In-line FY23 update, further progress anticipated
Good revenue progress, a strong EBITDA uplift (and margin expansion), an ungeared year-end balance sheet and the in-year launch of an ambitious 2030 strategy represents a healthy FY23 scorecard for Hunting. Furthermore, additional order book growth and unchanged management guidance positions the company well to achieve further progress.A number of large contract awards announced at the end of FY22 and as FY23 progressed contributed meaningfully to the FY23 outturn. In addition, Hunting ended the year with a record US$575m order book (versus US$473m a year earlier).
Hunting’s balance sheet is confirmed to be broadly funds neutral at the end of FY23: indicative, we believe, of good cash collection in H2/Q4 on an elevated revenue base. Together with further anticipated earnings progress in FY24 and FY25 feeding into positive cash generation, this provides a strong platform for prospective M&A activity and potential further earnings upside.
ED estimates are unchanged at this stage, as are previously identified peer group discounts of c. 20-30%. Our fair value is also unchanged in US dollar terms, but after adjusting for FX changes now translates to 407p / share - still almost 50% higher than current levels.
Hunting is a holding company. Co.'s segments are: Hunting Titan, which provides perforating products; U.S, which supplies connections, oil country tubular goods (OCTG), drilling tools, subsea equipment, and intervention tools, among others, for the U.S. and overseas markets; Canada, which manufactures connections and accessories for operators in Canada; Europe, which supplies OCTG and well intervention equipment to operators in the North Sea; Asia Pacific, which manufactures connections and OCTG supply; Middle East, Africa and Other, which sells intervention tools in the Middle East and Africa; and Exploration and Production, which comprises its exploration and production activities.
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