Daily Stock Market Report (Fri 20 Dec 2024) - SOM, HEAD, MOS
Good morning!
The flow of news has reduced to a trickle and this is likely to be a very brief report.
9.50am: as there is nothing else of interest, I'm hanging up my pen here for today. See you on Monday!
Explanatory notes
A quick reminder that we don’t recommend any shares. We aim to review trading updates & results of the day and offer our opinions on them as possible candidates for further research if they interest you. Our opinions will sometimes turn out to be right, and sometimes wrong, because it's anybody's guess what direction market sentiment will take & nobody can predict the future with certainty. We are analysing the company fundamentals, not trying to predict market sentiment.
We stick to companies that have issued news on the day. We usually avoid the smallest, and most speculative companies, although if something is newsworthy and interesting, we'll try to comment on it. Please bear in mind the "list of companies reporting" is precisely that - it's not a to do list. We have a particular emphasis on under/over expectations updates, and we follow the "most viewed" list of readers, so if you're collectively interested in a company, we'll try to cover it. Add your own comments if you see something interesting, and feel free to discuss anything shares-related in the comments.
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What does our colour-coding mean? Will it guarantee instant, easy riches? Sadly not! Share prices move up or down for many reasons, and can often detach from the company fundamentals. So we're not making any predictions about what share prices will do.
Green (thumbs up) - means in our opinion, a company is well-financed (so low risk of dilution/insolvency), is trading well, and has a reasonably good outlook, with the shares reasonably priced. And/or it's such deep value that we see a good chance of a turnaround, and think that the share price might have overshot on the downside.
Amber - means we don't have a strong view either way, and can see some positives, and some negatives. Often companies like this are good, but expensive.
Red (thumbs down) - means we see significant, or serious problems, so anyone looking at the share needs to be aware of the high risk. Sometimes risky shares can produce high returns, if they survive/recover. So again, we're not saying the share price will necessarily under-perform, we're just flagging the high risk.
Others: PINK = takeover approach, BLACK = profit warning, GREY = possible de-listing. Links:
Daily Stock Market Report: records from 5/11/2024 (format: Google Sheet). Updated to 19/12/2024.
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our view (Author) |
|---|---|---|---|
Somero Enterprises (LON:SOM) (£169m) | Directorate Changes | CEO/President retires in March 2025. He will consult for a further year. Search for new CEO begins. | AMBER (Graham) |
Headlam (LON:HEAD) (£106m) | Property Disposals | £54m of sales at 64% premium to book. HEAD now has net cash plus a £95m property portfolio. | AMBER (Graham) |
Mobile Streams (LON:MOS) (£35m) | Final Results | Building a new sports betting business in Mexico. Cash available is £1.4m. | RED (Graham) |
Shearwater (LON:SWG) (£9m) | £2.3m contract wins | Momentum continues to build, supporting SWG’s ability to deliver results in line with expectations. |
Short Sections
Somero Enterprises (LON:SOM)
Up 2% to 312p (£173m) - Directorate Changes - Graham - AMBER
It’s a big day in Somero’s history as we learn that Jack Cooney is retiring as CEO in March 2025. He has been CEO since 1997 and is now 77 years old. The company did announce a succession plan last year which involved the promotion of Jesse Aho to COO, taking charge of new product development. Mr. Aho has now been appointed to President and I can only presume that he is a strong contender or the frontrunner for the CEO appointment. He has been with Somero since 2008.
In other news, the 89-year-old Chairman is also planning to step down whenever the new CEO is appointed. And we have a trading update: trading for FY Dec 2024 is in line with expectations.
Graham’s view: this one has gone off the boil in recent years as revenues and profits have been on the decline. I was neutral on it in August and was concerned that the company would fail to hit H2-weighted full-year forecasts for 2024. So I’m pleasantly surprised to learn that the company is on track (Cavendish forecasts: revenue £110m, adj. PBT £27.6m). However, I also note that no forecasts have been published for 2025; it was previously suggested that 2025 might be flat in terms of revenue.
Somero’s failure to achieve much traction outside the United States has been a disappointment, and I remain concerned that weak results within the US might be primarily due to cheaper alternatives from competitors, rather than cyclical construction demand and higher interest rates. According to the most recent official statistics, US construction spending year-to-date is up 7.2% compared to 2023 (Monthly Construction Spending, October 2024). So I am concerned that Somero could be facing fundamental challenges, and I would not want to pay more than the current PER of around 9x for it. Perhaps new management can bring some new ideas to the table.
Headlam (LON:HEAD)
Up 11% to 146p (£118m) - Property Disposals - Graham - AMBER
Mark looked at this recently and noted a big discount to tangible book value, even before taking into account the undervaluation on the balance sheet of its freehold property. A big chunk of that value has now been realised with four property sales for almost £54m, where their book value was only £33m. Two of the properties will be leased back, one has been replaced, and one is apparently not being replaced at all. It’s all part of HEAD’s strategic changes and improved operational efficiency.
Following the transactions, HEAD says that it has a net cash position and a property portfolio with a January 2023 market valuation of £95m. HEAD’s net debt was last seen at £28m as of June 2024, and I expect that it increased further since then, due to operating losses suffered in H2.
