Somero Enterprise Share Discussion Threads

[eggbaconandbubble] 21/1/2019 19:52

Cannacord topping up!

[someuwin] 21/1/2019 10:52

...Cheers. Sounds very good.

[rivaldo] 18/1/2019 14:50

Worth pasting here extracts from Finncap's new note:

"Trading ahead of expectations, 5% EPS upgrade

The company has announced a positive trading update signalling a stronger than expected H2, with sales and EBITDA moderately ahead and cash more meaningfully ahead of expectations. We upgrade our 2018 EPS forecast by 4.9% and raise 2019 by 4.6%, confirming robust trading continues. The company has also announced a small bolt-on acquisition of Line Dragon for $2.0m, which looks an ideal close fit. The shares have significantly derated and the trading update confirms robust trading continues, thus providing a strong buying opportunity. The 7% dividend yield and single digit P/E in 2019 highlight strong value – this quality stock is one of our favourites."

"Forecasts.

We upgrade 2018 sales forecasts by 4.2% to $93.8m, resulting in EBITDA of $30.4m and adjusted PBT of $29.0m, up 4.9%. EPS therefore rises to 39.6.. Similarly, in 2019, we rais e s ales by 4.8% to $98.5m, with EBITDA of $31.4m and adjusted PBT of $30.0m up 4.6%, giving EPS of 41.9c. Our 2018 cash forecast rises to $28.1m (up $3m). We have not altered our regular dividend forecast of 17c, but there should be some upside to our supplemental dividend forecast of 7.0c.

Valuation.

The announcement confirms a strong trading outcome and positive outlook statement, which is in contrast to recent weak share prices. The shares have weakened to stand at very attractive levels. Strong cash returns support a premium dividend yield of 7.0%, while a P/E of 9.0x in 2019 is based on conservative growth parameters. Somero is a high quality stock and currently remains one of our favourites; we retain our PT of 465p, which provides plenty of upside following recent underperformance."

[lammylover] 16/1/2019 19:38

Excellent results well BOD! Its about time SOM was re-rated. 12/9/18 was valued at 430p per share; astonishing that it dropped back below 300p purely on global sell off / Trump trade wars etc. Still a bargain even at todays price, despite healthy rise. IMO Strong Buy - Rich

[mfhmfh] 16/1/2019 18:56

Positive write-up on Stockopedia today.

Buy rating reiterated in today's IC.

[spann_703] 16/1/2019 13:16

Ok, thanks crazycoops.

[crazycoops] 16/1/2019 12:16

spann, the reason they are listed on AIM is a legacy issue. Iirc, they were owned by a UK based PE firm who then floated on the UK market.

[rhomboid] 16/1/2019 11:31

Hi stepone

The RNS says ‘In addition, the Board expects net cash at 31 December 2018 will be more significantly ahead of market expectations of $25.0m.’

..FinnCap have guided that to mean net cash of $28m ...it could be more/less but it’s significantly ahead..

So yield is veering towards epic🙂

I hold

[spann_703] 16/1/2019 11:30

Why is this company listed on the UK AIM market?

[stepone68] 16/1/2019 11:19

Hi Rivaldo, ah, thanks for clarifying. I agree that based on a $25m cash pile, the special divi should be $5m, which is almost 9c a share.

Unfortunately I still lose 30% of that in withholding tax as a result of using iWeb as my broker :-(

I keep meaning to transfer my Somero holding to my SIPP, maybe now is the time to do it.

[podgyted] 16/1/2019 11:06

G Neary covered on Stocko this a.m., concluded :-

"Whichever way you look at it, the company is cheap on conventional metrics and is a top performer when it comes to return on capital, operating margins, etc.

So it's difficult for me to argue against the view that the shares are still undervalued, and perhaps structurally undervalued to their listing on AIM.

When I studied this company in some detail, I came to the view that it faced very little competition, at least in North America/Europe, and I believe that this is still the case. It offers the best machines and one of the very few options when it comes to achieving flat concrete floors. This explains its surprisingly high returns.

