UBS gave a boost to Hunting Plc (LON:HTG) on Monday, upgrading its rating for the energy services products provider to ‘buy’ from ‘neutral’ as it is more positive on its US business, Titan.
The Swiss Bank also raised its target price for the FTSE 250-listed firm to 710p from 600p, with the shares currently trading at 577p each, up 5.4% on Friday’s close.
READ: Hunting warns that US offshore and international oil markets remain slow
In a note to clients, UBS’s analysts said: “We had been cautious on Hunting given the downside risk to earnings in their US Titan business, but with the recent round of capex comments we believe these risks are now well understood and priced in.”
They pointed out: “Hunting's lesser-known international business, which accounts for 30% of revenues but generated an operating loss over the past 4-5 years, is approaching an inflection point and should start to turn positive from 2019.”
The analysts added that momentum in Hunting’s non-Titan US business also showed good growth, up 30% sequentially into the second half of 2018 and they expect this to continue into 2019.
The analysts said they have also upgraded their 2019 operating profit forecast for Hunting by 25%, with Titan better than expected, and its other US and International business improving.
They said: “We expect the analyst event mid-May to provide more colour on the growth profile. The shares have de-rated significantly with consensus 1-year forward EV/EBITDA falling from 10x to the current level of around 6x.”