December 21st, 2023 | 07:30 CET
After the COP28 Climate Conference: Hydrogen, solar or oil? Plug Power, Nucera, Saturn Oil + Gas, JinkoSolar in focus
It could have gone better! The COP28 Climate Conference in Dubai is over, the results sobering for many, for others within the realm of expectations. While large parts of the world are calling for a stricter approach to reducing fossil fuels, the countries in the Gulf region want to continue their successful business model of the last 150 years. Oil is not going out of fashion, and its production will continue to be abundant and delivered to buyers through various channels. Hydrogen and solar energy, like wind power, are essential energy sources, but they will not replace existing structures; at best, they will supplement them. Even nuclear energy, which has been widely frowned upon, is now seen as a climate solution by countries such as Poland, France and Finland and is being drastically expanded. Where are the opportunities for investors?
time to read: 4 minutes
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Author:
André Will-Laudien
ISIN:
PLUG POWER INC. DL-_01 | US72919P2020 , THYSSENKRUPP NUCERA AG & CO KGAA | DE000NCA0001 , Saturn Oil + Gas Inc. | CA80412L8832 , JINKOSOLAR ADR/4 DL-00002 | US47759T1007
Table of contents:
"[...] The Oxbow Asset now delivers a substantial free cash flow stream to internally fund our impactful drilling and workover programs. [...]" John Jeffrey, CEO, Saturn Oil + Gas Inc.
Author
André Will-Laudien
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
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Plug Power and ThyssenKrupp Nucera - Will there be a revival in 2024?
A look at the Refinitiv Eikon rating platform does not really help investors with Plug Power because out of 30 opinions, there are still 11 "Buy" recommendations, 16 "Neutral" ratings and only 4 "Sell" recommendations. It is, therefore, not surprising that the average price expectation for 12 months is still frozen at USD 14.75. But the supporter front is crumbling. The most recent negative example is Piper Sandler analyst Kashy Harrison, who has downgraded the hydrogen stock from "Neutral" to "Underweight" and massively lowered the price target from USD 6.50 to a low USD 2.30. A small ray of hope yesterday: The share was able to close with slight gains for the 5th trading day in a row after a 66% half-year loss. EUR 4.12 may now be an entry point for momentum-oriented investors.
The H2 spin-off from ThyssenKrupp, nucera, is proving strong. Following the publication of the quarterly figures, some banks and analysts have adjusted their valuations and price targets. Goldman Sachs confirms its low rating of "Neutral" for the hydrogen share with a 12-month price target of EUR 16, but Deutsche Bank has EUR 29 on the cards. Nucera's order intake has recently more than halved, but CEO Ponikwar states several new lucrative projects are in the pipeline. They come from all over the world, with only Germany lagging far behind in terms of investment. Nevertheless, the CEO is neither tense nor nervous and sees hydrogen as "the technology of the energy future". Apparently, this argument has struck a chord with investors. Since the press conference, the share price has risen from EUR 15 to just under EUR 20. Anyone who shares this opinion should add both Plug Power and ThyssenKrupp Nucera to their buy list for 2024.
Saturn Oil & Gas - A bouquet of good news
Saturn Oil & Gas is back on track operationally. Initial production results for the start in the Cardium and Bakken light oil targets in Alberta and Saskatchewan show good values. The deeper deposits in southeast Saskatchewan, including the best-performing group of Frobisher wells, recently delivered excellent drilling results. Six horizontal wells were drilled in the Viewfield area, targeting Bakken light oil. Initial 30-day production ("IP30") from the new wells averaged 113.8 barrels of light oil per day. During the start-up periods, Bakken wells generally show a steady increase in oil production, averaging approximately 100.0 barrels/day in the first 15 days and increasing to an average of 127.6 barrels/day in the last 15 days. The average IP30 was 13% higher than the Company's expectations. In the Frobisher light oil areas of Crealman, Glen Ewen, Ingoldsby and Weir Hill, an average IP30 of 98.7 barrels/day was achieved,** exceeding the company's expectations by 43% for the four new Frobisher wells.
The Saturn Oil share price has undergone a small consolidation since the September high of around CAD 3.06 and is currently trading at around CAD 2.30. With 139.3 million shares, the Company is currently valued at around CAD 320 million. The last quarterly figures gave an EBITDA estimate of around CAD 430 million for the year as a whole. Free cash flow is estimated at CAD 145 million, which will reduce net debt to around CAD 455 million by the end of the year. However, the WTI price is currently slightly below the management calculation of USD 80. This could be the reason why some investors are getting nervous here. On the other hand, the current share price opens up the opportunity to enter at a 2024 price/cash flow ratio of 0.8. A lower-valued oil company with these growth figures will be hard to find in North America.
JinkoSolar - CEO optimistic about the future
We briefly examine the Chinese solar panel manufacturer JinkoSolar. Following outstanding quarterly figures in October, the Company's share price has finally turned and has made a sustained recovery from the sell-off level of around EUR 24. Chairman and CEO David Li has also commented on the recent rise in the share price. Despite short-term fluctuations in the solar industry, the global trend continues to show strength. He expects demand in the solar segment to increase by 20 to 30% in the coming 2024 financial year compared to the previous year. The market leader is countering high market volatility with technical innovations and rising average margins. In addition, the cost of polysilicon has fallen compared to the previous year, while deliveries to the USA show pleasing sequential growth, as stated by the manager recently at the BNEF Summit.
However, the challenges in the global PV market remain significant: Increased competition due to changes in supply and demand, rapid technological development, high refinancing costs and ongoing geopolitical tensions make it difficult to predict business accurately. Nevertheless, at a price of EUR 30.90, the Jinko share is only valued at a 2024 P/E ratio of 5.4. The current book value is around EUR 60. Therefore, a lot would have to happen in the solar market for the Chinese company to encounter problems. The market capitalization of EUR 1.6 billion is roughly on par with the current cash reserves. Worth considering!
The two indices, DAX 40 and NASDAQ 100, are finishing the year close to their highs. What applies to the major indices ended in a strong correction for many smaller stocks. Almost the entire GreenTech sector has been sidelined, while traditional energy sectors such as oil and nuclear energy have performed quite well. Fundamental figures will likely have a stronger impact again in the new year. JinkoSolar and Saturn Oil & Gas also have rising revenue and profit forecasts.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
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