Hunting rallies as Goldman Sachs says recovery is undervalued

Oil service group Hunting got a boost on Wednesday after Goldman Sachs reiterated its ‘buy’ rating on the stock, adding it to its ‘conviction list’ as it said the valuation offers a good buying opportunity.

The bank said it expects revenue growth and margin expansion to start from the second half of next year as US onshore drilling activity picks up.

It does not see risks to the balance sheet given that it expects Hunting to remain free cash flow positive through 2015/16.

GS said that within its European sector coverage, Hunting is among the few companies offering exposure to US shale, where it expects a sharp recovery in 2017 onshore rig levels.

The bank reckons US rig count will rebound by around 50% year-on-year in 2017.

“The absence of balance sheet pressures, capex flexibility, growth opportunities, and an attractive valuation makes the stock an attractive investment in our view.”

GS trimmed its target price on the stock to 546.40p from 560.10p.

At 1115 GMT, Hunting shares were up 3.5% to 326p.