About the company:
Somero Enterprises, Inc [SOM] provides industry-leading concrete-levelling equipment, training, education and support to customers in over 90 countries. The Company’s cutting-edge technology allows its customers to install high-quality horizontal concrete floors faster, flatter and with fewer people. Somero equipment that incorporates laser-technology and wide-placement methods is used to place and screed the concrete slab in all building types and has been specified for use in a wide range of commercial construction projects for numerous global blue-chip companies.
The table below shows an overview of the past 5 years of trading.
|31 Dec 2017||Full Year||86||18||33.00||USD|
|31 Dec 2016||Full Year||79||14||25.00||USD|
|31 Dec 2015||Full Year||70||12||21.00||USD|
|31 Dec 2014||Full Year||59||15||26.00||USD|
|31 Dec 2013||Full Year||45||5||10.00||USD|
One can extrapolate a decelerating growth rate with the 2017/2016 turnover being 9% compared to the 2014/2013 at 31%. Furthermore the past 6 month revenue growth posted in the interim results show revenue growth of 6%.
The EPS does better with the recent post being 20% and likewise the 2017/2016 EPS growth being 28%. However, if revenue fails to continue to grow, then the company will be limited.
If one assumes that the company stops growing at 100 million turnover with a 50c net income per share and remains at current multiples then the projected share price would be around 475 which is 15% above current levels on a conservative basis.
The current earnings multiple for SOM is 12.5X with a 4% dividend yield and a 2x dividend cover. The FTSE100 multiple is 14.25 and the FTSE250 is 16 for comparison, so SOM offers a 20% discount on this basis.
The shareholder breakdown is as follows:
|Unicorn Asset Mgt||4,572,661||8.13|
|Close Asset Mgt||4,017,962||7.14|
|Lazard Freres Gestion||2,298,000||4.08|
|Artemis Investment Mgt||2,206,123||3.92|
|Old Mutual Global Investors||2,171,000||3.86|
|Jupiter Asset Mgt||2,150,000||3.82|
|River & Mercantile Asset Mgt||2,113,691||3.76|
|Aberdeen Standard Investments||2,043,314||3.63|
|Janus Investment Mgt||2,011,980||3.58|
|Artemis Investment Mgt||1,776,443||3.16|
|Hargreaves Lansdown Asset Mgt||1,694,924||3.01|
|JPMorgan Asset Mgt||1,555,351||2.76|
In the terms of AIM Rules published February 2007 and insofar as it is aware, at 27 June 2018, 10.85% of the company’s AIM securities were not in public hands.
The shares of SOM are not subject to UK stamp duty reserve tax which makes them 0.5% cheaper to buy compared to a FTSE 100 stock.
SOM equipment has been used in construction projects for a wide array of the world’s largest organizations including Walmart, Home Depot, B&Q, Carrefour, IKEA, Mercedes-Benz, Coca-Cola, FedEx, Tesla and Prologis.
A simple breakdown is:
EMEA: Europe, India, Middle East, Scandinavia, and Russia
ROW: China, Southeast Asia, Australia, Korea and Latin America
- If the company has such big customers and such a good product, then why is the growth rate so slow especially given that the company is worldwide ?
- What are the market risks ?
update 28 Nov 2018
Based on the new share price (320p) and the updated market cap (178 mill).
If one assumes that the extrapolation using first & second derivatives produces £24 mill, then the PE for 2018 would be 7.5x.