Hunting Share Price Drop Was Disproportionate, Says Analyst

Equity Development told investors in a note on Monday that the sell-off in Hunting (LON: HTG) shares following the oilfield services group’s first-half results went too far, reiterating a fair value estimate of 502 pence on the stock.

“The adverse share price response following Hunting’s H1 results announcement was disproportionate, in our view,” analyst Toby Thorrington wrote.

The absence of a sizeable discrete order in the Middle East has distracted from strong progress at the Subsea and Perforating Systems divisions and the broader outlook across the group’s diverse end markets, he said.

First-half results were in line with pre-close guidance. Subsea and Perforating Systems advanced revenue and EBITDA strongly, largely offsetting a tough comparator in OCTG, leaving group revenue down 6% and EBITDA down 12% year over year, with an EBITDA margin of 12.5%. Hunting reaffirmed its commitment to a 13% annual dividend increase, declaring a 7-cent interim payout, and ended the period with net debt of $19 million.

The missing Middle East order prompted Hunting to cut full-year EBITDA guidance to $138 million to $141 million from $145 million to $155 million. Equity Development trimmed its own EBITDA estimates by 5% this year and around 3% thereafter.

Hunting shares fell 14.5% on Friday to 405p. The stock dropped a further 2.8% in Monday’;s session, closing at 393.5p per share.

Thorrington noted the share price fall equated to roughly £100 million of equity value, widening the discount to fair value to nearly 20%, with potential further upside if Hunting wins in the KOC re-tender expected later this year.