Somero Enterprise Share Discussion Threads

[ragehammer] 29/3/2018 10:33

I think the ex div date should actually be next Tues 2 Apr which is the day before the 3 Apr "on the share register" date. But multiple sources (e.g. Stockopedia) have it down as today. I assume Easter is somehow confusing things (maybe me!)

[slopsjon2] 29/3/2018 09:49

ex div for 12.75p plus special 3.6p and the price has barely moved.

[grabster] 23/3/2018 20:09

Congratulations to all who saw something when this thread started and considered it worth investing in back then. The trend throughout 2014 and 2015 was very gently upwards - but patient holders were rewarded in 2016, and again in 2017, and again already in 2018! A beautiful stock. Lovely chart.

[mr_spock] 23/3/2018 15:38

I've given up being excited re China, and I sense that a good proportion of investors feel the same way. I'm struggling to think of any company that has really made a rip-roaring success of investing there (hoping one of you can help me here). There's lots of talk about potential (and of course the potential is there) but where is the meaningful end result?
The US and Europe appear to be picking up; that's of more interest I think.

[grahamburn] 23/3/2018 15:19

Though the Somero share price defied gravity (ie the rest of the market) yesterday and some of the reversal today is probably natural, there could also be an element of concern about the growing trade war between the US and China.

OK, currently China hardly registers in terms of turnover (and certainly not profit) for the company, but the directors have regularly indicated the potential for growth in that region. Anti-US sentiment will undoubtedly reduce that potential for the time being.

[rivaldo] 23/3/2018 11:47

Many thanks to Glaws2 and rhomboid from me too - terrific and very encouraging posts.

The new high rise machine sounds very exciting. I love SOM's caution and work in ensuring that the demand is out there.

Cfro, looks like you've got your opportunity...

[cfro] 22/3/2018 18:02

Many thanks glaw2 for the presentation update, much appreciated. Thanks too to rhomboid for additional points. The new screed machine designed for the higher rise sector looks promising.

SOM is a core pf holding for me and will be looking to add further to my holding as opportunities assist over the next coming weeks.

[rhomboid] 22/3/2018 14:03

Hi Glaws2

I attended the same presentation but your summary is better than mine would have been , some additional points

1) they mentioned U.K. was growing strongly, one customer Stanford flooring had just ordered $1.2m of equipment.. this is them;



I was intrigued to see how credit worthy these customers were so pulled the accounts and was amazed to see they have c 40 staff but make over £5m a year profit which is v reassuring in the context of Somero enjoying v high margins, it seems everyone at the top end of the concrete flooring market may be doing the same!

Secondly on the new high rise product I asked could it be Somero2 ie a similar size market to the one Somero addressed with their current products back in the day. Howard as the main sales guy was nodding his head vigorously..before Jack could utter slightly more cautious but still bullish statements..

Thirdly to ensure the new product was what the market wanted they got a panel together of some industry experts over 2 days, that feedback is informing the product design, they may need some modest bought in additional engineering expertise to get it to market, they’ve already had prototypes out at work. In terms of the market size my take is they didn’t see the need to scope it accurately as they were in no doubt it was big enough to get excited about.

Fourthly , they have a v flexible make to order assembly operation and they’ve never been unable to deliver in a timely fashion, because they’ve high margins they’re happy to keep inventory high to facilitate this.

Finally all their products (inc the new high rise) are expected to deliver similar margins.

I came away v happy with my (sizeable) holding.

[interceptor2] 22/3/2018 09:56

Thank you Glaws2 for the update, very interesting.

Not surprised that management were very bullish with their main market prospects in the USA and Europe looking rather healthy during 2018, think that there is a strong likelihood of further ahead updates this year.

Forward PER of only 15 and that is with the brokers only factoring in a growth figure of 5.7%, always best to be a conservative allowing the company to beat expectations.

Worth repeating that PBT increased 21% last year with dividend increasing 40%, the forward estimate yield is over 4%, not bad for a company growing at this rate.

