towers inquiry links on here - I spent a couple of hours yesterday reading these and decided to sell into the rise this morning, to reduce my portfolio risks.
Great results - this business has loads of potential going forward and probably seriously undervalued, but I will stand aside now until the Grenfell inquiry and any fall out from it subsides. I'm worried about fines / reputational damage.
Rich
Bargain indeed.
'Anything under £1 is a bargain'
The update is out, and is just what's required.
Results are in line, i.e around 6.6p EPS. With order books up 30% year on year, the outlook is tracking nicely for the 7.8p EPS forecast this year.
The cash pile is £16m - way ahead of Shore Capital's forecast £11.8m! And not far off 15% of the market cap.....
Good also to see SUR reiterate their services are "non-discretionary in nature and driven by mandatory inspections and accreditation requirements, alongside services which form a critical part of the Government's growing Green Agend".
Bargain time imho.