Somero smashes expectations and boosts dividend

Manufacturing specialist ends year with a bang
Thursday 12 Jan 2017 Author: Daniel Coatsworth

Somero Enterprises (SOM:AIM) 232.5p

Gain to date: 68.5%

Original entry point:  Buy at 138p, 14 January 2016

The US-focused specialist machinery manufacturer has issued a very positive trading update for its financial year ending 31 December 2016. Revenue, earnings before interest, tax, depreciation and amortisation (EBITDA) and net cash are all expected to be ahead of market forecasts.

SOMERO ENTERPRISES REG S - Comparison Line Chart (Rebased to first)

The company is so confident about the health of its trading that it will start to pay a greater percentage of earnings in dividends to shareholders. The payout ratio is moving from 30% to 40% of adjusted net income.

Its net cash level is also above the $10m target, so it has hinted at paying a special dividend in 2017. That will depend on requirements for current business needs and future investment in the first half of the year.

Broker FinnCap has upgraded its 2017 pre-tax profit forecast by 6.4% to $23.3m and reckons its will report $21.8m for 2016. Its price target for the next 12 months has been lifted from 217.5p to 254p.

We tipped this stock a year ago and it has since risen by 68.5%; a superb result. We remain big fans of the company as the stock isn’t overly expensive and there is a supportive backdrop amid implications that Trump wants to bring manufacturing back to the US. (DC)

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