Somero Enterprise Share Discussion Threads

[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...

[rivaldo] 11/11/2016 16:25

We all know about road, rail etc not being SOM's markets, but I'm pretty sure that hospitals and school builds (as specifically mentioned by Trump) would be prime customers.

As would warehousing and manufacturing, which will benefit from any Trump-inspired spend or relocation back to the USA.

SOM are also remarkably innovative, always introducing new products. I notice that for example they now have a product suitable for residential projects....

[grahamburn] 11/11/2016 15:12

Personally, given the company's prime focus is machinery for concrete slab floors for warehouses and supermarkets, I am not too sure that the present discussion about infrastructure spending is particularly relevant to its future success. OK, such spending may well have spin-offs as national GDP grows which are relevant, but, so far as I am aware, Somero equipment isn't used for roads, rail, and bridges etc. etc, though maybe a few public sector buildings (eg large halls in educational establishments?) will require their expertise.

In my opinion, the recent rise in the share price is simply overdue given the announcements of record trading for the current year with significant growth in most of its markets.

[cfro] 11/11/2016 13:57

It is not just the US that intend to spend on infrastrucure, it will also be a policy for the UK too. Central banks/governments are now coming to terms with the fact that monetary policy has probably gone as far as it can go..

Only problem is that any additional spend must be added to the nations debt which particularly in America's case is already way too high.

[rivaldo] 11/11/2016 12:47

Glaws2, just to point out that in addition to US earnings, the dividend is now worth a lot more in sterling terms to us UK shareholders.

[jimbobjames2002] 11/11/2016 12:09

Great to see new highs for SOM, such a good company.

Only caveat I would say is that for all of Trump's big words regarding infrastructure spending, who knows whether he will back it up or not. Everyone knows his tendency to lie and exaggerate! Many of his views and policies are deplorable (denying the existence of climate change, jeopardising the future of NATO etc.), but a huge US infrastructure spend would be great news for SOM.

[breaktwister] 11/11/2016 11:36

I bought back in here as soon as Trump won.

[glaws2] 11/11/2016 11:21

Thanks interceptor

[glaws2] 11/11/2016 11:00

Hang on - how does the sterling exchange rate help us given SOM reports in USD.

[interceptor2] 11/11/2016 09:39

You beat me to it rivaldo, was about to post very similar comments. :o)

Other investors now realizing the opportunities here if Donald Trump follows through with his infrastructure spending plans. As you have mentioned the PER is barely into double digits for the coming year and is still only on 11.4 for current financial year, and this a company with a strong net cash position of £12.6m at the last year end.

It is worth looking back at the last three trading statements released since June 2016, with each statement becoming stronger, the last statement released with the interim results said that strong trading in June has carried over into July and August, if this strong trading continues to the year end then they are likely to be ahead of expectations again.

And not forgetting that since the release of half year results in September, the pound has weakened another 6% versus the US Dollar.

[rivaldo] 11/11/2016 08:51

New highs now.

SOM are still barely on a double-digit P/E based on Finncap's 18.33p EPS forecast for the coming year (which may be increased substantially following the dollar's strength against the pound) - and that's even before stripping out the cash pile.

Given what we can assume is now reasonable certainty for the next 4 years about increased infrastructure spending in the core USA market - plus the likelihood of further inroads in the vast markets of China and India - it might now be a very interesting ride going forward for SOM.

[cfro] 10/11/2016 10:11

This should be excellent news for SOM that will be a major beneficiary of infrastructure spending in the US. Investors are starting to realise that this morning judging by the strong bounce back.

[rivaldo] 10/11/2016 07:29

Indeed - the Mail this morning emphasises this:

"Initially the clear winners appear to be US infrastructure and US businesses. Trump has already pledged to rebuild America’s roads, rail, hospitals and schools"

[pj 1] 09/11/2016 08:15

As long as they train up the additional millions of....immigrants? mexicans?.......errrr those who have not worked for decades? lol

[rivaldo] 09/11/2016 08:06

Almost the first thing Trump just said in his maiden speech as upcoming US President (God help us!) was:

"we’re gonna rebuild our infrastructure, which will become by the way second to none. And we’re going to put millions of people to work as we rebuild it"

Which should be good news for SOM.