Somero Enterprise Share Discussion Threads

[rivaldo] 14/3/2018 07:16

Excellent results - well ahead of forecasts for sales, EBITDA, PBT and EPS.

PBT of $25.7m compares to just $24m forecast by Finncap.

And 0.31c EPS compares to forecast 27.4c. Upgrades coming for this year?

Plus there's a 3.6c special divi on top of the 15.5c normal divi.

Most importantly, current trading for both the USA and Europe is very strong indeed:

"Current Trading and Outlook

The high level of activity in North America during the latter part of 2017 has continued in 2018. We continue to see strong interest in our equipment and remain encouraged by the positive non-residential construction outlook in the US for 2018. The expected positive impact from US corporate tax reform is an additional factor reinforcing our confidence in North American growth prospects.

In Europe, the strong performance of 2017 is also expected to carry forward into 2018. Similar to conditions we see in the North American market, European interest in our equipment remains strong driven by demand for replacement equipment, technology upgrades, and new products. Our confidence in the growth prospects in Europe is supported by improved economic conditions across the territory."

[smallcapinvestor1] 09/3/2018 13:27

I've been on here for years saying if som was 100 or 1000 times the size it would be exactly the kind of company that buffett would love to buy. It meets all his criteria.

[glawsiain] 09/3/2018 11:42

Final results are just a few days away - March 14. The last trading update stated

" Board now expects 2017 revenues will be slightly ahead of market expectations of $84.7m, EBITDA will be comfortably ahead of market expectations of $26.0m"

with an outlook of

"Following record results in 2017, the Board is confident in the Company's ability to deliver another year of profitable growth in 2018 as the underlying market conditions in our core markets remain positive and as the Board continues to see significant growth opportunities in our other territories. The Board's confidence is further supported by recently enacted pro-growth US corporate tax law changes which are expected to stimulate increased economic activity in the Company's largest market."

[rivaldo] 09/3/2018 11:38

SOM are noted here as one of 10 AIM stocks which Warren Buffett might like (I also own TAP which is recommended):

[...]

"The rules we used included:

● Companies in the top 20 percent of the market based on their percentage of free cash flow to sales.

● A minimum average 10% return on capital employed and return on equity over five years.

● Companies producing above average operating margins in their respective sectors over five years.

We sorted the list based on Stockopedia's QualityRank, which takes into account long-term quality factors, balance sheet strength and any potential accounting or insolvency risk red flags - from zero (poor) to 100 (excellent)."

[chashley1806] 08/3/2018 12:22

Bother! In my para 6, I've just realised I used the wrong anticipated eps % growth rate. It should be 24%, not 27% (using Paul Scott's figures). So, para 6 should read:6) Continuing the analysis for the estimated 2018 eps figures, if my maths is right, fair value would imply a share price of 710p (ie. if 12/24 = 355p, then 24/24 = (355x24)/12 = 710p.)This doesn't change my overall message: I'm anticipating significant upside to the share price based on Jim Slater's PEG analysis which, if I'm right, could see the share price doubling this year from 355p to 710p.

[chashley1806] 08/3/2018 11:22

(Re-sending post with, I hope, better formatting).Hi dannyt90In short, my hope is that we will see significant upside to the share price Here's my thinking based on using Jim Slater's PEG analysis.1) Paul Scott recently reported some updated eps estimates as follows: 2017: eps is 21.8p; 2018: eps is 27.2p. This follows a reported eps in 2016 of 18.5p (at current £/$ exchange rate). 2) So, using Paul Scott's figures, year-on-year eps % growth is an estimated 17% between 2016 & 2017, and 24% between 2017 & 2018.3) As I understand Jim Slater's PEG analysis, a fairly valued company is when the PER equals the eps % growth rate. Therefore, if the eps % growth rate for 2016/17 is 17%, then a fairly-valued PER would be 17.4) At the time of writing, the share price is 355p with my broker stating SOM's PER to be 12, which undervalues the company according to the Jim Slater PEG analysis. So, if my maths is right, fair value using these figures would imply a share price of 502p (ie. if 12/17 = 355p, then 17/17 = (355x17)/12 = 502p).5) That's not a million miles off the last target price issued by SOM's analysts of 450p (as I recall).6) Continuing the analysis for the estimated 2018 eps figures, if my maths is right, fair value would imply a share price of 799p (ie. if 12/27 = 355p, then 27/27 = (355x27)/12 = 799p.So, as I see it, there is potentially lots of upside to the share price if: a) the actual eps reported by SOM's next week is in line with broker estimates; and b) the market recognises that the share price is undervalued and re-rates accordingly.My frustration up till now is that SOM has been meeting analyst expectations over the past couple of years, but the market has not recognised this. Maybe this will change after next week?

