Investment Column: Oil services recovery underpins Hunting

Anite; Photo-Me International
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The Independent Online

Our view: buy

Share price: 756p (+15p)

Hunting's global reach has always been among its chief attractions, in our view. And it was on show yesterday, when the oil and gas services group posted an update ahead of its half-yearly results in August.

Thanks to its international reach, the group said it was well placed to capitalise on the recent uptick in activity in the oil services market. With oil prices continuing to hover north of the $100 per barrel mark, energy firms are upping investment in projects – and that means more business for the likes of Hunting.

"Activity is recommencing in the Gulf of Mexico, which will see new orders being placed, while our European businesses remain resilient despite the increase in taxation on North Sea activities," the company's chief executive David Proctor said. "With the momentum seen during the first half of 2011, the board remains confident of trading in line with its expectations for the year as a whole."

But although positive, cautious investors would no doubt ask if it is worth buying now that the stock is up more than 20 per cent since the beginning of the fourth quarter of 2010?

The City certainly appears to think so. Royal Bank of Scotland analysts, for example, said they expected the full-year results to be weighted towards the second half of the year, which bodes well for performance.

What really attracts us, though, is that, in addition to performing well, Hunting remains affordable. We last recommended buying in when the stock was trading on multiples of 26 times forward earnings.

Currently, RBS puts it on just over 27 times. But that falls to less than 22 times on the estimates for 2012. Given the momentum in the oil services market, the continued strength in the oil price and the expectations of a strong performance in the second half, we see no reason to sell or sit on the fence.


Our view: buy

Share price: 74.5p (-1.5p)

Anite provides an invaluable service to phone manufacturers and operators, as it tests to check whether their shiny new kit is any good or not.

After a strong financial year, the company is looking to push on, and there are plenty of catalysts suggesting it is worth a look. Yesterday, the group said pre-tax profits were up 62 per cent in the 12 months to the end of April to £16m. Over the same period revenues rose by almost a fifth to £93.7m.

Wireless makes up nearly 80 per cent of the company's revenues. Handset testing also outperformed, with order intake almost doubling to £59.6m. The company is particularly well placed with the march of 4G, which already represents a third of revenues, up from 12 per cent a year earlier, and can only fly from here.

There was further good news as there was no slowing of 2G and 3G revenues. Anite revealed that its network testing business also outperformed expectations.

The black spot was its travel business, where revenues declined 13 per cent. The company pointed out that despite a challenging year for the operation it was making progress with the order book increasing from £49.2m a year earlier to £63.2m.

Altium Securities puts the stock on a multiple of 15 times forward earnings for 2012 and reckons it will be pushed higher by 4G wins. We agree.

Photo-Me International

Our view: buy

Share price: 63p (+7.25p)

The past year has proved rather volatile for Photo-Me, with its share price moving from 30p to more than 80p by September before more than halving six months later.

The company has been on the rise since then, however, moving up by 7.25p to 63p yesterday after its full-year results. Last night's gain means that it is now up about 60 per cent in less than three months.

The figures were certainly positive, with the group – which operates photo booths around the world – managing a 28 per cent rise in underlying profits. Geographically, France was the highlight, while its profits in Asia were close to the previous year despite the Japanese earthquake and tsunami.

Overall, cash generation was particularly strong, with a net cash inflow over the year of nearly £33m. Moreover, the company's bullish comments about the year ahead bode well, and with these figures prompting analysts to raise their expectations, Photo-Me could prove a pretty picture for investors. Now is a good time to wade in.