Hunting plc (LON:HTG) was discussed by Gervais Williams, Co-Fund Manager of The Diverse Income Trust plc (LON:DIVI) in a wide-ranging exclusive interview about the Trust and the LSE-listed companies in the DIVI portfolio.
DirectorsTalk asked:
Hunting Plc is a precision engineering group with operations all around the world. Their subsea business seems to be growing its order book in particular. What’s your view on them?
Gervais Williams commented:
Yes, it has been interesting actually because this is a company which is really servicing energy companies. It has got a very, very strong business in the US, it’s actually had to downsize its business in the UK with less investment going in there. So, they have had some costs associated with that, and there was a downgrade along the way.
The key feature about this business is i) it’s got a very strong balance sheet, and ii) it’s got tremendous assets. Ultimately, we believe, not only will it continue to win customers, and as you say, it has won a series of contracts recently, but it has actually got a new business which it has acquired and built up over the years, which is involved in helping get better energy recovery from existing wells. They put down a special kind of bug food – all these wells have a certain number of bugs at the bottom and if you put down the right kind of food, then actually the bugs make some of the energy, the oil, more liquid, and they can improve the recovery rates. Sometimes they can improve recovery rates really quite significantly.
We think this is an area which is very overlooked in the Hunting story. We think with energy prices rising, we think the core company looks very attractive anyway but with this extra overlay of uncertain upside, we are very upbeat.
