Good morning!
Somero Enterprises Inc (LON:SOM)
Share price: 156.5p (down 1.9% today)
No. shares: 56.2m
Market cap: £88.0m
(At the time of writing, I hold a long position in this share)
Trading update - this update is ahead of the AGM tomorrow. I like the concept of putting out a trading update the day before the AGM, as it gives everyone time to digest the news before the meeting. Other companies might like to consider adopting this approach too?
The key message is positive:
This positive trading environment, together with margin improvement due to price increases and cost controls, and solid operating cash flow generation means the Company's overall results are tracking comfortably in-line with market expectations for the full year ending 31 December 2016.
"Comfortably in line" must presumably mean slightly ahead? It seems odd that the share price should have slightly fallen today, when a rise would have been more logical.
Perhaps some investors were spooked by these comments about regional markets?:
Somero is pleased to report that overall business is progressing well in 2016 with positive trading in the Company's core US, European and Chinese markets. In the Latin America, Southeast Asia, Korea and Middle East territories, while year-to-date trading is somewhat below previous year levels, the Company remains encouraged by solid activity in these markets and expects improvement over the rest of the year.
Some people might have read this as introducing risk that these markets may not improve in H2? That doesn't concern me, because SOM is essentially a play on the health of the US economy - by far its most important market.
Valuation - the figures look extremely attractive - a low PER, together with a strong balance sheet (with net cash), and very high quality scores too. No wonder the StockRank of 97 is so high. This looks remarkably good value to me.
My opinion - of course, there is a reason that this share is so modestly valued. That's because earnings collapsed in 2008 when the financial crisis hit. So at some point in the future, we know that earnings will again fall sharply.
However, my view is that a crisis of the same severity as 2008 is probably not likely to happen for a while. Famous last words! Importantly now, policymakers know what to do when banks get into trouble -…
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