Congratulations to holders. I can't quite convince myself to buy shares in a small American company, so I will leave it to others to enjoy the ride.

Worth noting that the StockRank is an excellent 88, and it has an A+ from the Magic Formula Score, i.e. high returns and low valuation."

[podgyted] 16/1/2019 11:04

Video of new machine if you're interested.

[rivaldo] 16/1/2019 10:49

Stepone68, Finncap specifically indicate that the 24c dividend includes the special divi, but that there is further upside to that divi (which is what I was attempting to convey!):

"We have not altered our regular dividend forecast of 17c, but there should be some upside to our supplemental dividend forecast of 7.0c."

[death by donut] 16/1/2019 10:47

Would the Chinese reverse engineer the product to the same standard tho. With the tolerances required in the laying of flat floors , surely they'd be found out if their copies were not up to scratch?

[stepone68] 16/1/2019 09:40

I think they are including the supplemental div in that 6% yield. If 24c is going to be the regular dividend, that would imply $28m of Adjusted Net Income, a 60% increase on last year, which seems unlikely.

If Adjusted Net Income is $20m, then total div will be $10m, or 18c per share for a 4.1% yield. Even at last night's close that would only have been a yield of 4.5%.

Somero make it pretty clear that the special div will be $5m of the cash pile, which is 9c or 7p. So I'm guessing a total div around 26c for a yield of 6.2% INCLUDING the special.

[mw8156] 16/1/2019 09:36

Someuwin
would have thought cyclicality and still limited progress in China, where companies reverse engineer Somero's products, might represent two reasons not to hold too large a chunk.

[rivaldo] 16/1/2019 09:23

Finncap have a 465p target price.

They now see historic 39.6c EPS, i.e around 31p. They've left their dividend forecast at 24c, i.e around 19p - almost a 6% yield - but note there should be "some upside" to that with another special/supplemental dividend.

It would be interesting to see some potential sales numbers for the new Skyscreed high-rise product. Anyone here with industry knowledge - I haven't got the foggiest! Given SOM's expertise I'd have to say that the potential must be pretty large.

[someuwin] 16/1/2019 08:30

All looking extremely positive here.

No reason not to be holding a big chunk of this one.

[likitorma] 16/1/2019 08:06

Great start. Loving it.

[modform] 16/1/2019 07:40

This has to be rerated at some point, it looks ridiculously cheap for such a cash generative company, just look at the cash pile

[podgyted] 16/1/2019 07:37

finnCap:-

"The company has announced a positive trading update signalling a stronger than
expected H2, with sales and EBITDA moderately ahead and cash more meaningfully
ahead of expectations. We upgrade our 2018 EPS forecast by 4.9% and raise 2019 by
4.6%, confirming robust trading continues. The company has also announced a small
bolt-on acquisition of Line Dragon for $2.0m, which looks an ideal close fit. The shares have significantly derated and the trading update confirms robust trading continues,
thus providing a strong buying opportunity. The 7% dividend yield and single digit P/E
in 2019 highlightstrong value – this quality stock is one of our favourites. "

Well they like it!

[likitorma] 16/1/2019 07:23

Hope this does not become one of those typical AIM days where they spike it up on news but it completes the day in the red territory as profit taking happens. Be mindful of spikes, MMs will bring your trousers down.

[xajorkith] 16/1/2019 07:22

Superb performance, despite all the fear, proving once again what a high quality company this is.

Should see a significant rise.

[podgyted] 16/1/2019 07:18

The new product could be huge.

"The Company continues to make good progress in executing its product innovation growth strategy highlighted by the introduction of the new SkyScreed© 25, a new, innovative product targeting the structural high-rise market segment. The SkyScreed© 25 will be officially launched at the annual World of Concrete trade show in Las Vegas, Nevada in late January 2019."

I remember the management being really excited about this last year - and now its ready to go!

[smallcapinvestor1] 16/1/2019 07:15

Agreed. Wonderful stuff. Fantastic management doing great work for all stakeholders.