[chashley1806] 08/3/2018 11:18

Hi dannyt90In short, my hope is that we will see significant upside to the share price Here's my thinking based on using Jim Slater's PEG analysis.1) Paul Scott recently reported some updated eps estimates as follows: 2017: eps is 21.8p; 2018: eps is 27.2p. This follows a reported eps in 2016 of 18.5p (at current £/$ exchange rate). 2) So, using Paul Scott's figures, year-on-year eps % growth is an estimated 17% between 2016 & 2017, and 24% between 2017 & 2018.3) As I understand Jim Slater's PEG analysis, a fairly valued company is when the PER equals the eps % growth rate. Therefore, if the eps % growth rate for 2016/17 is 17%, then a fairly-valued PER would be 17.4) At the time of writing, the share price is 355p with my broker stating SOM's PER to be 12, which undervalues the company according to the Jim Slater PEG analysis. So, if my maths is right, fair value using these figures would imply a share price of 502p (ie. if 12/17 = 355p, then 17/17 = (355x17)/12 = 502p).5) That's not a million miles off the last target price issued by SOM's analysts of 450p (as I recall).6) Continuing the analysis for the estimated 2018 eps figures, if my maths is right, fair value would imply a share price of 799p (ie. if 12/27 = 355p, then 27/27 = (355x27)/12 = 799p.So, as I see it, there is potentially lots of upside to the share price if: a) the actual eps reported by SOM's next week is in line with broker estimates; and b) the market recognises that the share price is undervalued and re-rates accordingly.My frustration up till now is that SOM has been meeting analyst expectations over the past couple of years, but the market has not recognised this. Maybe this will change after next week?

[dannyt90] 05/3/2018 13:33

Earnings Announcement next week 14th March 18.Any thoughts on share price around this Announcement?

[mrx001] 22/2/2018 11:46

Doesn't look likely today. :0(

[its the oxman] 22/2/2018 11:37

Gonna break 400p soon

[interceptor2] 20/2/2018 08:17

free stock charts from uk.advfn.com


The chart set up is looking rather constructive, SOM seems to follow a fairly regular pattern of enjoying long periods of positive increases after a good time of consolidation. The last decent stage 2 advance started in March 2016 at 158p breakout and enjoyed a 113% advance to 337p in the next 12 months. Currently we broke out last month of the old 337p resistance after 10 months of consolidation and are now 11% higher at 375p, feels like the early stages of the next stage 2 period?

Since the AGM in June 2017 when they advised the USA had been flat the news from the US which is 70% of revenue has become stronger in every update. First they reported in the trading update in July that June saw the highest trading levels during the year as weather improved and cancelled projects were being carried over to H2.

Then with the release of the interims in September it was confirmed that the positive momentum in the US in June had continued into H2, then followed the January trading update that was again very positive about trading the US as well as Europe and ROW.

SOM did say that the tax changes in the US was positive and expected to stimulate economic activity. Other regions were also very strong but the reason I have concentrated on the US is because still 70% of revenue is derived from there so any faster than expected growth there will have a significant effect of the full year results.

I read plenty of press and financial commentary that the growth in the USA isn't sustainable or that it isn't real growth, but I have noticed that in nearly every UK company that has exposure to the US that their RNS updates are all rather positive about trading and outlook towards the US, so I have to conclude the growth is real and that SOM are in a very healthy position as we look forward to the full year results next month.

