“I don’t know what the investment world thinks now,” Hunting (HTG) chief executive Jim Johnson told us, when asked for his thoughts on the market’s whipsawing views on his company’s stock, and its sharp leverage to commodity prices over the past year.
The water torture-like selling pressure from BlackRock, the world’s largest asset manager, probably hasn’t helped sentiment towards the oil services outfit. But then again, Mr Johnson’s outlook for 2019 suggests an uptick in activity is “conditional on activity levels improving” against a backdrop of “ongoing commodity price and geopolitical volatility”, which sort of explains investor nerves.
Activity levels had been particularly strong within onshore US basins in the first three quarters of 2018, before momentum “slowed marginally” in the final months of the year. Offshore activity showed signs of a return to form but “remains patchy”, while the best that can be said about Hunting’s international businesses is that losses narrowed, thereby capping the group-wide return on capital employed at 9 per cent.
Given the two-speed nature of trading, Hunting has at least managed cash effectively. Despite a surge in working capital from $39.9m to $96.6m, better overall profitability meant free cash flow climbed 64 per cent to $80.7m, leaving space for dividends, higher capital investment and a near-doubling in net cash.
Consensus forecasts are for earnings of 43.2¢ a share in 2019, against estimates of 35.6¢ last year.
| HUNTING (HTG) | ||||
| ORD PRICE: | 548p | MARKET VALUE: | £905m | |
| TOUCH: | 547-549p | 12-MONTH HIGH: | 935p | LOW: 448p |
| DIVIDEND YIELD: | 1.2% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 713¢* | NET CASH: | $61.3m | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2014 | 1.39 | 109 | 45.9 | 31.0 |
| 2015 | 0.81 | -289 | -156 | 8.0 |
| 2016 | 0.46 | -144 | -76.8 | nil |
| 2017 (restated) | 0.72 | -27.6 | -16.0 | nil |
| 2018 | 0.91 | 74.7 | 54.4 | 9.0 |
| % change | +26 | - | - | - |
| Ex-div: | 18 Apr | |||
| Payment: | 10 May | |||
| £1=$1.33. *Includes intangible assets of $330m, or 200¢ a share. | ||||
