Somero Enterprise Share Discussion Threads

[lingy] 15/5/2016 18:29

Signed hope others follow

[rivaldo] 12/5/2016 11:36

A series of buys this morning, including £52,000 just bought at 155p - nicely above the published 154p offer price.

[rivaldo] 12/5/2016 08:38

Excellent new article tipping SOM:



"Smooth operator could beat expectations

Somero Enterprises is the dominant player in the market for using laser-guided screeding machines to produce perfectly flat concrete floors for industrial buildings.

The firm last featured in this column in December, when I raised concerns about the cyclical risks of investing at what might be a relatively late stage in the cycle. Ironically, I’m less concerned about this now than I was then.

There are several reasons for this. Firstly, I’m trying to break out of the classic value investing trap of buying too soon on the way down, and selling too soon on the way up. A second reason for my confidence in Somero is that the firm produced a stonking set of 2015 results along with very confident guidance for the year ahead:

“We see 2016 as an exciting year full of opportunity. We believe we are well positioned to capitalize on expected growth in our core US and other existing markets, extend our global footprint and grow revenues from new products. Most importantly, we look forward to delivering another year of superior results for our shareholders.”

I also gained confidence after reading the transcript of Small Cap Editor Paul Scott’s interview with Somero’s CEO and CFO, which took place in January. This really provides a lot more detail and colour on the firm’s competitive advantage and on how management sees the market opportunity in the US and overseas. It’s well worth a few minutes of your time (as of course is all of Paul’s small cap coverage).

A fine set of figures

Stockopedia continue to rank Somero highly, with a StockRank of 98. Last year’s figures have now been assimilated into the firm’s StockReport. Rather than analyse them from scratch, I’ve decided to compare them to the StockReport I used back in December. What’s changed?

Back in December, Somero traded on a rolling forecast P/E of 8.9. Although the shares have risen by 22% since then, rising earnings guidance means that today’s forecast P/E is almost unchanged at 9.3. Forecast yield is also unchanged, at 3.4%.

Somero’s earnings per share dipped in 2015, but it’s worth noting that operating profit rose strongly. The fall in net profit appears mainly to be the result of Somero spending around $4.2m on new building facilities. These are being funded out of free cash flow, which is currently very strong. Net cash doubled from $6m to $12.6m last year, despite this investment.

Last year’s rise in capex is nothing to worry about.

Somero’s ValueRank has fallen from 78 to 71 since I last looked at the firm, but I’m not concerned by this small change. The fundamentals remain solid and very appealing, in my view.

Solid quality

Somero’s QualityRank today is 96, a fall of just two points since December. Very little seems to have changed. The operating margin rose from 21.2% to 25.0% in 2015. Return on capital edged up from 42.5% to 44.7%.

Other metrics have also improved. As Somero’s 2009 results have dropped out of the QualityRank calculation period, Somero’s five-year average net margin has risen from 3.7% to 9.1%. The long-term average return on capital has risen from 0.4% to 17%. These numbers show the severity of Somero’s previous debt problems, and the strength of its recovery since then.

As management are keen to explain, a repeat of this calamity should be unlikely. The company’s policy is now to maintain a net cash buffer of $10m at all times, so that when the next recession does come, Somero will be able to ride out the storm in safety.

If you’re wondering why Somero’s QualityRank has fallen at all, I suspect the reason is that the stock’s Piotroski F-Score has fallen from 8 to 7. The reason for this is that last year’s lower post-tax profits resulted in a lower return on assets last year. This is simply the result of the money being spent on new buildings and is absolutely not a concern, in my view.

Big momentum gains

Perhaps the biggest difference between now and December is that Somero’s momentum has improved significantly. The stock’s MomentumRank has risen from 70 to 87.

Broker forecasts for 2016 earnings have risen and the outlook for 2017 suggests further progress is expected. Somero’s cash-backed dividend is also expected to rise and the forecast yield is 3.3% for 2016, rising to 3.6% for 2017. That’s quite high for a small cap.