[glaws2] 22/3/2018 09:31

I went to a management presentation yesterday - some feedback from that :


• Tax rate reduced to 28% for year (from 33%)will reduce to 21% going forward
• Main US trade (selling) show (World of Concrete in Las Vegas in Jan) busiest they have encountered in a decade. All customer feedback from both US and Europe is that the market is very strong and continues from the 2017 H2 strength.
• See signs of growth in Middle East, Latin America and ROW
• India a particular growth area – sales grew from $100k in 2016 to $745k in 2017; now have 3 people in country. Generally small scale projects, lack of infrastructure means large warehouses can’t be supported.
• China expected to grow (up until now demand has been generated by multi-nationals demanding quality in the country) – are increasingly hopeful that local operatives will now buy. My gut feel – don’t see that there will be much growth here)

Have been developing a machine to screed in Structural High Rise sector. Concept developed after meeting with concrete contractors identified need. This opporutinty has

• New market for Somero
• Different customer base
• No competiton
• Have not been able to quantify the market – only establish a need
• Prototypes developed – been working on this for 12 months now
• Expected to go into production in Q4 2019 with first revenues in 2020.

In summary - management were very bullish.

[rivaldo] 22/3/2018 09:14

Tipped as a Buy in today's Shares Magazine:

"SHARES IN CONCRETE levelling specialist Somero Enterprises (SOM:AIM) hit an all-time high of 379p following the publication of its full year results on 14 March.

The 2017 numbers were very impressive with pre-tax profit up 21% to $25.7m, a 40% increase in the ordinary dividend, the declaration of a special dividend and the continuation of a debt-free balance sheet.

The company tells Shares that the performance was down to the sales team capturing business opportunities, good execution and positive market conditions.

As well as winning new business, existing customers are either buying more equipment from Somero to expand their fleet or upgrading old kit with new technology – the latter particularly the case in Europe. Approximately 15% of revenue comes from sales of spare parts and components.

Product development continues to be very important. For example, it is looking to engineer solutions to place concentrate on multiple stories of high-rise properties.

SHARES SAYS: 

This is a well-run business generating significant value for shareholders. China is the only weak part of Somero where operations have been below the board’s expectations. It continues to believe there is a bigger opportunity in this part of Asia.

We remain fans of the business and still rate the shares as a ‘buy’ despite recent share price strength."

[podgyted] 21/3/2018 11:06

£400k buy at 400p.

[rivaldo] 20/3/2018 22:43

New highs tonight, with a nice close aided by a late £6k buy at 390p. Hopefully the start of a further re-rating.

[glawsiain] 19/3/2018 10:21

Paul scott (of stockopedia) has re-tweeted this from rhomboid

Rhomboid1 @rhomboid1MF Mar 17

#SOM interesting to note how SOM results have been captured by @Stockopedia algorithms, it was qualifying for 1 screen last month..now a mighty 6🙂..since 2012 it’s grown it’s margin from 4% to a hugely impressive 29.7% ,ROE from 6 to 52.5%, a deep & growing moat, I’m a holder🙂

Link to image:

[rivaldo] 19/3/2018 09:39

Finncap's increased 465p target price is summarised as follows FYI:

"Full-year results – dividend turbo boosted

Full-year results were slightly above expectations and point to being on track to
exceed our previous FY 2018 forecasts slightly. Market conditions remain robust in its main US market, with significant growth seen in Europe. A revised dividend policy gives new clarity to cash returns, (backed by $19m of net cash), and triggers a strong uplift in ordinary dividend plus a supplementary dividend. The shares remain attractive on an earnings basis but also have premium yield attractions. Our raised 465p TP is based on a P/E of 17.0x in 2018 and 16.0x in 2019 and offers strong upside scope to the shares. Market conditions remain favourable and cash returns underwrite our positive stance.

Results
Results were slightly better than the year-end update, with a strong December. Revenue increased by 8% to $85.6m, with EBITDA at $28.0m, an increase of 14%. Adjusted PBT was $26.2m up 19% and following a lower tax rate adjusted EPS at 33.3ȼ, was up 27%. A final dividend of 12.75ȼ was declared, making 15.5ȼ in total – a 40% increase. A supplementary dividend was declared at 3.6ȼ – tobe paid alongside the final. Net cash of $19.0m, was down $1.1m on the prior year with $19.8m of operating cash flow and $13.9m paid on dividends.

