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Broker tips: Hunting, F&C Asset Management, Forth
Thu, 09 Feb, 2012
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Broker tips: Hunting, F&C Asset Management, Forth
Thu, 26 Aug 2010, 11:29:00
FinnCap believes interim results from <b>Hunting</b> leave the oil services group well placed to achieve the broker's projected full year numbers which have been upgraded to take into account the recent Innova-Extel acquisition. "The outlook statement points to firming end markets, stating that despite the Gulf of Mexico issue the second half looks encouraging. The group has increased capital expenditure on a number of projects as well as making some smaller bolt on acquisitions," the broker notes. Since the period end the group has also acquired Innova-Extel for $125m, prompting FinnCap to increase its 2010 profit before tax forecast for the group to £40.7m, while next year's forecast moves up to £55.7m. "There may be some further scope for uplift on today's decent interim results,"suggests FinnCap analyst David Buxton. "The shares have outperformed over recent months and now trade on a P/E [price/earnings] of 29x for the current year dropping to 20.8x next year. The important ex-cash basis puts Hunting on just 12x for 2011, versus the peer group on 13.6x. Alternatively an EV [enterprise value] /EBITDA [earnings before interest, tax, depreciation and amortisation] of 5.0x for 2011. We therefore continue to rate the shares a buy," the broker concluded. Westhouse Securities is another broker that has Hunting on its "buy" list. It described the results as "a solid performance from Hunting, with the earnings enhancement from the Innova-Extel acquisition still to come." The halving of the interim dividend by fund manager <b>F&C Asset Management </b>caught the market on the hop, and is likely to sour sentiment in the short term, KBC Peel Hunt reckons. The broker is reviewing its target price and stock rating after underlying profit before tax and net outflows in the second quarter disappointed. "Assets under management as at 30 June stood at £95.3bn, a 6% reduction from 31 March (and compared to our expectation of £96.5bn), reflecting lower market levels and adverse foreign currency movements," KBC analyst Stuart Duncan observed. Adjusted profit before tax rose by 7% to £15.9m. KBC has not put the finishing touches to its new set of profit forecasts but Duncan said the full year profit before tax figures would probably be revised to somewhere around £50m, taking into account "current market and foreign exchange levels, as well as the contribution from Thames River Capital (which is expected to complete imminently)." "We expect our earnings per share (EPS) forecast to fall to c6.5p, taking into account the greater number of shares now in issue (we would expect a range of EPS numbers given the complexity in determining the appropriate number of shares to use post TRC acquisition)," the broker added. "We shall review our target price ... to take account of the reduced dividend but are mindful of balancing this with Sherborne's intentions going forward," Duncan said, referring to Sherborne Investors, which bumped up its stake in F&C Asset Management on 18 August to 11%. "Sherborne's intentions are not yet clear but previous experience indicates an activist stance towards delivering increased value," Duncan suggests. Results from <b>Forth Ports</b> were ahead of Nomura Securities' expectations, but not enough to persuade the broker to up its price target or full year forecasts. "At the underlying pre-tax profit level, the first half came in at £17.0m, against our forecast of £15.8m. The outperformance came from the core ports division and the contribution from Ocean Terminal," the broker said. For the time being, at least, the broker is sticking with its full year earnings per share forecast of 53.57p, although it notes that management reported that the second half has started well, despite some still difficult market conditions. "Our valuation is also unchanged at this stage. With good progress being made with property planning and development, alongside the renewable energy initiatives, the risk to this valuation is moving to the upside," the broker said. Nomura rates the shares a "buy" with a price target of 1450p.
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