Hunting Plc (HTG)

Overview
Hunting Plc (HTG) is a manufacturer of tools & equipment for the energy industry. The company's business is divided into six product lines. The group has its operations worldwide and has a strong distribution network which helps the customers to get technical and logistical assistance locally. The outstanding market capitalisation was around £982.19 million and a dividend yield of 1.14 per cent.

Financial Results and Review – Financial Year 2018 ($, million)

(Source: Annual Report, Company Website)
 
In the Financial year 2018, Hunting Plc reported revenue of $911.4 million in the financial year ending December 2018 against $724.9 million for the previous year of the same period. There was a significant increase of 25.73 per cent due to an increase in the revenue from multiple geographical areas. The company reported Profit from continuing operations of $104.7 million in FY2018 against $14.3 million for FY2017. There was a significant increase due to increased revenue and a decline in the operating expenses of the company in the current financial year. The profit before tax for FY2018 stood at $104 million as compared to $11.5 million in FY2017. The profit after tax stood at $82 million in FY2018 as compared to $10.5 million in FY2017. The Basic earnings per share for FY2018 stood at 51.6 cents against 8 cents in FY2017. The Diluted earnings per share for FY2018 stood at 49.6 cents against 8 cents in FY2017.

Share Price Performance

Daily Chart as at Mar-20-19, before the market close(Source: Thomson Reuters)
 
On 20th March 2019, at the time of writing (before market close, GMT 9:52 AM), Hunting Plc shares were trading at GBX 584.50, down by 1.76 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 934.50/GBX 448.00. 
 
Valuation Methodology


Conclusion
The company had shown significant financial growth as compared with the previous year. There had been solid fundamental performance among all the product lines of the company. Overall there has been a significant decrease in the operating expenses of the company. But while mitigating controls, each business needs to take approval for a new commercial relationship, which increase the chances of Anti-Bribery and Corruption risk. Based on the strong growth prospects of the company and the valuation done using the above method, we have given a Speculative BUY recommendation at the closing price of GBX 595 (as on 19th March 2019) with single-digit upside potential based on 7.6x NTM Enterprise value to EBITDA (approx.) on FY19E EBITDA.
 

KAZ MINERALS PLC (KAZ)

Overview
KAZ Minerals Plc (KAZ) is among the largest copper producers in Kazakhstan. The company is engaged in the mining of copper and the development of new copper mining projects. The company has split its business into five reported segments.The outstanding market capitalisation was around £2.99 billion and a dividend yield of 1.45 per cent.

Financial Results and Review – Financial Year 2018 ($, million)

(Source: Annual Report, Company Website)
 
In the Financial year 2018, KAZ Minerals Plc reported revenue of $2,162 million in the financial year ending December 2018 against $1,663 million for the previous year of the same period. There was a significant increase of 30 per cent due to an increase in the production and prices of copper. The company reported EBITDA stood at $1,310 million in FY2018 against $1,038 million for FY2017. The company reported operating profit stood at $851 million in FY2018 against $715 million for FY2017. There was an increase of 19 per cent due to an increase in the revenue and a decrease in the operating expenses of the company in the current financial year. The profit before tax for FY2018 stood at $642 million as compared to $580 million in FY2017. The underlying profit stood at $530 million in FY2018 as compared to $476 million in FY2017. The Basic and diluted earnings per share for FY2018 stood at 1.14 cents against 1.00 cents in FY2017.

Share Price Performance

Daily Chart as at Mar-20-19, before the market close(Source: Thomson Reuters)
 
On 20th March 2019, at the time of writing (before market close, GMT 10:18 AM), KAZ Minerals Plc shares were trading at GBX 622.00, down by 2.17 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 1,102.50/GBX 421.50. 
 
Valuation Methodology


Conclusion
The company had increased its production capacity and the current copper prices have also increased. The current trading levels which indicate the stock movement towards 52-week high with support coming from a few growth drivers like increased financial performance especially revenue and profit and positivity coming from economic forecasts.Based on strong fundamental performance and the valuation done using the above method, we have given a BUY recommendation at the closing price of GBX 635.80 (as on 19th March 2019) with single-digit upside potential based on 5.7x NTM EV/EBITDA (approx.) on FY19E EBITDA.
 
* All forecasted figures and peers have been taken from Thomson Reuters. Currency exchange rate taken for 1 USD = 0.756 GBP

*The buy recommendation is also valid for the current price as covered in the report (as on Mar-20-19).

Note- GBp or GBX are interchangeably used for Pence Sterling.

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