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The Expert View: Centamin, Rockhopper Exploration and Aggreko

A roundup of some of analyst commentary on shares including Hunting and Oxford Instruments.

by Harry Brooks on Dec 18, 2012 at 05:01

Our daily round-up of analyst recommendations and commentary, featuring Centamin, Rockhopper Exploration, Aggreko, Hunting and Oxford Instruments.

Key stats
Market capitalisation£481m
No. of shares out1,101m
No. of shares floating1,025m
No. of common shareholdersnot stated
No. of employees1111
Trading volume (10 day avg.)20m
Turnover211m USD
Profit before tax113m USD
Earnings per share0.10 USD
Cashflow per share0.13 USD
Cash per share0.09 USD

*Correct as at 17 Dec 2012

Back to ‘normal’ for Centamin

‘It is back to “normal” for Centamin (CEY.L),’ commented analysts at Westhouse as the shares yesterday continued to recover from last Thursday’s sudden 50% drop.

The company has now resolved both of two issues which had spooked investors last week: it has resumed gold exports form its Sukari mine in Egypt, while it expects its fuel supply to resume ‘in the coming days’.

While the shares managed double digit percentage gains on both Thursday and Friday, they remain 10p shy of the 52p price before Centamin announced the threats to its fuel supply and exports.

Westhouse analysts Nick Hatch and Rob Broke said: ‘We believe that provided operations resume in the next few days, the company could still meet its 250,000oz target for 2012.

‘We will review the cost of capital that we use in our Net Present Value analysis for Egypt (currently 16% nominal), but otherwise it is back to 'normal' for Centamin.’

Key stats
Market capitalisation£439m
No. of shares out284m
No. of shares floating270m
No. of common shareholdersnot stated
No. of employees15
Trading volume (10 day avg.)3m
Turnover0m USD
Profit before tax-33m USD
Earnings per share-0.12 USD
Cashflow per share-0.12 USD
Cash per share0.02 USD

*Correct as at 17 Dec 2012

Merchant Securities cuts target price for Rockhopper Exploration

Brendan Long, analyst at Merchant Securities, has reduced his target price for Rockhopper Exploration (RKH.L) based on the sum Premier has agreed to pay for a stake in the company's assets in the Falkland Islands.

Extrapolating from Premier's offer for a 60% stake in the Falklands assets, Long reached an implied total value of $1.476 billion. Long noted it's very unusual to be able to put a clear cash value on a firm's oil assets, and he called his estimate 'a remarkably good valuation point'.

'To the above value we have added $50 million to reflect the company’s cash balance,' he added. 'We have reduced this value by $14 million to reflect capital gains tax due. Finally we have introduced a $32 million value deduction to reflect general and administrative costs to first oil.'

Long's target price falls to 328p from 358p, but he reiterated his 'buy' recommendation.

Shares in the group closed at 154.1p on Monday, down 3.9p or 2.5%.

Key stats
Market capitalisation£4,515m
No. of shares out268m
No. of shares floating235m
No. of common shareholdersnot stated
No. of employees4262
Trading volume (10 day avg.)0m
Profit before tax£260m
Earnings per share97.53p
Cashflow per share168.43p
Cash per share20.31p

*Correct as at 17 Dec 2012

Seymour Pierce says 'buy' Aggreko as shares plummet

Caroline de La Soujeole, analyst at Seymour Pierce, has stood by her 'buy' recommendation on Aggreko (AGGK.L) despite the shares crashing yesterday after the temporary power firm warned over next year's revenues.

Although the company said it would meet profit expectations for 2012, the management were decidedly gloomy about the year ahead, projecting a £100 million fall in revenues. A reduction in military revenues as US troops are withdrawn from Afghanistan, uncertainty over Japanese contracts and the loss of 2012's Olympic boost will all take a toll, the company said.

However, the analyst said today's dip in the share price represents a good entry point. 'Aggreko is, in our view, a well-managed, quality business. The underlying drivers, namely the continued supply demand power imbalance in developing countries, remain strong.

'We remain BUYers of the shares. Short term share price weakness today would make a good entry point.'

Shares in the group closed at £17.60 on Monday, down 365p or 17.2%.

Key stats
Market capitalisation£1,111m
No. of shares out146m
No. of shares floating120m
No. of common shareholdersnot stated
No. of employees3453
Trading volume (10 day avg.)0m
Profit before tax£28m
Earnings per share20.27p
Cashflow per share46.54p
Cash per share49.02p

*Correct as at 17 Dec 2012

FinnCap stays positive on Hunting

David Buxton, analyst at FinnCap, has reiterated his 'buy' recommendation on energy services company Hunting (HTG.L) in spite of the company issuing a warning about revenues in the year ahead, resulting in a dip in the shares.

The interim management statement said trading was in line with expectations, and it also included positive news on a successful resolution of the Canadian tax dispute relating to Hunting's sale of Gibson in 2008, which will result in a cash inflow of £25 million.

However, the closing sentence of the chief executive's statement didn't bode well: 'The Board of Hunting is pleased with progress during 2012 however; the short term outlook is increasingly cautious due to the economic climate seen in a number of our operating regions.'

Buxton said this cautious statement probably refers to the uncertain impact of the 'fiscal cliff' in the US, but he said the shares still look to be a good bet. 'The shares appear decent value on about 12x for 2013. We therefore maintain our Buy rating, which is based on a target price-to-earnings ratio of 14.8x for 2013 which is similar to the rating the shares currently have for 2012.'

Shares in the group closed at 759.5p on Monday, down 46.5p or 5.8%.

Key stats
Market capitalisation£779m
No. of shares out56m
No. of shares floating51m
No. of common shareholdersnot stated
No. of employees1834
Trading volume (10 day avg.)0m
Profit before tax£25m
Earnings per share45.01p
Cashflow per share83.49p
Cash per share62.49p

*Correct as at 17 Dec 2012

Investec backs Oxford Instruments' Asylum Research acquisition

Michael Blogg, analyst at Investec, has put his recommendation and target price for Oxford Instruments (OXIG.L) under review following its acquisition of Asylum Research for $32 million.

Oxford Instruments will pay up to $80 million for the scanning probe/atomic force microscopy group, comprising a $32 million upfront payment plus up to $48 million tied to undisclosed performance milestones. The deal is due to be completed by the end of the month.

Blogg said the multiple paid for Asylum was very high at 1.6x sales given that the group had margins of just 5.6% last year. However, he added that there are lots of synergy opportunities, and Oxford Instruments has a good track record of increasing margins.

'Although the group does not say so, this looks to be neutralto-positive for earnings per share even on these low margins, since the group is sitting on £38 million of cash and the effective cost of finance should be low, with scope to enhance fairly quickly as the synergies are tapped,' he added.

Shares in the group closed at £13.85 on Monday, up 5p or 0.4%.

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Look up the shares

  • Centamin PLC (CEY.L)
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  • Rockhopper Exploration PLC (RKH.L)
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  • Hunting PLC (HTG.L)
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  • Aggreko PLC (AGGK.L)
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  • Oxford Instruments PLC (OXIG.L)
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