50% upside potential and more! TUI, BASF, Saturn Oil + Gas

Saturn Oil & Gas: At least 50% upside potential?

A company that is one of the fastest growing in its country and is also considered a value play is very rare. With a three-year revenue growth of over 9,200%, Saturn Oil & Gas ranked 4th in the 2024 "Canada's Top Growing Companies" category by the magazine "Report on Business". Saturn even took first place among the fastest-growing oil and gas companies – for the second year in a row.

John Jeffrey, CEO of Saturn, commented: "With a team and strategy designed to challenge the status quo and break from conventional industry standards, Saturn has continued its success by making bold strategic acquisitions, executing efficient drilling programs, and focusing on profitable operations."

At the same time, various analysts recommend the Canadian oil producer as undervalued. Most recently, the experts at ATB Capital rated Saturn Oil & Gas as a "value play for long-term oil exposure." They see the fair value at CAD 3.80. The security is currently trading at CAD 2.34. Thus, the upside potential is over 50% and appears conservative. Other analysts see the fair value at over CAD 5, with Ventum Capital Markets being particularly bullish at CAD 7.50.

The fact that the oil producer is not only trading below NAV but is also remarkably cheap in a peer group comparison and has started a share buyback suggests that Saturn shares will rise. Additionally, the Company has initiated a stock buyback program. Due to the high free cash flow, shareholders can likely soon look forward to a generous dividend.
Save the date: Saturn Oil & Gas and other exciting international small and mid-caps will be presenting at the virtual International Investment Forum, IIF, on October 15, 2024. Here you can access the program and free registration.

BASF: Dividend reduced, but analysts approve

There is little reason for joy at BASF at the moment. The German chemical giant recently announced that it would lay off a large number of its employees in Germany. As part of the new corporate strategy, the dividend policy has also been updated. From 2025, there should be a minimum distribution of EUR 2.25, compared to EUR 3.40 in 2023. In addition, share buybacks of up to EUR 4 billion are to be carried out. From 2026, investments should be significantly lower than depreciation on tangible assets. This does not exactly signal a growth strategy.

The adjustment of the dividend strategy also came as a surprise to analysts at DZ Bank. However, they say it gives the Company more financial leeway and is viewed positively. The analysts welcome the new strategy and recommend buying BASF shares. The target price for the shares of the DAX-listed company is EUR 58. Other analysts have price targets between EUR 51 and EUR 54.

TUI: Convincing booking figures

And how are TUI shares doing? Driven by strong booking figures, it seemed as if the breakout above EUR 7 would be achieved last week. However, the travel boom still does not appear to be fully convincing investors, and the stock was trading at EUR 6.88 again yesterday. This shows that the EUR 7 mark is proving to be a tough hurdle.

The booking update for the winter season is positive. So far, TUI has received around 1.8 million bookings. Thanks to stronger demand for package tours and products, bookings are up 7%. Overall, average prices have risen by 5%. Demand for all major short and medium-haul destinations has increased compared to the previous year. The Canary Islands, Egypt, and the Cape Verde Islands are particularly popular. Thailand, Mexico, and the Dominican Republic are the top destinations for long-haul destinations.

Nevertheless, analysts remain largely unenthusiastic about the TUI share. Only Deutsche Bank stands out with an interesting target price of EUR 10.50. The interim result is solid; therefore, the "Buy" recommendation is maintained.

If TUI's business continues to perform strongly, more analysts will have to give up their reluctance. This could give the share new momentum. The combination of growth and value clearly supports the Saturn Oil & Gas share. Even the conservative target of CAD 3.80 corresponds to a price opportunity of over 50%. On the other hand, BASF does not currently present a compelling buy opportunity. Layoffs and dividend cuts are hardly strong buying incentives.