Valuation of Hunter Group ASA

This thesis conducts a valuation of Hunter Group ASA (Hunter Group) in order to determine the company’s intrinsic value to be able to give a buy, sell or hold recommendation of the stock related to the current market price. Hunter Group is an investment company currently operating within the crude tanker industry. Therefore, an introduction of the crude tanker industry following an introduction of Hunter Group was given. Thereafter, a strategic analysis was conducted as the company and its operating environment should be analysed to understand its strategic position. After this, an analysis of the financial statements was conducted. Subsequently, the forecasting of cash flows could begin, as the strategic analysis and the analysis of financial statements previously conducted were the basis for the forecasts. This was combined with external sources of information to arrive at the best possible estimates. The suitable cost of capital was also estimated, using WACC and CAPM. The forecast of the cash flows and the cost of capital were then used to do a discounted cash flow analysis. Hunter Group’s calculated intrinsic value of equity was NOK 6,93 per share. The noted stock price on the 10th of May 2021 was NOK 3,09. Based on this, the stock of Hunter Group was estimated to be undervalued, and a buy recommendation of the stock was given. Nevertheless, as there is uncertainty related to future outcomes, a sensitivity analysis was conducted. It was the WACC and freight rates that were chosen as the subjects for the sensitivity analysis. The estimated stock price was not sensitive to changes in WACC, and a little sensitive to changes in freight rates. However, both of these would have to change substantially for the conclusion of the discounted cash flow analysis to change. Finally, a relative valuation was conducted. However, as this method has its limitations and Hunter Group does not have any good comparables, the method was only used as a supplement and to increase the understanding of the fundamental analysis already conducted. Looking at the different multiples and reviewing which were most relevant determining the value, this also concluded that the stock of Hunter Group was undervalued. Consequently, the conclusion was maintained; the stock is undervalued, a buy recommendation of the stock is given. It was also discussed that the stock has significant upside potential over the target price, which further confirms the conclusion