Daily Stock Market Report (Thur 16th July 2026) - SOM, MSI, ROR, CAPD, DNLM

There’s little overnight news to report:

• US strikes on Iran continue. An Iranian-linked supertanker has been hit as part of the new blockade of Iranian ports.

• SpaceX is in the headlines as its share price has fallen back to $135, which is where its IPO was priced. It was over $200 a month ago.

• Thomas Tuchel is still expected to lead England into Euro 2028, despite criticism of his defensive substitutions in last night’s loss against Argentina.

Overnight market movements:

• The FTSE is down 0.35% at 10,470

• S&P 500 is unchanged at 7,575

• Brent crude (September) is down 0.5% at $83.80/bbl

• Gold is down 0.7% at $4,030/oz

• Bitcoin is unchanged at $64,900

Site issues: there are issues with the site this morning, I'm very sorry I don't have more information but I have raised the alarm! 

Afternoon update: I believe things are running more smoothly now.

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Roland Head joins me today.

The Agenda is complete.  Spreadsheet accompanying this report: link.

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Companies Reporting

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Graham's Section

Rotork (LON:ROR)

Up 67% at 485.2p (£3.96bn) - Offer for Rotork plc - Graham - TAKEOVER

After a lull in takeover activity, UK-listed stocks are suddenly dropping like flies again.

Rotork is an old name on the stock market, having been listed continuously since 1968.

But it turns out that Swedish-Swiss company ABB is willing to put a high price on it:

• 506p in cash (including a permitted dividend of 3p).

It’s a recommended acquisition and it’s at a 73% premium to yesterday’s close.

This is far above the typical minimum needed to get deals over the line, suggesting that a) the stock has been severely undervalued, b) the Rotork board negotiated a very generous offer, or c) some combination of the above.

Valuation:

The Implied Enterprise Value represents a multiple of approximately 5.3x Rotork's sales and 19.5x Rotork's adjusted EBITDA for the financial year ended 31 December 2025.

19x EBITDA is a serious earnings multiple. In P/E terms, the offer is about 29x, head and shoulders above the 16x forward multiple that it was trading at yesterday.

What it does: Rotork makes industrial flow control equipment: actuators, gearboxes and related software.

It will fit in nicely at the industrial conglomerate ABB:

Rotork is expected to operate as a separate division within ABB's Automation business area under a strategic growth mandate, consistent with the ABB Way. The Acquisition would add 3 per cent. to ABB Group revenue and 12 per cent. to the revenues of ABB's Automation business area for the financial year ended 31 December 2025.

The Chair of Rotork says: “The combination brings together two companies whose purposes are closely aligned, with a shared focus on automation and electrification to enable more sustainable and efficient operations.”

Irrevocable undertakings/letters of intent: there is no word yet from major shareholders as to whether or not they support the acquisition. They may have only heard about it today, like the rest of us. Here are the top entries on the shareholder register:

As we don't yet have undertakings or letters of intent from these institutions, we can't say for sure what position they'll take.  But I expect that they are very likely to be pleased with the prospect of a windfall at a 73% premium.

Graham’s view

Congratulations to anyone holding Rotork overnight. I think this is likely to go ahead due to the enormous premium being offered, far above where the UK market was willing to value Rotork.

As always, I have mixed feelings about this spate of takeovers. The obvious downside is that it leaves us with a smaller pool of listed shares to analyse. On the other hand, given that stock market valuations are low, we need these takeovers to realise value for our investments. And that's very important, too!

I'd be relaxed if there was a steady stream of IPOs to replace the companies that are leaving us, but that is not the case.

At least this wasn’t yet another US takeover. If anything, it proves that takeovers aren’t just being driven by the much higher valuations on the other side of the Atlantic.

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Roland's Section

Somero Enterprises (LON:SOM)

Up 14% at 211p (£110m) - Trading Update - Roland - AMBER/GREEN ↑

Today’s upgrade makes for pleasant reading for shareholders in this US small cap, which produces concrete-levelling machines used by construction contractors.

Somero makes most of its money in the US but has suffered a slump in sales in recent years following the pandemic-era warehouse boom. It looks like the group’s performance may be starting to recover under newish CEO Tim Averkamp.

H1 trading update:

The Board is pleased to report better-than-expected trading in H1 2026, as improved conditions seen toward the end of 2025 continued through the first half, primarily reflecting continued stabilization in US private non-residential construction, the Company's largest market.

