Small Cap Value Report (Fri 12 Jan 2018) - SOM, XPP, PEG, QTX, LGT, IPX

Friday, Jan 12 2018 by
75

Good morning!

Plenty of interesting little updates today.

I shall work through this list:

There have also been requests for me to cover some of the asset management companies which had trading updates this week. Duly noted!

Regards,

Graham



Somero Enterprises Inc (LON:SOM)

  • Share price: 370p (+8%)
  • No. of shares: 56 million
  • Market cap: £208 million

Trading Update

This is a US-based provider of concrete "screeding" machines - they allow for new concrete floors to be made perfectly flat.

We've covered this stock plenty of times here before. It's one of the few quality overseas stocks on AIM!

Today's update let us know that the company continues to perform well, and was ahead of expectations in H2.

As a result of the strong H2 performance, the Board now expects 2017 revenues will be slightly ahead of market expectations of $84.7m, EBITDA will be comfortably ahead of market expectations of $26.0m driven by the volume increase and effective operating cost management, while net cash at 31 December 2017 is expected to be not less than $18.5m, well ahead of market expectations of $16.5m.

It's helpful that the market expectations are given, so we don't have to guess what they are!

Most of the new revenue comes from geographic expansion, rather than from new products.

The company has many excellent characteristics, not the least of which is the apparent lack of competition in manufacturing these niche products.

The only criticism I've seen fit to make is that it hasn't made new product development a slightly bigger priority. It typically spends 2% of sales on product development, and introduces at least one new product per year. Could it be a little bit more ambitious than this, perhaps? Only $1 million of 2017's revenue growth has come from new products.

One of the benefits of being careful with its development spending is that the cash pile keeps growing. And the company has been quite generous in paying out surplus cash to shareholders in the past. However, it sounds like…

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Disclaimer:  

All my own views. I am not regulated by the FSA. No advice.

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Somero Enterprises, Inc. is a manufacturer of laser-guided equipment. The Company's equipment automates the process of spreading and leveling volumes of concrete for commercial flooring and other horizontal surfaces, such as paved parking lots in North America. The Company's products include S-22E, S-15R, S-15M, STS-11M, S-840, S-485, CopperHead XD 3.0, Mini Screed C, PowerRake 3.0, 3-D Profiler and SiteShape. Its Somero Floor Levelness System monitors Laser Screed performance, operator performance and reports alert percentages of issues. The Somero SiteShape System allows for grade shaping automatically using users' motor grader, dozer or other grading machine. The Somero 3-D Profiler System allows automatic paving of contoured sites using a Somero Laser Screed equipment. The CopperHead XD machine encounters applications, such as chaired rebar, low slump and poor subgrades. The Somero eXtreme Platform (SXP) allows users use their Laser Screed equipment. more »

LSE Price
397.5p
Change
0.6%
Mkt Cap (£m)
223.7
P/E (fwd)
n/a
Yield (fwd)
n/a

XP Power Limited is a United Kingdom-based developer and manufacturer of critical power control components for the electronics industry. The Company provides power solutions, including alternating current (AC)-direct current (DC) power supplies and DC-DC converters. The Company's segment include Europe, North America and Asia geographical. It designs-in power control solutions into the end products of blue chip original equipment manufacturers, with a focus on the industrial, healthcare and technology sectors. Its product categories include high efficiency/convection-cooled, chassis mount/open frame, configurable, external, encapsulated and printed circuit board (PCB) mount, DIN rail, baseplate-cooled, through hole mount, surface mount, light-emitting diode (LED) drivers and distributed power/hotswap. more »

LSE Price
3580p
Change
-0.6%
Mkt Cap (£m)
688.9
P/E (fwd)
19.0
Yield (fwd)
2.4

Petards Group plc (Petards) supplies advanced security and surveillance systems. The Company operates in the development, supply and maintenance of technologies used in advanced security, surveillance and ruggedized electronic applications segment. It offers software driven on-board digital video and sensor systems for fitment to new build or retrofitted to existing rolling stock, and its applications include driver only operation, condition monitoring, saloon car closed circuit television (CCTV), drivers view cameras and automatic passenger counting systems. It offers electronic defensive countermeasure systems for fitment to rotary and fixed wing aircraft, threat simulation systems and mobile radios predominantly for the United Kingdom Ministry of Defense. It offers mobile speed enforcement and automatic number plate recognition (ANPR) systems to law enforcement agencies, and is sold under the Provida brand. It serves markets, including transport, defense and emergency services. more »

LSE Price
24.5p
Change
 
Mkt Cap (£m)
14.1
P/E (fwd)
10.8
Yield (fwd)
n/a



  Is LON:SOM fundamentally strong or weak? Find out More »


41 Comment on this Article show/hide all

Paul Scott 12th Jan 1 of 41
13

Positive update from Somero Enterprises Inc (LON:SOM) today (disclosure: I have a long position)- a very nice, niche business, which makes the laser-guided machines used to lay perfectly flat concrete floors (very important for warehouses). Being based in USA, it should hopefully benefit from tax reductions.

Paul.

EDIT: I've just seen a broker note, upgrading 2017 EPS forecast by 7.7% to 29.5c, and 2018 by 7.0% to 36.8c. That translates into 21.8p and 27.2p, giving a 2017 PER (based on share price now of 360p) of 16.5 times, and a 2018 PER of 13.2.

Conclusion - it still looks cheap, based on 2018 forecasts. Also note that it has a strong balance sheet, and reports net cash today of $18.5m. Positive outlook comments too. Very nice.


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About Graham N

Graham N

Full-time investor and independent analyst. Prior to this, I spent seven years in the financial markets as an analyst and institutional fund manager. I'm CFA-qualified, also holding the Investment Management Certificate and the STA Diploma in Technical Analysis.Away from finance, my main interests are recreational poker and everything to do with China, especially Mandarin Chinese. more »

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