Finncap have increased forecasts12 Jul 2016 15:02
Paul Scott has updated today with his views on SOM - Finncap have increased their forecasts (hope he doesn't mind me copying with the link):
http://www.stockopedia.com/content/small-cap-value-report-12-jul-2016-asc-gfrd-nrr-beg-som-wjg-142184/
"Trading update - a pleasing update from this US-based global supplier of laser-guided concrete laying machinery;
(extract from RNS)...trading in June was significantly stronger than both the previous month and when compared to a year ago. This was led by particularly strong activity in North America; with China, the Middle East, and Europe each contributing satisfactorily to overall growth.
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 (extract ends).
Good stuff.
Finncap has edged up its forecasts for 2016 from $18.9m to $20.3m at the adjusted PBT level. This translates into forecast adj. EPS rising from 21.3c to 22.5c. There's obviously a translation benefit into sterling too.
So at a rate of £1 = $1.315, I make that 2016 forecast EPS of 17.1p, so the PER is only 9.6.
Net cash was last reported at $12.6m, which is likely to have risen since then. There's also a translation benefit into sterling, so this is £9.6m, or 17.0p per share - quite useful. Strip that cash out, and the ex-cash PER drops to only 8.7.
My opinion - we have to remind ourselves that this is a highly cyclical business. So at some point, we don't know when, earnings are likely to fall. I doubt we'll see such a dramatic fall as happened in 2008-9 though. Also the company's balance sheet is now very much stronger than it was then.
It's good to see Somero making positive noises about other markets too, not just its core US market. I think there's considerable scope for Somero to grow its overseas markets, and it's that potential upside which is my main interest in the company, as the peak of the cycle this time could be a lot higher than the last peak, if they conquer new markets where they currently only have a toe hold".
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