Construction kit maker Somero Enterprise (SOM:AIM) saw a bounce back boom in building projects late in 2020, and that means full year results will sail beyond previous expectations.
Analysts at FinnCap hurried out a note to clients first thing on Thursday with a 25% hike in earnings per share (EPS) estimates that will grab the attention of many fund managers and retail investors. The analyst David Buxton also recalculated his share price target, coming up with 435p, more than 50% up on his previous 285p mark.
NEW PRODUCTS SEED DEMAND
Somero, which makes top of the line laser-guided concrete floor flattening equipment, saw sales of its three recently launched products (SkyScreed, SRS-4 and Broom+Cure) hit $7 million, helped by more Covid-safe on-site product demonstrations. Management decided to increase sales and support staff to meet the emerging need.
While this will ‘drive a meaningful increase in operating costs, which will temper profitability in 2021, it will also enhance prospects from new products thereafter’, said FinnCap’s Buxton.
FinnCap rejigged its numbers in the wake of Somero’s second half update which saw the company say that performance ‘significantly increased from the first half 2020 and surpassed revenues reported pre-pandemic in H2 2019,’ thanks to ‘robust trading activity in the company’s largest market, North America.’
PROFITS TO BEAT FORECASTS BY 24%
Somero now anticipates year to 31 December 2020 revenue of approximately $88 million, 10% higher than the $80 million analysts previously had pencilled in. That will equate to a near-24% jump in profits thanks to well managed costs, with adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of approximately $26 million. Consensus estimates had been pitched at $21 million.
Somero, which was flagged as one of Shares Great Ideas in November 2020 at 260p, rallied close on 7% in Thursday trade to a 373p two-year high.