Somero’s 2015 results made it clear that the firm should be able to deliver material ongoing growth from the US market. Growth elsewhere will be a bonus. In the case of China, it’s a long-term goal where the potential rewards are vast.

I’m happy to add the stock to the portfolio at this time, and look forward to the next trading update in the summer".

[rik shaw] 07/5/2016 15:24

RCN and CPX- see relevant BB for extracts

[grabster] 03/5/2016 13:21

Many thanks for that excellent report Rivaldo.

PS: What were the other two tips??

[rivaldo] 27/4/2016 07:49

Nice RNS this morning disguised under the bland title "Change of registered address"!

The new HQ and training facility have been completed on time and on budget, and in very quick time. Hopefully using SOM's own equipment :o))

[rivaldo] 19/4/2016 13:42

Climbing again - £44,000 of buys at the full 169p offer just reported.

EDIT - a further £25,000 just bought at 169p.

[rivaldo] 18/4/2016 08:43

New highs again, with continued small buying. Nice bounce too from the early markdown.

Given the terrific outlook in last month's prelims, hopefully this buying will continue into the forthcoming AGM statement.

[imranawan] 15/4/2016 15:15

Thanks Twonky.

[twonky] 15/4/2016 14:44

01/03/2016 – Somero Enterprises Inc. (DI) had its “CorporateR21; rating reiterated by analysts at FinnCap. They now have a GBP 185.00p price target on the stock.

01/03/2016 – Somero Enterprises Inc. (DI) had its “Buy” rating reiterated by analysts at Canaccord Genuity. They now have a GBP 190.00p price target on the stock.

[imranawan] 15/4/2016 14:03

What was the broker price target on SOM? From memory I recall it was around the 175p level....

[tromso1] 15/4/2016 13:42

Nice breakout.

"The chart looks poised to attempt a breakout, so it could get quite interesting."

[rivaldo] 15/4/2016 10:31

More new highs.

[simoan] 13/4/2016 13:19

Kudos to the AJ Bell dividend team who contacted me this morning about the SOM dividend payment. Apparently the company sends all brokers a US dollar cheque, they will not pay the dividend any other way. This is why they do not declare an exchange rate for the dividend because it varies with the exchange rate at the time the cheque clears with your broker and what exchange rate loading they apply. Most brokers take on the exchange risk and pre-pay the dividend in sterling near or just after the payment date but before the dollar cheque clears. AJ Bell do not and so they wait until the cheque clears before crediting accounts with the payment, so AJ Bell customers will not see it until next Monday.

Hope this information is useful.
Si

[rivaldo] 13/4/2016 11:40

New all-time highs now methinks. Nice buying at 157p today.

[rivaldo] 13/4/2016 08:04

Nice start - up 1.5p on just a 1k buy at the full 155p offer price. New recent highs now.

[melody9999] 12/4/2016 22:13

Bit of a struggle to get above 150p. Maybe new highs shortly now.

[ulinbac] 12/4/2016 17:05

In this today. Been watching for a while

[simoan] 12/4/2016 15:46

Well if you're with AJ Bell the dividend won't be paid into accounts until Monday 18th April. Apparently, the registrar will only send out a US dollar denominated cheque and whilst other brokers pre-fund the payment AJ Bell do not. Quality.

Si

[rivaldo] 11/4/2016 13:44

Barclays have told me that in the next day or two everyone will be able to buy SOM in their ISAs after they adjust their systems.

They do also reclaim any excess withholding tax paid on dividends received on request (I was credited with my SOM divi on Friday).

[grabster] 10/4/2016 20:42

Barclays have always been the least cooperative of brokers - saying no when most others say yes. They've been like that for at least 20 years. If any broker is going to say "You can't do that" it will always be Barclays! As evidenced in hundreds of bb posts over the years.

I have my SOM shares in an ISA.

[twonky] 09/4/2016 15:18

So does HL

[grahamburn] 09/4/2016 13:54

TD Direct Investing definitely allow in an ISA - see above.