Somero Enterprise Share Discussion Threads

[davebowler] 30/11/2016 10:40

TD Waterhouse email due to holding SOM;
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[rivaldo] 28/11/2016 07:21

Tipped on T.M.F:



"Could this Trump-friendly stock flatten the competition in 2017?
By The Motley Fool Nov 25, 2016

With a market cap of only £128m, it's not surprising if many investors haven't heard of Somero Enterprises(LSE: SOM). But thanks to Donald Trump's US election win and his commitment to boosting infrastructure, I think this company could be receiving a lot more attention over the coming months and years. Let me explain why.

Amazing returns

On initial inspection, Somero hardly sets the pulse racing. It manufactures laser-guided equipment used for spreading and levelling volumes of concrete for commercial flooring and other horizontal surfaces. So far, so dull.

Nevertheless, a quick look at the company's share price performance over the past few years should make a lot of investors sit up and take notice. Back in 2011, Somero's shares could be picked up for just 10p. Today, thanks to sizeable increases in revenue, net profits multiplying from $1m to $12m since 2012 and a notable jump since Trump's victory, the very same shares are priced at just over 226p each. Think about that. If you'd had the foresight (or fortune) to invest £1,000 in the company a few years ago, you'd now be looking at a pot of more than £22,000. That's quite a return.

But there are other attractions to Somero besides its rocketing share price. Returns on capital and operating margins have exploded over the past few years. Although not a share most would choose to invest in for income, the dividend has also been rising by double figures and an easily-covered payout of just over 3% is expected for 2017. The company has $12m in cash on its books and no net debt. Any other positives? You bet. On a forward price-to-earnings (P/E) of just below 11 for 2017, Somero's shares still look cheap to me.

As a company - albeit a cyclical one - I think Somero has a lot to offer investors. But how does it compare to other companies involved in infrastructure, such as £1.35bn cap property, residential, construction and services company Kier Group(LSE: KIE)?

Brexit-related risk

On a forecast P/E of 13, shares in Kier look reasonably priced. There's a chunky dividend yield of 4.8% to keep income investors interested and net profits look set to be substantially higher over the next two years (£105m and £117m in 2017 and 2018 respectively). At face value, Kier looks a pretty inviting investment.

Unfortunately, there's one big elephant in the room that I think could make the Sandy-based company's shares substantially more volatile than those of Somero Enterprises. Yes, you've guessed it: Brexit. In times of economic uncertainty, large infrastructure projects can be shelved or delayed, ultimately hurting Kier's bottom line. Given that the majority of its revenue comes from the US, Somero isn't quite as exposed to the consequences of our EU departure. Indeed, in its last set of results in September, CEO Jack Conney made reference to the latter's strong performance in its North American, European and Chinese markets. It's this geographical diversification that, in my opinion, will see Somero outperform stocks like Kier for the foreseeable future.

So long as you're willing to take on extra risk for the possibility of higher returns, I think Somero Enterprises warrants serious attention. I fully expect to see the company featuring on many watchlists before too long."

[rivaldo] 25/11/2016 08:52

Nice plug for SOM in this week's Shares Magazine:

"Will Lough, assistant manager on the River and Mercantile UK Long-Term Recovery GB00B614J053) fund and director of research, makes a similar case for Somero (SOM:AIM). The group specialises in the automatic levelling of concrete and has a significant business in the US. As such, it should be a beneficiary of any infrastructure boom as governments increasingly prioritise fiscal spending over monetary policy to boost their economies.

He adds: 'The group also sells a lot to groups building up warehouses, such as Amazon (AMZN:NDQ), who need their concrete completely flat to ensure that machinery can manoeuvre properly. Somero can benefit from growth in that market as well.'"

[rivaldo] 25/11/2016 07:54

I note that CRH and Ashtead jumped yesterday on further consideration of Trump's infrastructure plans. SOM had a quiet day....our turn today perhaps.

[cfro] 23/11/2016 13:11

Yep, into new highs again. :-)

[geraldus] 23/11/2016 12:38

This stock has certainly had the 'Trump' effect,I hope he follows through.

[rivaldo] 22/11/2016 12:14

Good news in this sector in general today with both the LVD bid and SFR stating they're trading ahead of expectations (both are holdings of mine!).

The sector is certainly warming up, and the posters above may be right about bid potential here given the weakness of the pound.

[smallcapinvestor1] 21/11/2016 10:54

I am very familiar with som having started investing at 10pA u.s. Bid is a possibility but i think a Chinese bid is more likely once they build up a reputation over there.The Chinese like to buy overseas brands and the opportunity in China is much bigger than the u.s.

[rivaldo] 21/11/2016 08:46

A £13k buy just reported at 222p, well above the full 220.5p published offer price.

Agreed cfro. A nice secure feeling here now with not only US infrastructure, but UK spending set to increase. Plus of course growth in China, India etc.

[cfro] 20/11/2016 17:51

Good post hpcg,

Like you i was also a little sceptical of the 'US AIM' tag, but have since realised that it is nothing to worry about whatsoever..

Also agree that SOM now looks an obvious takeover target but unless one came at a huge premium to current share price i would rather keep SOM for a longer term hold to let the US infrastructure 'story' really unfold here.

[mammyoko] 20/11/2016 09:50

Price to US purchaser is 20% cheaper after Brexit sterling fall

[hpcg] 19/11/2016 04:10

In addition to the business itself I would also think there is the potential for a large premium takeout. The business metrics, ROE, ROCE, margin, are excellent, whilst the valuation does not reflect that. The irony is that whilst AIM is loaded with overseas filth which has a dedicated following this has genuinely good credentials. I know I was in the looks to good to be true camp when I first purchased, but ironically I think opinions changes as the price goes up. Basically this is a good business to own as a shareholder, and thus also for another company, or even back to PE.