Operations
Four out of six regions saw growth. The US was up 2% with a strong H2 following a weaker H1, with a strong outlook. Europe was the star performer, seeing 54% growth, helped by strengthening economies. China was down 14%, but is responding to marketing measures instigated later in the year. LATAM was up 35%, offsetting a weaker Mid-East. New product introductions continue to boost sales growth. Ride on screeds were up 29%, with stronger 3D profilers and accessories & spares also strong. Remanufactured sales were down 5% and in part reflect the Chinese experience.

Forecasts
We slightly upgrade our 2018 forecasts, with a $0.7m increase in adjusted PBT to $27.7m, boosting EPS by 2.5% to 37.7ȼ. We introduce new 2019 forecasts based on modest sales growth of 4.4% and EBITDA margins of 32.1%, giving YoY EPS growth of 6%. Cash conversion remains strong, allowing a 39% upgrade to annual dividend in 2018 and significant further scope for supplemental dividends.

Valuation
The shares have been strong performers over the past year, reflecting robust market conditions and the gain from US tax changes. We increase our price target from 450p to 465p pointing to a P/E of 17.0x in 2018 followed by 16.0x in 2019.
Cash returns and a 5.4% yield are key features of the investment case. We therefore
still see upside to the shares and remain positive on the group’s prospects."

[rivaldo] 15/3/2018 22:53

Tipped in the IC....



"Tip Update: Buy at 370p

Record full-year revenue took Somero (SOM) within striking distance of its $90m (£65m) sales target. The concrete levelling specialist’s adjusted cash profit also reached a new high, rising 14 per cent to $28m. In somewhat of a hat-trick, operating cash flow simultaneously rose to an unprecedented $19.8m from $17m year on year. Topping off an excellent set of results, Somero has updated its dividend policy: management now targets a year-end net cash balance of $15m, whereby 50 per cent of any surplus cash will be distributed to investors – for 2017, this meant a special dividend of 3.6¢ a share.

The proportion of non-US revenue rose to 32 per cent, reflecting an increasingly diversified top line. Europe was the star performer with eye-catching growth of 53 per cent to $12.2m. Management says the company's European equipment fleet is relatively old so technological upgrades could breed new opportunities.

China endured a 14 per cent decline in sales to $5.5m, largely driven by a sluggish first half. Somero still sees a strong opportunity to expand its market presence here, albeit over a longer timeframe. Middle Eastern sales also fell 28 per cent to $2.1m, although activity levels were maintained.

Analysts at finnCap forecast adjusted pre-tax profit of $27.7m and EPS of 37.7¢ for 2018, up from $26.2m and 36.5¢ in 2017.

IC View

Trading on an undemanding forward multiple of 14, the shares still represent good value – particularly given management’s confidence in US growth prospects. The new dividend policy is an added bonus. Buy."

[rivaldo] 15/3/2018 13:59

Cheers - link to Paul Scott's write-up:



which concludes:

"My opinion – this is such a nice company, producing strong results every year. It has a very strong balance sheet, with net cash, and pays generous dividends.

I feel that some investors have perhaps been overly cautious about this company, because of the problems it had in 2008, in the great financial crisis, when a lot of orders dried up as you would expect. Business is bound to drop again when the next recession kicks in. However we have synchronised growth now in most major economies, so I imagine Somero is likely to continue doing well for some time to come.

The valuation still looks reasonable, especially when you strip out cash. So I cannot see any reason to sell any of my shares any time soon. For that reason I'm happy to continue holding for the foreseeable future.

Stockopedia also likes the share, with a stock rank of 95."

[dannyt90] 15/3/2018 13:31

Looking to top up today

[mfhmfh] 15/3/2018 09:08

positive write-up by Paul Scott on Stockopedia.

[interceptor2] 14/3/2018 12:28

SP slowly inching higher and now at 377p resistance level.

Technical's as well as fundamentals looking positive.

Interesting that the UK was highlighted first as growing strongly in Europe, I hadn't expected that. I wonder if UK construction sector is picking up again for some companies?

[rhomboid] 14/3/2018 12:17

Thx Martin AJ Bell use intesa and pay gross

[glaws2] 14/3/2018 11:27

There was an extensive discussion on with-holding tax etc on this thread if you want to scroll back up.

[stepone68] 14/3/2018 11:13

I thought I had an email from my broker about this, but it must have been an online chat - there are some comments about it here;



It's not been a massive issue up to now, but will be more of a problem if they keep increasing the dividend at this rate!