Customer activity in the region has improved, with some projects previously delayed by uncertainty over tariffs, interest rates, restrictive immigration policy, and geopolitical conflict beginning to move forward.

North America: Somero says it’s seeing improving demand for its larger Boom Screeds following a three-year decline, with new models contributing to sales. I guess this could reflect contractors who purchased equipment in 2021-23 deciding to upgrade to newer models.

Other markets: Somero remains heavily dependent on the US market which generates about three quarters of revenue. But the company is trying to expand in Europe and Australia and say it’s seeing some progress in these markets:

• Europe: “trading was ahead of H1 2025, despite the market continuing to be affected by macroeconomic and geopolitical headwinds, as well as competitive pressures”.

• Australia: trading “continued to normalise, improving moderately year on year”.

• Rest of the World: “trading is expected to be broadly comparable with H1 2025”.

Outlook

Following the stronger first half, and assuming trading in the second half of the year is in line with management expectations, the Board now expects FY 2026 revenue to be ahead of market expectations, with commensurate improvement in profit and operating cash generation.

Somero specifies consensus expectations as being for revenue of $86m and adjusted pre-tax profit of $13.5m.

Fortunately, house broker Cavendish has made updated forecasts available on Research Tree this morning – many thanks. These show a useful increase to full-year expectations:

• FY26E revenue: $90.6m (+5.4% vs previous)

• FY26E adj pre-tax profit: $15.8m (+17.2% vs previous)

• FY26E adj EPS: 22.3c (+19.4% vs previous)

• FY26E net cash: $33.2m (unch)

This is good news, as it looks like Somero’s 2026 profits should now be ahead of those reported for 2025 (adj PBT: $15.2m, adj EPS: 20.0c).

It’s also encouraging to see that balance sheet strength has been maintained and that margins should improve this year as volumes start to recover.

Governance review: Somero recently suffered a remarkable shareholder rebellion, with a majority of shareholders apparently voting against every AGM resolution (see here and here).

I don’t know the background to this, but the company is carrying out a governance review and says today that it will publish the results on 21 July 2026.

Roland’s view

Somero’s operating profit has fallen by nearly 70% since 2021, but today’s update suggests 2026 could mark the start of a return to (modest) growth.

There’s still plenty of macro exposure to consider here – not least what happens if the data centre boom slows in the US.

Cavendish hasn’t published any forecasts for 2027 yet, suggesting visibility is limited. As I understand it, this is a characteristic of this business. In previous management webinars the company has explained that contractors don’t generally order new machines until they have a committed work package to deliver. As a result, Somero has to maintain good stock availability despite only having very short-term visibility on sales.

Today’s upgraded forecasts and share price movements leave Somero trading on a 2026E P/E of 13 with a possible dividend yield of 3.9%.

While Somero’s sales and profits remain well below past levels, this is reflected in the share price. Personally, I think a return to historic highs may be unlikely. My impression is that Somero faces more competition than it did historically.

Even so, I don’t see any reason why Somero can’t remain a leading player in the concrete levelling market if it’s well managed. I think there’s scope for further gains if the company can deliver a sustained return to (modest) growth:

Graham was neutral on Somero in June and the StockRanks have mirrored this view.

I’m tempted to remain cautious, but in the light of today’s upgrade I think it’s fair to update our view to be moderately positive, at AMBER/GREEN.

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MS International (LON:MSI)

Down 4% at 1,400p (£230m) - Final Results & Directorate Changes - Roland - GREEN =

Today’s results are slightly overshadowed by the news that MSI’s executive chairman and largest shareholder Michael Bell has stepped down after 50 years with the business.

Mr Bell explains his departure with the comment that “age brings notable challenges”. He will become Life President from today and has also entered into a consultancy agreement for a fee of £12,500 per month.

Bell will be replaced by two men:

• Michael O’Connell is promoted from Group MD to CEO. He has worked with Bell for over 40 years and is “fully aligned with my [Bell’s] approach to the business”. O’Connell is a 6.5% shareholder.

• Anthony Wreford will become non-executive chairman. Mr Wreford is an experienced strategic advisor who is said to have “played an important role in the Company’s recent strategic decisions in an independent advisory capacity”.

Of course, the main strategic change in recent times was last year’s decision to focus on developing MSI’s defence business and investigate the sale of its other divisions (Forgings & Petrol Station Superstructures and Branding).