Edit - in addition, I can't think of any reason for a UK based shareholder to sell at this point in time. Nor really to think about it until it is a 12 cash adjusted multiple, or a 2.5% yield.

[interceptor2] 18/11/2016 16:06

Feeling like a rather powerful continuation breakout now, there isn't much else in the small cap sector that offers such high exposure towards US infrastructure spending. Think I will hold on tight here.

[cfro] 18/11/2016 13:16

Good to see more large scale accumulation here.

[rivaldo] 18/11/2016 12:20

New highs now, and on good volumes too. 854,000 shares through at 210p in 4 large trades today, with a nice rise afterwards.

[rivaldo] 15/11/2016 11:44

Nice - £180,000 of shares just bought at 200p (and more at 198p).

[rivaldo] 15/11/2016 10:27

Found it - thx again Richard:

[rivaldo] 15/11/2016 09:16

Cheers for that Richard 12th - I'm assuming that's from the IC's Simon Thompson, or is it someone else?

A 230p target price gives plenty of upside from here, but with a likely 4 year infrastructure boom coming in the USA, plus global expansion in even bigger markets, it's possible there's a lot more to come from this company which so dominates its market.

[richard xii] 14/11/2016 17:11

I have been running through my watchlist of companies after the unexpected US election result to capitalise on the Republicans' landslide victory. There is one company that clearly stands out as a major beneficiary: Aim-traded Somero Enterprises (SOM:193p), a Florida-headquartered company that specialises in the design, assembly and sale of patented, laser-guided concrete levelling equipment for commercial floors.Not only is the business heavily exposed to the US market - the region accounted for 75 per cent of Somero's revenue of $29.8m (£23.7m) in the first half of this year - but trading activity is being buoyed by a combination of new product launches and a healthy non-residential construction market, both of which are supporting demand for replacement equipment, technology upgrades and fleet additions. Somero's sales in North America shot up by 35 per cent in the six months to the end of June 2016 and there is no sign of momentum waning given the company's healthy order backlog. For good measure Europe, China and Australia, which account for around a fifth of Somero's sales, all posted double-digit growth, too.But it's the prospect of a major fiscal boost, and ramp-up in infrastructure spending by the newly elected Republican administration, that's likely to attract further investor interest, and with good reason. That's because the company is bang on course to deliver a 15 per cent increase in full-year adjusted pre-tax profit to $20.3m on revenue up 9 per cent to $76.5m in the 12 months to the end of December 2016, as analyst David Buxton at broker finnCap predicts. Cash generation is very healthy, and so is the state of the company's balance sheet, so much so that Mr Buxton anticipates a 20 per cent hike in year-end net funds to $15.2m, a sum worth almost 22p a share at current exchange rates. This means that Somero's shares are rated on 9,.5 times cash-adjusted post tax earnings estimates for 2016, hardly an exacting valuation for a company that's predicted to grow EPS by over 8 per cent to 24.6¢ (19.5p at current exchange rates) in 2017 based on a reasonable 6 per cent increase in revenue.Moreover, if activity in the construction industry gets a lift from a debt-funded Republican investment programme next year, and president elect Donald Trump has expressed deep disappointment at the level of infrastructure spending during his campaign, then I feel those 2017 earnings forecasts could have even more upside. Mr Trump's plans involve granting $137bn of tax credits to construction companies in order to leverage $1 trillion of investment targeted at "fixing our inner cities and rebuilding highways, bridges, tunnels, airports, schools, and hospitals". This could prove a boon for the construction industry, and the non-residential segment which Somero has a hefty exposure to.There is a decent income stream for shareholders, too: analysts expect the payout per share to be raised by 10 per cent to 7.6¢ in 2016, rising to 8.1 cents in 2017, implying prospective dividend yields of 3.1 per cent and 3.3 per cent, respectively.So, having initiated coverage at 140p ('On solid foundations', 22 Apr 2015), and reiterated that advice at 172p at the time of the half-year results ('On the upgrade', 7 Sep 2016), I am raising my target price from 200p to 230p, or the equivalent of 10.6 times cash-adjusted earnings estimates for 2017. Strong buy.

[grahamburn] 14/11/2016 14:54

There's a brief reference to Somero in today's email from Investors Chronicle in their "tipster's" column on shares which might benefit from the Republican's victory.

It starts as follows (cannot access the remainder as it's subscriber content only):
______________________________

Exploiting earnings potential

I have been running through my watchlist of companies after the unexpected US election result to capitalise on the Republicans' landslide victory. There is one company that clearly stands out as a major beneficiary: Aim-traded Somero Enterprises (SOM:193p), a Florida-headquartered company that specialises in the design, assembly and sale of patented, laser-guided concrete levelling equipment for commercial floors.

[grabster] 11/11/2016 21:17

Airport aprons, passenger concourses, airport carparks; multistorey carpark floors; ferry ramps; all fall within Somero's range of activities. Bear in mind that - unlike their competitors who mostly produce machines to apply the screed (the 2"-3" finishing fine-mix layer), Somero machines are also used to lay the main concrete slab structure, as well as the screed. Since 2005 they also deal with the accurate levelling of asphalte, and their software is employed in controlling dozers on large outdoor projects.

Their emphasis does still remain on floors (ie, indoor sites) rather than large outdoor projects - but certain areas of external infrastructure do employ Somero technology.

[eggbaconandbubble] 11/11/2016 16:53

Railways have stations - buildings! Roads have service stops etc etc...