Market Comment and two ‘price recovery’ stocks – Hilton Food, and Keller Group

07.04.2025

Market Comment

We have come through much worse than this and we know that we just have to battle onwards against the massive swings that we have seen in the market in the last few days.

The share prices of several companies have seen substantial falls and could now offer risk-tolerant investors some cheap buying opportunities.

For this coming week, I have identified a handful of companies whose shares have eased back and could well create a share price recovery when the market settles down again, as it inevitably will within the next few weeks.

Hilton Food Group (LON:HFG) - Tomorrow’s Finals Could Be Better Than Expected

This Huntingdon-based group works with leading international retailers and food service brands, creating and producing at scale high-quality packaged meat, seafood, meat alternatives and prepared food products.

It operates in ten countries, with some 24 high-performance facilities.

Its workforce of some 7,000 people helps to serve over 20 international markets in the UK, Ireland, Europe, and the Asia-Pacific region.

Three months ago the group issued a Trading Update for its 52 weeks to 29th December 2024, showing continued strong volume growth all of its operating regions.

It experienced a strong Christmas trading period, with group performance in line with expectations.

CEO Steve Murrells stated that:

"The final quarter of the year has delivered a strong performance, with the full-year outturn in line with expectations.

This success was driven by another solid Christmas trading period and underpinned by our innovative ranges and the growing popularity of beef as a festive centrepiece.

Our core year-round product ranges, combined with high-quality new product launches, continue to strengthen our customer relationships, and support our ongoing success."

Analyst Sean Kelly at Panmure Liberum recently noted that the group has expanded into the Middle East, proving it has a longer growth runway than the market is pricing in, and reiterated his Buy rating, putting out a Target Price of 1140p on the food supplier’s shares.

A month ago, the group signed a joint venture with NADEC in Saudi Arabia, with production due to start in 2026, to supply the joint venture and integrate its red meat products into their well-established distribution network. 

In the country red meat is typically sold through in-store butchers rather than the centralised packaging offered by Hilton.

Kelly stated that:

“We expect this contract to demonstrate significant growth over time, similar to its initial UK and Australian operations.

Nevertheless, this contract is yet further proof that Hilton is both a higher quality operator with a longer growth runway than the low valuation currently appreciates.”

Based on company compiled consensus, it is expected that the 2024 adjusted pre-tax profits could have been within the range of £74-77m, with a mean of £76m.

An interesting pointer, ahead of tomorrow’s results announcement, was that on Friday, when the market was dropping off the ledge, the shares of Hilton Food actually rose 20p to close at 857p, valuing the group at £769m.

(Profile 23.12.24 @ 916p set a Target Price of 1100p)

Keller Group (LON:KLR) – next month’s AGM Update should prove positive

This group is the world's largest geotechnical specialist contractor providing a wide portfolio of advanced foundation and ground improvement techniques used across the entire construction sector.

With around 10,000 staff and operations across five continents, Keller tackles an unrivalled 5,500 projects every year, generating annual revenue of around £3bn.

On announcing the group’s 2024 final results a month ago, CEO Michael Speakman stated that:

"2024 was another outstanding year for Keller, ahead of expectations, delivering improved performance across all key metrics - profits, earnings, margin, return on capital, cash conversion and debt reduction.

This performance builds on the positive momentum developed in recent years as a result of the disciplined execution of our strategy.

Since the strategy was first launched in 2019, we have rationalised the geographic and product portfolio of the Group and more recently focused on improving the project execution across the business.

The result is a more consistent performance, improved operating margins and higher levels of cash flow have allowed the Group to grow earnings and de-lever the balance sheet considerably, and given us the platform to increase the dividend and announce our intention to launch a multi-year share buyback programme, part of an ongoing commitment to return capital to shareholders.

Our record year-end order book of £1.6bn across our diverse revenue streams underpins our expectations for growth in the next phase of implementation of the Group's strategy.

Whilst we remain mindful of the uncertain geopolitical and macroeconomic environment in the short-term, we anticipate further progress in 2025 and a return to our typical second-half weighting.

We have ensured that Keller is set up to be resilient over the medium and longer term and well positioned to capture growth opportunities both organically and through selective M&A.

We are strongly encouraged by the sustained improvement in the Group's performance that provides the platform to continue to enhance shareholder value."

Analyst Robert Chantry, at Berenberg, considers that the group is bucking the trend in its sector, delivering higher profits, cashflow and dividends.  

He noted that Keller is a standout performer, with its earnings up 18% and pre-tax profits rising 25%, jumping ahead of market expectations and stated that: 

‘Keller has maintained the step-up in performance shown through full-year 2023 and first-half 2024, with the North America division continuing to be a key driver.

The record order book at £1.6bn and group-wide focus on contract discipline leave the company well set up for full-year 2025, while the strong balance sheet gives ample strategic headroom.

While there are risks to the engineering market and therefore its projects, he said the results are another really encouraging update with trading conditions and company performance remaining strong."

Chantry retained his ‘Buy’ rating and with a Target Price of 1900p on the stock, which was trading 88p lower on Friday night at 1302p.

(Profile 10.08.20 @ 643.50p set a Target Price of 750p*)

Asterisks * denote that Target Prices have been achieved since Profile publication.