Graham’s view: net assets were £200m as of June 2024. We could potentially write that up by c. £20m on the back of today’s news, minus the losses in H2. It would have been helpful if the company had confirmed the book value of its remaining properties, to easily understand the write-ups that might be possible from additional transactions.
It is tempting to upgrade our view on this to AMBER/GREEN on the basis of balance sheet strength, but the company is still forecast to make a large pre-tax loss (£20m+) in 2025. Flooring distribution is a low-margin, cyclical business and the balance sheet is the only obviously attractive feature of this share, in my view. I think you also need some conviction in the turnaround plan to be tempted here.
Mobile Streams (LON:MOS)
Down 1% to 0.4p (£35m) - Final Results - Graham - RED
This was a basket case when I looked at it six years ago. Its current focus is a 23% interest it has in a Mexican casino and sports book business. Previous business activities have more or less dried up.
Today’s results to June 2024 (they are very late) disclose that cash was close to zero as of June 2024. The company has raised £1.6m in fresh equity since then, “mostly via the exercise of warrants”.
With its partners in the new Mexican venture, MOS is “in the final stages of preparations for the launch of online sports betting and online casino operations as well as sports podcast services…”
Graham’s view: according to an announcement in April, the Mexican business raised fresh equity at a pre-money valuation of $5m. Mobile Streams was happy to report a 5x increase in the value of its original investment. But remember that MOS only has a 23% interest here. Unless the value of this business has multiplied many, many times since April, I don’t see how it’s possible to justify this £35m market cap.
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36 comments
RE: MOS and it's 23% interest in the Mexican sports betting business.
You say "Unless the value of this business has multiplied many, many times since April, I don’t see how it’s possible to justify this £35m market cap."
Actually, they've bought 100% of the Mexican business.
Late RNS from Morgan Sindall (LON:MGNS) yesterday. Pleasantly pleased to see that a non executive director had bought 75K @ 37.658 (price currently 38.75) then gob smacked further down the RNS to see his wife had purchased 430K. Shares up 66% over 1 year, but those purchased indicate there may be more to come.
We've just published our latest podcast episode featuring Graham, Roland, and Megan. I think we've fixed the audio teething problems we had last week, thanks all for that feedback!
You can find Takeovers, £100m whisky, and decoding stock market jargon now on:
Listened to it this evening while doing the recycling! Would be great if you could release them on Amazon Music too please :-)
"The flow of news has reduced to a trickle".. nice choice of words with Mobile Streams reporting today.
Canaccord Genuity sees more upside at On The Beach
Canaccord Genuity has hiked its target price for travel company On Beach group (LON:OTB) by more than a half on the back of higher long-term growth potential.
Annual results from OTB earlier this month were in line with market expectations, though the group surprised to the upside with a £25m share buyback plan, new medium-term targets and a strong start to the new financial year.
Medium-term targets include a total transaction value of £2.5bn, up from £1.2bn last year, EBITDA margins of 40% (from 31.8%) and a pre-tax profit of £85m (from £31m).
"This suggests a marked acceleration in the growth based around total addressable market (TAM) expansion into City breaks," Canaccord said.
"We believe near-term growth is likely to be driven by cross-selling to the existing active customer base, with the initial impact of launch suggested being very positive, and this should help underpin short-term numbers before the company looks to start competing for new customers against much larger peers."
Canaccord cut its profit forecasts for next year slightly on the back of higher expected investment costs, but raised estimates for the year after. The broker reiterated a 'buy' rating on the stock, and raised its target price from 192p to 287p.
Somero Enterprises (LON:SOM) there is chatter about being acquired. Note Regent Gas Holdings new position.
Or maybe the new CEO will take the list to the US to benefit from Trump.
I has just occured to me to say a HUGE WELL DONE AND THANK YOU .to Stockopedia for not having adverts - and as a result not asking subscribers to pay to go 'ad free' as per ADVFN which annoys the hell out of me. Cheers! Keep it up guys.
Please put the ticker so we know what you are talking about without having to look back to the poster who you are referring to. Its simple.
There's only 11 comments, 8 are about On Beach group (LON:OTB). Don't exactly need to be Sherlock Holmes
Someone feed the wolf please. Looks like he’s getting hungry :)
This made me chuckle
@cafcash49 Are you using 'unthreaded' view? Switch to 'threaded' view and it will make more sense and you will also be able to see the conversation flow.
Fascinating that Weinstein of Saba has decided to take on the boards of 7 investment trusts simultaneously! They made a killing on their previous stake in Scottish Mortgage Investment Trust (LON:SMT) and walked away with millions so it’s fascinating that the prices of some these have actually dropped on the announcements! Puzzling!
“Trust boards have recommended shareholders take no action while they draft fuller responses to Saba’s claims, unveiled yesterday, that they have failed investors by not holding fund managers to account for poor performance and wide discounts.
The boards of Edinburgh Worldwide (EWI), Baillie Gifford US Growth (USA), Keystone Positive Change (KPC), European Smaller Companies (ESCT), Henderson Opportunities (HOT), CQS Natural Resources Income & Growth(CYN) and Herald (HRI) have all said the proposals are not in the best interests of shareholders.”
https://citywire.com/investmen...
