Hunting – sounding the horn for the recovery

6 mins. to read
Hunting – sounding the horn for the recovery

Hunting has had its ups and downs over the years, but Mark Watson-Mitchell reckons better times are ahead.

Although it has been in existence for over 140 years, I have only followed this group for the last four decades.

From its origins of shipowning, it ventured into oil tankers, and later it went into aircraft servicing and manufacturing, even owning an airline. Then in 1938, it started oil prospecting in Texas and later moved into Canada, before progressing into petroleum retailing, lubricants and specialised products.

It has reinvented and reorganised its operations several times in its history and always shown its ability to adapt to changing fortunes in its marketplace.

I can remember having several breakfast and lunchtime meetings in the company’s offices overlooking Nelson’s Column in Trafalgar Square, with Richard Hunting, the group’s former Chairman. I always enjoyed listening to him and his team describing the operations of their business.

It has had its ups and its downs over the years. However, I have always been impressed by the professionalism that its management has shown.

The gradual metamorphosis

Today Hunting (LON:HTG) is an international energy services provider to the world’s leading upstream oil and gas companies.

Irrespective of whether it is intended for oil, gas, onshore or offshore, conventional or unconventional, its broad range of products and associated services spans the lifecycle of the wellbore.

It manufactures the premium, high-end tools and components that are required to extract hydrocarbons across that lifecycle of an oil and gas well.

An impressive portfolio of intellectual property

Hunting’s substantial IP portfolio is a significant barrier to entry for competitors and allows it to defend margins and offer more operational flexibility, particularly in a downturn. 

It has a truly global footprint, employing nearly 3,000 people operating in 11 countries with distribution and with the use of its products extending well beyond those countries. 

Recent results

The group declared its final results for the 2020 year two weeks ago and its Report and Accounts are due to be published this coming Thursday (18). 

The group’s AGM is due on 21 April, at which time we should get the latest trading update.

The reported finals showed that 2020 was not a good year for the group, which was understandable due to the massive reduction of activity in the global oil and gas marketplace. 

Last year’s revenues fell from $960m to just $626m, while 2019’s $93.1m pre-tax profit was replaced with an underlying adjusted $19.4m loss.

Current estimates

But oil prices have moved significantly better in the last few months and better times are now being anticipated.

Estimates for the current year suggest similar revenues, with the loss falling to only $5.4m. 

Going into 2022 sales could pick up slightly to $650m, with a break back upwards into profitability of around $5m.

Undervalued assets

On the face of it, that looks both dismal and dull, but I have faith in the group’s management to safely turn the group’s profitability around before resuming its previous growth path.

The group had net assets of $976m, at the last balance sheet date, with $101.7m cash in the bank.

With some 165m shares in issue the group is today capitalised at only £454m ($630m). 

It is obvious that the group has a strong enough balance sheet and cashflow to cope with its recovery back into profitability this year. About £702m of assets shows the company standing at around a 35% discount.

Broker ratings

Brokers are not in unison as to their price objectives for the group’s shares – RBS rate the shares a ‘sector perform’ up to 305p, while Jefferies rate the shares as a ‘buy’ looking for 360p. Barclays raised its price from 260p to 300p and recommend ‘overweight’ portfolio positions.

Less than three years ago the shares were trading at 845p, but by September of last year they had eased back to just 120p. At the start of this month the shares peaked at 297p, and they closed at 275p last Friday night.

My view

I am looking for the shares to be back over that peak and heading for 350p fairly soon and then head even higher.

Accordingly, I now set my target price at 350p.

Follow-up on Renewi, REACT, MP Evans, Avingtrans and Zytronic…

Renewi (LON:RWI)

Last Thursday’s results update was impressive and certainly helped to push the waste recycling group’s shares quite a bit higher.

Last Friday night they closed at 49.20p, after having hit 54.90p on the results day. That is now more than doubling my profile price early last October.

Broker Peel Hunt raised its ‘buy’ price objective from 49p to 64p.

(Profile 09.10.20 @ 24p set a Target Price of 35p*)


Have you noticed the way the shares of this cleaning business have been edging up over the last week or two?

They closed at 2.09p after hitting 2.20p, on Friday.

Could the punters be anticipating a positive trading update, covering the interims to the end of March, expected in the next few weeks? 

Hold tight, there certainly appears more to go for.

(Profile 28.01.21 @ 1.5p set a Target Price of 2.5p)

M.P. Evans (LON:MPE)

Having hit 720p in the middle of January, this sustainable Indonesian palm oil producer has since then seen its shares ease back to 590p. 

That could well be a good bargain to be had.

On Tuesday 23 March the group will declare its results for the year to end-December last – they will be impressive.

I am looking for revenues to have leapt nearly 40% to $165m, upon which it will have more than doubled its adjusted pre-tax profits to $22.5m ($10.7m), thereby jacking its earnings up more than three times to 22.5c per share.

Current year estimates are for $200m sales, 31c earnings, 25c of dividend per share.

I see the shares soon shooting way over my previous price objective – with 800p, even 900p being possible.

Remember that the group has been a large buyer of its own shares for cancellation.

(Profile 07.04.20 @ 540p set a Target Price of 700p*)

Avingtrans (LON:AVG)

Last Friday the market seemed to be delighted with this specialist energy and medical engineering group’s £35m disposal of its Peter Brotherhood subsidiary, marking the group’s shares up to 340p before profit-taking clipped them back to close up 24p on the day at 325p.

That subsidiary only cost £9.3m in 2017. The net proceeds will be used to pay down some of the group debt, while also giving it some added firepower following its PIE strategy (pinpoint, invest, exit) in other deals.

Brokers finnCap increased their price objective from 345p to 416p upon the announcement.

Stay firmly with the shares.

(Profile 04.11.20 @ 260p set a Target Price of 325p*)

Zytronic (LON:ZYT)

Having peaked at 185p last Thursday, the shares of this interactive touch sensor products group closed the week at 180p.

It is possible that we could see them rise still further ahead of the company announcing its interim trading update to end-March in early April, just a few weeks away.

The shares have performed very well in less than two months, up 47%.

There may well be more to go for, but I would not chase them until more is known.

(Profile 27.01.21 @ 122.5p set a Target Price of 155p*)

(Asterisk* denotes that Target Prices have been attained since profile publication.)

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