[rivaldo] 19/2/2018 23:00

I'm assuming the 75,000 share trade at 360p cleared an overhang today. New highs tomorrow hopefully.

[rivaldo] 19/2/2018 10:46

Looking good again here.

Results will be on 14th March. With a booming US economy, huge potential in China and India and this outlook from January, there's every reason to believe SOM's upswing will continue for some time yet:

"Outlook

Following record results in 2017, the Board is confident in the Company's ability to deliver another year of profitable growth in 2018 as the underlying market conditions in our core markets remain positive and as the Board continues to see significant growth opportunities in our other territories. The Board's confidence is further supported by recently enacted pro-growth US corporate tax law changes which are expected to stimulate increased economic activity in the Company's largest market."

[glaws2] 16/2/2018 08:02

Been some heavy volume over the last few days.

[macmuck] 13/2/2018 19:23

Bought a small amount today. First since my initial in 2014. I spoke to Rick Borst then (he is on linkedin) and he was so bullish about the company, I had to buy! Was my first purchase and was over-cautious!

[rivaldo] 09/2/2018 14:45

Looks like some sizeable buyers out there - up today on more very healthy volumes, and has held up extremely well in the current markets.

[cfro] 29/1/2018 17:35

I'ts just worth mentioning in light of the big rise in the share price in recent weeks that the forward PE is still low.

Although i admit to not having seen any updated broker estimates i suspect the PER is possibly only around 14.

[rivaldo] 29/1/2018 16:21

Very healthy volumes - 500,000 shares traded today, and nice and solid.

Hopefully this is a platform for another upwards move soon.

[nfs] 23/1/2018 10:47

I note global growth looking good for 2018 2019 per the IMF, and JIm O'Neil saying the same thing.Bodes well for Somero

[rivaldo] 22/1/2018 07:42

Tipped in Shares Magazine - notes Finncap's increased 450p target and concludes "keep buying":

[glaws2] 21/1/2018 13:53

Adan - an understandable strategy, but given SOM's metrics (PE 13 for 27% EPS growth; ROCE ~50% and OM of 27%) I'd been interested to know what equities you are retaining.

[smallcapinvestor1] 21/1/2018 10:22

The way to make proper money in equities is to find a great company, buy in and never sell.

[adamb1978] 20/1/2018 19:04

Hello

Some good news for all SOM holders - I sold out last week, which probably means that its got a lot further to run! Reasons for selling were:

- SOM are trading at their peak multiple, meaning that further multiple appreciation is less likely and share price growth needs to be driven by earnings
- non-residential construction is forecast to grow by 3%-5% this year in the US, so SOM need to outgrow the market or benefit from operating leverage to get something exciting (say close to 10%) at the bottom line
- from a personal perspective, I'm taking a more cautious approach through this year given that I believe we'll have a correction some time in 2018 or 2019 - so many indicators are flashing red and we've recently seen a capitulation of the bears, which often signals a market top (be fearful when others are gready etc). So am banking some profits (I bought into SOM at 143p) and will be gradually shifting some equities allocation into shortish dated (2-3 years) corporate bonds over this year and next.

SOM is a great company, has a moat and is well managed; they don't rely on spin, just quietly go about delivering. I'd be very happy to buy in again, either after a meaningful pull-back, or after a market correction. Indeed, after the next recession, this is one which I'll be keeping an eye on given that the sector its in might mean it gets hammered and therefore offer great returns in the next upturn. I just dont see too much upside from here. Time will tell whether I'm right or wrong.
All the best for holders,

Adam

[rivaldo] 16/1/2018 12:19

SOM have been featured in a Tip Update in the IC - hopefully this will also be in Friday's print edition:



"Tip Updates yesterday

Somero upgrades expectations

The concrete levelling specialist will beat expectations for 2017 revenues and cash profits....."

[3500sr] 14/1/2018 15:03

It is also worth remembering that the rise immediately prior to the update only took us back to where the share price was in April and May 2017