Analysts at Canaccord Genuity lowered their target price on oil and gas industry supplier Hunting from 320.0p to 200.0p on Thursday, stating the group was now trading below inventory value.
Canaccord said Hunting faced “a classic challenge”, a company with “clearly differentiated skills” whose core market of oil and gas was cash-generative but in “structural decline” and where investors no longer see “a credible long-term growth case”.
The Canadian bank highlighted that earnings from oil and gas had “disappointed for a long time”. With Hunting generating “meaningful profits” in just two of the seven years since the end of the oil and gas supercycle in 2014.
However, Canaccord did noted that group was nonetheless cash generative and its $270.0m inventory provides the company with substantial asset backing as it starts to make acquisitions in adjacent, high-growth areas.
“We have been BUYers through the downturn and whilst the investment case has changed, to deep value, we reiterate that with a new price target of 200.0p (was 320.0p), reflecting weaker earnings expectations as the group transforms to a more diversified end customer mix over the next few years,” said the analysts.
Canaccord also noted that Hunting’s current market cap of $329.0m, as of Wednesday’s close, was below its inventory plus net cash balance of $374.0m.
