Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

Hunting - thoughts on the first significant acquisition

Hunting has announced the acquisition of National Coupling Company Inc. ("NCC"), a leading developer and manufacturer of subsea hydraulic equipment, for an initial cash consideration of US$55m on completion and an additional US$5m to be paid after one year provided that certain financial performance targets are achieved.

NCC’s 2008 normalised profits before tax were US$4.6m with an EBITDA of US$6.5m. These are after adjusting for non-recurring items of US$3.1m. The net assets and gross assets of NCC at 31 December 2008 were US$15.6m and US$20.8m respectively. So seemingly not that cheap on a PER basis (just under 16x historic post tax earnings!) relative to current quoted valuations – cash rich, high margin Rotork trades at just under 14x 2008 numbers. NCC must have some good technology!

It is expected the acquisition will be earnings enhancing in 2009 – we estimate approx 1.6p of additional earnings per share in 2009, based on 8 month contribution from NCC.

Hunting had net cash of £372m at year end; allowing for the cash outflow following acquisition of NCC of US$55m (c£38m) and further Gibson sale proceeds received of £17.5m and allowing for a neutral cash position for the quarter results in net cash currently of approx £351m or c£2.68 per share. Stripping this out leaves the shares trading at approx 5.8x consensus estimates before the NCC acquisition or 5.4x assuming an enhancement of 1.6p to current year earnings.

There is a more comprehensive update note at


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