Possible disposals: today brings news that the company is in talks with potential buyers for the sale of the Petrol Station Superstructures and Branding business. No details are available currently, but Mr Bell hopes that “an announcement can be made before the end of the summer”.

The company also reports unsolicited interest in the Forgings business and plans to revisit this once the Petrol Station Superstructures sale is “approaching a satisfactory conclusion”.

Today’s results are presented with the main focus on Defence, reflecting the group’s strategic plan. Let’s take a look.

FY26 results (y/e 30 April 26): key points

• Revenue down 2.1% to £115.0m

• Pre-tax profit down 24.9% to £15.1m

• Diluted earnings per share down 24.5% to 65.7p

• Net cash of £46.5m (FY25: £28m)

• Full-year dividend of 26p per share (FY25: 23p)

There are no broker forecasts in the market for this business, so we cannot see if these numbers are in line with expectations. However I think that they are.

In its FY25 results, the company advised that delayed purchase decisions in the defence sector meant that FY26 results could be adversely affected. This seems to have been reflected in today’s numbers.

Defence and Security: in today’s management commentary Bell sounds a note of frustration about the length of time needed to navigate government procurement processes (my emphasis):

Additionally, it's very encouraging that most Governments now regularly state that defence should have a higher priority. However, getting to the point where these objectives translate into firm defence orders is a jump that's taking longer than reasonably anticipated. Anyone with an eye on the political agenda will have seen how Governments are reassessing their defence priorities and objectives against other financial demands.

Despite this, there is some positive news on the company’s MSI-DS Terrahawk counter-drone system:

Following on from the successful trials of the MSI-DS Terrahawk VSHORAD, these systems have been providing vital protection within the Middle East. The MSI-DS Terrahawk has been officially recognised as having provided protection against a significant number of drones within the region during the conflict.

The group’s newly-developed MSI-DS Multi Weapon Station has also received its initial order, “for delivery into the Middle East in 2027”.

More broadly MSI reports “a substantial level” of interest in its “combat proven systems” and expects much of this to convert to orders in due course. The company has appointed a new US VP of Business Development to help develop US land and naval markets.

Management reminds us that revenue from defence contracts is only recognised when control of goods and services passes to the customer:

The significance is that, whilst we might be busy in our manufacturing and production facilities, the timing of the transfer of control means revenue and profits are not instantly recognised.

Profitability & Balance Sheet

Today’s accounts show a reduced operating margin of 12.1% (FY25: 15.9%). But this remains a very profitable business – my sums suggest a return on capital employed of 18.7% (FY25: 22.5%).

Cash generation also deserves a mention. MSI’s net cash position improved to £46.5m last year (FY25: £27.8m). Checking the cash flow statement suggests this was due in large part to a net working capital inflow of c.£11m, as inventories and receivables fell sharply (presumably reflecting completed orders).

Stripping out working capital movements suggests to me that free cash flow was about £11m last year, giving perfect 100% conversion from net profit of £11.0m.

This looks like a high quality business to me, in financial terms, with great balance sheet strength and liquidity. I don’t have any concerns in this regard.

Outlook

Nomad Shore Capital has published an updated note on MSI today but hasn’t included any forecasts for FY27. The company’s guidance for the year ahead is also limited, albeit positive:

As we have previously communicated, these results confirm a year of strategic progress and new opportunities without these being yet reflected in the overall financial performance. I am confident that many of the market barriers that have constrained us last year will ease during the current financial year.

I, therefore, leave the Board confident that our prospects remain excellent.

Roland’s view

Last year’s earnings decline means the shares look more expensive than they did in January, despite a flat performance so far this year:

Today’s results value MSI shares on 21x trailing earnings, with a 1.9% dividend yield. This P/E falls to 17x if net cash is stripped out.

The investment case here is based on the potential for significant growth in defence, paired with possible proceeds from the disposal of the group’s other operating divisions.

Taking a medium-term view on this suggests to me that this story remains intact and that there could still be some value on offer here. I wonder also if there’s the potential for a takeover of the defence business once the other divisions have been divested.

We’ve been GREEN on this business in the past, with Graham commenting in January that “this is really a call on the integrity and judgement of management, rather than any real insight into prospects of the company’s defence division”.

I’m inclined to maintain our positive view today on the basis that I think the story of management integrity and strategic consistency remains intact and could deliver further value, on a medium-term view.