SOM, bullish aticle.....13 Jan 2016 14:19
Lifted from 111
Aim-traded Somero Enterprises (SOM:139p), a Florida-headquartered company that specialises in the design, assembly, and sale of patented, laser-guided concrete levelling equipment for commercial floors, has beaten market expectations handsomely for the 2015 financial year following a strong operational performance in the final quarter. In fact, sales hit at an all-time high in December, which is not traditionally the strongest month of the year, and with the benefit of an improved gross margin performance, the company now expects to report cash profit materially ahead of current market expectations for the 12-month period.
Demand in the second half of 2015 proved to be robust across the company's core product range, with North America and Europe contributing significantly to sales growth while performance in China was both healthy and stable. It's worth flagging up that year-end demand for its products in North America was predominantly driven by technology upgrades and fleet additions, highlighting lengthy project backlogs for the company's customers that extend well into 2016. Following the announcemnt, analyst Matthew Walker at Canaccord Genuity now expects 2015 adjusted pre-tax profit will rise from $14m to $18.6m (£12.7m), representing a 11 per cent upgrade, based on a 16 per cent increase in revenues to $69m, to produce adjusted fully diluted EPS of 14.9p. Mr Walker has also raised his dividend per share forecast by 11 per cent to 4.5p, up from 3.4p in 2014. And with management guidance pointing towards "another year of growth", and the company in a robust net cash position estimated to be around 14p a share, I feel that Somero's shares should be trading far higher than on a cash-adjusted PE ratio of 8. A forward dividend yield of 3.2 per cent is supportive too.
So, although the shares are trading in line with the level when I initiated coverage ('On solid foundations', 22 Apr 2015), and are just shy of the level at the time of my last update ('Switch on for gains', 9 Sep 2015), I still believe my 185p target price is both warranted and achievable. Trading on a bid-offer spread of 138p to 139p, I continue to rate Somero's shares a buy.
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