December 20th, 2021 | 13:56 CET
Alibaba, Ayurcann, Rock Tech Lithium - Portfolio boosters for 2022
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Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.
Alibaba - Turnaround in sight?
Alibaba has not had a good year from a shareholder perspective. On the one hand, because of the regulation by the Chinese government, on the other hand, the annual forecast was cut, and the margins became smaller. When Didi announced its withdrawal from the New York Stock Exchange, the fear of delisting also went around among Alibaba shareholders. There are always accusations that the Company is not closely connected to social media, unlike WeChat and TikTok. Despite all the problems, what makes the stock a promising candidate for 2022?
It has expanded its social media activities with DingTalk, reaching more than 500 million users. The Company is in a better economic position than all its competitors and already has competitive advantages in global e-commerce. If you look at the sales growth in combination with the margin, you quickly see that no one can keep up here. Amazon is growing less and has a 15% less margin. Pinduoduo and Bilibili are growing faster but making losses. Tencent has more margin but is growing 14% less. Due to greater competition within China, exponential growth has slowed.
While e-commerce margins are declining, the profitability of other businesses is increasing significantly almost everywhere. The main opportunities are in the global market, and Alibaba, via AliExpress, knows how to connect international customers directly with Chinese manufacturers. In Eastern Europe in particular, they are well ahead of Amazon and are able to gain market share. It has also been able to gain market share in Western Europe, whereas its big competitor is stagnating. The specter of delisting should not worry investors too much. Alibaba ADR shares can be exchanged for corresponding shares in Hong Kong. That would likely weigh on the share price only in the short term.
Ayurcann - Growing fast with high margins
Canada-based Ayurcann Holdings Corp. offers licensed cannabis producers the opportunity to have their raw material refined post-harvest through the Company's offered outsourcing solutions. Services offered range from extraction and refining to bulk distillate oil sales, formulation and white-label manufacturing, fulfillment and distribution, and custom packaging solutions and inventory management services. Medical cannabis is also offered, such as tinctures, vapes for vaporizers, topicals, and creams. Canadian customers can purchase these products through the Ayurcann Marketplace, where they receive advice from expert staff.
That cannabis is a growth market is shown by the annual figures. The fiscal year ended June 30, and sales increased by CAD 7 million or 1,149% over the previous year. Operating income was over CAD 2 million. An increase of 440%. On November 29, the Company released its third-quarter numbers and again, further growth can be seen. Revenues climbed 137% YOY to CAD 1.9 million. Profit was CAS 931,000, up 137%. The margin of 49% shows the attractiveness of the business. In addition, the expansion of production capacity at the Pickering Plant was completed. The Company can now process 300,000kg of biomass and expand filling up to 3 million packs.
The Company has an international customer base that owns well-known cannabis brands - ranging from Xplor in the UK to Innocan Pharma from Israel to Green Bee Botanicals and Her Highness from the US. In the US, some states have legalized cannabis. The stock was previously listed on the CSE in Canada and Frankfurt. Since December 16, Americans have also been able to buy the shares on the OTCQB, the leading marketplace for startups in the US. Despite all the good news, the share is trading at just CAD 0.165, well below its high for the year at CAD 0.75. The market capitalization of CAD 20 million is significantly lower than that of the competitors and offers some catch-up potential.
Rock Tech Lithium - The lithium market will continue to boom
The hype around electric vehicles was one of the hot topics in 2021 and will remain so in the future. The switch from internal combustion engines to zero-emission drives creates a huge demand for lithium, cobalt and graphite needed to produce e-batteries. The Canadian Company Rock Tech Lithium wants to extract lithium from its mine in an environmentally friendly way and then convert it into lithium hydroxide using a converter. The first converter is to be built in Guben and start operation in 2024.
One converter can supply around 500,000 electric cars with lithium hydroxide. Since the raw materials are finite, the Company has already looked into recycling the old e-batteries. That would cover the entire value chain and make the Company independent of lithium mining in the long term. As soon as the first lithium hydroxide factory is up and running, four more are to be built in Europe by 2029. As a result, according to management's plans, the Company is likely to capture about 30% of the European market.
While the new plant is being prepared, pilot studies are underway to produce high-quality, battery-grade lithium hydroxide. The purity level must be more than 99.5%. In November, the trials were completed successfully. On December 3, the Company published the results of the technical study of the converter conducted by Wave International Pty. The plant will pay for itself within 64 months. Currently trading at CAD 6.02, the share has consolidated significantly after its recent rally and offers a first entry opportunity here at support.
All three companies have significant upside potential. Unlike other e-commerce companies, Alibaba is trading near a multi-year low and is fundamentally cheap. Ayurcann is in the black, has good margins and is growing strongly. If you want to bet on cannabis, this is the place to be. Rock Tech Lithium offers attractive opportunities to enter the lithium market, which is set to become increasingly important in the coming years.
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