Hunting PLC -Achieving Momentum Using New Technologies and also Taken Several Measures Against COVID-19 Outbreak.

Hunting Plc (LON: HTG) provides services to upstream oil and gas companies.

On 25^th June 2020, the company will release its trading update.
Q1 Trading Update (as on 15^th April 2020) – Reflecting Strong Balance Sheet, with Decent Liquidity Profile.

The industry in which the company operates is facing supply shock and unprecedented demand due to the outbreak of Covid-19 and collapse in oil prices. The trading in the first quarter remained in line with the expectations. The group’s balance sheet is well-positioned with adequate liquidity, including net cash position of USD 22.3 million as of 31st March 2020, and undrawn borrowing facilities of USD 160 million committed until 2022.

Share Price Performance
 
Daily Chart as at May-15-20, before the market closed (Source: Refinitiv, Thomson Reuters)

Hunting PLC’s shares were trading at GBX 155.50 before the market close (at 1:30 PM GMT+1) on 15th May 2020 and were up by 0.19 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 574.00 /GBX 148.90.

Valuation Methodology
 
 
*Peers: Petrofac Ltd, Salpem SpA, Sunsea 7 SA, and GGG SA.

*Currency Exchange Rate for 1 USD = 0.818931 GBP.

Valuation Metrics

(Source: LSE)

As on 30^th April 2020, the Price/Earnings, EV/EBITDA and Price/Book multiples of the HTG were 9.8x, 2.4x and 0.3x, respectively and the same multiples were lower as compared with the Oil Equipment Services & Distribution industry. It is reflecting that the company is trading at a lower multiple as compared to its peers.

Conclusion
Despite this uncertainty, Hunting stays in a good position to deliver shareholder value with its robust financial footing and balanced portfolio of products. The trading for the first quarter remained in line with the management’s expectations, and the group has taken multiple steps to tackle the uncertain period. The company acquired Enpro (Enpro Subsea Limited) for cash which shows the ability to expand operations quickly. For 2020, the outlook stays uncertain, due to COVID-19.

Based on the decent prospects and supported by valuation as done using the above method, we have given a “Speculative Buy” recommendation at the current price of GBX 155 (as on 15^th May 2020, before the market close at 12:01 PM GMT+1), with lower double-digit upside potential based on 3.36x NTM Price/Cash Flow (approx.) on FY20E cash flow per share (approx.).

BHP Group PLC – Reported Robust Operational Performance

FTSE-100 listed BHP Group PLC (LON: BHP) is a resource company. It is involved in the operations of extraction and processing of minerals, oil and gas.

On 21^st July 2020, the Company will release its Operational Review for the year ended 30 June 2020.

Recent News
On 7^th May 2020, the Board announced the appointment of Xiaoqun Clever (effective 1 October 2020) and Dion Weisler (effective from 1 June 2020), as independent Non-executive Directors.

Operational Update – Reflecting Strong Financial Position Despite Challenging Environment
On 21^st April 2020, the Company announced the operational update for the nine months ended 31^st March 2020. The Group has a robust financial position, underpinned with the low-cost operations. It indicates that the group is strong and predictable to generate substantial cash flow through the cycle. The group’s copper equivalent production for the nine months ended March 2020 was broadly unchanged. In March YTD20, the total petroleum production decreased by 10 per cent to 82 MMboe against the March YTD19. As per the Mar YTD20 performance, the total copper production increased by 5 per cent to 1,310 kt; the total iron ore production surged by 3 per cent to 181 Mt (205 Mt on a 100 per cent basis).

Share Price Performance

Daily Chart as at May-15-20, before the market closed (Source: Refinitiv, Thomson Reuters)

BHP Group PLC’s shares were trading at GBX 1,425.60 before the market close (at 10:18 AM GMT+1) on 15th May 2020 and were up by 5.19 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 2,078.50/GBX 939.80.

Valuation Methodology

*Peers: Glencore Plc, South32 Ltd, Anglo American Plc, Kaz Minerals Plc, and Ferrexpo Plc.

*Currency Exchange Rate for 1 USD = 0.818931 GBP.

Valuation Metrics

(Source: LSE)

As on 30^th April 2020, the Price/Earnings, EV/EBITDA and Price/Book multiples of the BHP were 4.4x, 2.0x and 0.8x, respectively and the same multiples were lower as compared with the Mining industry. It is reflecting that the company is trading at a lower multiple as compared to its peers.

Conclusion
The production guidance for the 2020 financial year stays unchanged for metallurgical coal, petroleum, and iron ore. The company is also reviewing the guidance, and it will be around US$8 billion in the financial year 2021, which reflects lower than the current guidance. The deepening and intensifying impact of Covid-19 but makes the short-term outlook quite uncertain. The Company’s asset base can generate strong cash flows, which will boost the group’s petroleum and copper production rate in both the short and long term. The recent two appointments (as an independent Non-executive Directors) would give good addition to the Board, which also shows a good financial performance in future.
Over the course of 3 years (FY16 - FY19), the company’s revenue surged from USD 30,912 million in FY16 to USD 44,288 million in FY19. Compounded annual growth rate (CAGR) stood at 12.73 per cent.

Based on the above rationale and supported by valuation done using the above method, we have given a "HOLD" recommendation at the closing price of GBX 1,355.20 (as on 14th May 2020).

Fresnillo PLC – Mexico’s Largest Producer and Continued Focus on Costs to Maintain Healthy Margins

Fresnillo Plc (LON: FRES) is a Mexico-based leading precious metals company. The Company produces mainly gold and silver from mines.

On 22^nd July 2020, the Company will release its Q2 production report.

Q1 Production Highlights (for the three months ended 31^st March 2020, as on 29^th April 2020)

(Source: Production Report, Company Website)

Led by a lower volume of ore processed at Saucito and a lower ore grade at San Julián Disseminated Ore Body (DOB), the silver production for the current quarter decreased by 4% to 13.2 moz (including Silverstream) against the previous quarter (Q4 FY19), while it was flat (+0.7%) as compared with the corresponding period of the last year (Q1 FY19). The gold production was reduced by 6.7% in Q1 FY20 against the Q1 FY19, driven by a lesser extent, lower ore grade at Herradura and at San Julián (veins) and a lower volume of ore processed at both Herradura and Noche Buena. Due to higher ore grades at both Fresnillo and Ciénega, the quarterly by-product lead production surged by 14.7% against the same period last year (1Q19). The quarterly by-product zinc production rose by 4.2% against the first quarter of 2019, driven by higher ore grades at both Ciénega and Fresnillo, partially offset by a lower ore grade at San Julián (DOB).

Share Price Performance
 
Daily Chart as at May-15-20, before the market closed (Source: Refinitiv, Thomson Reuters)
Fresnillo PLC’s shares were trading at GBX 720.20 before the market close (at 1:25 PM GMT+1) on 15th May 2020 and were up by 3.60 per cent versus the previous day closing price. Stock 52 weeks High and Low are GBX 921.20/GBX 456.51.
Valuation Methodology


Conclusion
The company has shown a decent production performance in the first quarter of 2020. In Q1 FY20, the gold and silver production were in line with the expectations. The Group’s development pipeline is progressing well, construction of new mines is on track. FRES is also working on dilution control and raising development rates which could improve the overall performance of the business. In the unprecedented crisis created by COVID-19, Fresnillo continues to keep its guidance (full-year production) under constant review.

Based on the above rationale and supported by valuation done using the above method, we have given a "HOLD" recommendation at the closing price of GBX 695.20 (as on 14th May 2020).
 
 
*All forecasted figures and Peer information have been taken from Refinitiv (Thomson Reuters).

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.