As someone new to investment trusts, can anyone explain what is going on and is this an opportunity to invest or a hazard ? Happy Christmas everyone
Their claim is that the fund managers should do better, and use their stake to apply pressure so that (in theory) the fund managers are either ousted or raise their game. That often encourages them to buyback their trust's shares to narrow the discount on them.
In theory, that should lead to higher prices, so whether or not this is an opportunity depends on whether you think Saba will make a difference.
Brilliant thanks!
I would not buy just because of SABA. There are however many trusts trading at large discounts . Plus you can get exposure to say Vietnam, China or Japan- there are many geographical specialist trusts. Also Private equity. There is a monthly Trust chat, this months is here. https://www.stockopedia.com/co...
Thank you, very helpful - it’s fascinating reading ! Happy Christmas
And to you Pat. Looking at what our portfolio's went down this week should be some bargains out there for New year shopping.
To add to the responses on the Saba investment trust saga David Stevenson has written an interesting comment on Doceo TV (which I think is free to register for ). Pretty much halfway down the note:
https://doceo.tv/insights/news...
QuotedData have also put out an interesting link this morning ( Saturday)
https://quoteddata.com/2024/12...
Saba, seeking to requisition to convene a general meeting of the company seeking to remove the current board and appoint two replacement directors in their place. [QD comment from Matthew Read: this proposal alone is utter madness in our view. Why would the shareholders of any of Saba’s targets want to hand over control to one dominant shareholder who can then act entirely in its own interest, rather than the collective interests of all? In HRI’s case, Saba Capital has acquired around 19% of the trust’s issued share capital but, because of the long-running issue of retail investors who hold their shares through the platforms tending not to vote, professional investors such as Saba get a disproportionate share of the vote. This is a concern, particularly for a fund such as Herald whose investments are very long-term in nature (it has a very long tail of small investments that trade infrequently) as Saba’s proposals are very short-term and look likely to erode significant value for its long-term investors if Saba is able to drive through what would amount to a fire sale for a portfoliosuch as HRI’s.]
Think Weinstein might be a bit late to the party at least with Baillie Gifford Us Growth Trust (LON:USA) as it is one of the best performing Investment Trusts in 2024 - price up 55% YTD even after the 6% fall in last two days. I recognise that it was very poor in 2022 & 2023 but this shareholder won’t have anything to do with an opportunist US hedge fund guy who thinks he and his mates can do better than 7 boards! Why would I when my current significant holding is pure profit due to well timed sales and purchases over the last 3 years. There are far worse performing investment trusts than these 7 but guess Weinstein thinks he can make a fast buck from this selection.
Ditto. I am a 14 year holder of Katie Potts Herald Investment Trust (LON:HRI) and resent the opportunistic approach by Saba which will just add unnecessary postage and legal costs to each of these trusts. I hope they all do something clever like set the meeting dates for all 7 on the same day! That would be fun! Send the bloodsucking leaches home.
Hi NeilS,
Agreed. I don't hold Herald Investment Trust (LON:HRI). However, many years ago (1992-2000) I was a senior manager in a company in which Herald Investment Trust (LON:HRI) held a significant holding in their portfolio. I worked closely with the CEO and CFO at the time and they viewed Katie Potts very favourably.
It has been an interesting year.
Thank you to the posters on here, I have learnt a lot from your comments.
Hope everyone has a good Christmas and a prosperous New Year.
MONY (LON:MONY) down 5% this morning with no apparent news, any ideas anybody?
There is a RNS on 13 Dec that Blackrock have dipped below 5% in MONY (LON:MONY) . Perhaps they are continuing to sell? This is such a thin market that all it takes is one institution selling and you have a meaningful lurch down. Personally I think it’s highly compelling at these levels. But then again I could say the same for many, many UK small / mid caps. If nothing changes we can expect a boatload more takeover activity next year. But I’m hoping for a meaningful correction in the US driving some reversal in flows away from the US. The disconnect in valuations between the US and the rest is now bonkers…
On Beach group (LON:OTB) are buying back for cancellation big chunks OFF book which seems a bit bizzare. A better strategy would be sustained order book buying but presumably the big sellers are not long term holders.
At this rate they'll exhaust the £25m buyback quite quickly!
Can you explain what ‘off book’ means? The sale of shares agreed directly rather than in the open market?
On Beach group (LON:OTB)
Off-book trades are made directly between two parties, and are typically negotiated privately, especially for larger trades.
AT: Automatic Trade - An automatic trade generated by the SETS system through the order book.
Thank you that is very helpful.
It makes no difference nor any sense to do anything other than take out supply at lowest price possible.
See Simon Cooper (founder) sold the c.3m he bought around 88p at 228p. Decent trade from him that was well flagged here when he initially bought. I followed him in with some. Might follow him out and top slice some
I agree Toweller, very well played by Simon Cooper he deserves the profit. Be nice to see more CEOs put some proper cash on the line. If they think their shares are so undervalued, as they all say in interviews, get your wallet out.