Alibaba, Troilus Gold, Secunet Security Networks - New highs after setbacks?

Alibaba - Forecast cut

Chinese companies did not have an easy time on the US stock markets last year. That was mainly due to the Chinese government, which repeatedly put the brakes on the business of its tech giants. So did the Asian Amazon called Alibaba. The Company operates in several business segments: Retail and online commerce, cloud computing, digital media and entertainment, and innovation initiatives such as artificial intelligence and deep learning. Thus, the Company has a diversified footprint.

The latest quarterly figures failed to meet analysts' expectations. While revenue increased 29% YOY and 62 million new customers were added, adjusted EBITDA fell 32% to USD 4.35 billion. The decline can be attributed to investments in domestic consumption, globalization and cloud computing. Only cloud computing was ahead of analysts' expectations. The worst figures were the reduction of the annual forecast from 30% to 20-23%.

With the numbers, the share dropped significantly and is approaching the low for the year of USD 138.43. If this level is torn, the next support is at USD 130. After it became known in October that a company of Charlie Munger bought shares of Alibaba, the stock jumped. The group itself also said in its quarterly report that it had bought back 26.9 million shares. The majority of analysts have lowered their price targets, but these are often above USD 200. Currently, the share price is only USD 140.34.

Troilus Gold - Resource update eagerly awaited

Troilus Gold shareholders suffered a setback in the share price after the bought deal financing in June this year. The stock fell from 1.16 Canadian dollars (CAD) to CAD 0.68. That results in a cash balance of about CAD 53 million to complete further steps to become a gold producer. The Troilus Gold Project is located in Quebec, Canada and covers 1,420 sq km. The Troilus mine mined more than 2 million ounces of gold and 70,000 tons of copper from 1996 to 2010. At that point, the former owner believed the mine had reached its limit.

In 2017, Troilus Gold took over the old mine and began exploration work. More than 150,000m was drilled to the first resource estimate, totaling 8.1 million gold equivalent ounces, with an 85%:15% gold to copper ratio. Further drilling just over 81,000m has now been completed since this value study (PEA). On October 19, the Company announced the addition of 300m of up to 4.9 g/t gold equivalent in the Southwest Zone to the PEA resource. In the J-Zone, up to 4.4 g/t gold equivalent was found. Overall, therefore, a major resource update can be expected. That should come out in the first half of 2022, as will a preliminary feasibility study.

The Company places a lot of emphasis on sustainability, with 83% of the energy consumed coming from renewable sources. The number of full-time female employees is also well above the industry average. In August, the Company received ECOLOGO certification, the first explorer ever to do so. The share is currently quoted at CAD 0.87. Taking only the current resources as a basis, one arrives at more than CAD 1.5 billion. The market valuation of the Company is only CAD 171 million. So here, one can buy gold below the market price.

Secunet Security Networks - Fundamentally still expensive

The Essen-based S-Dax company Secunet Security Networks is active in cyber security. In addition to conventional IT security solutions, it also offers its customers unique solutions for biometric recording, encryption, and border control systems. The Company benefited from the Corona pandemic and the establishment of home office workplaces, which had to be secured accordingly.

After a rally of about 400% in the last two years, the Company gave an outlook for 2022 on November 12. It was worse than for 2021, causing the stock to plunge 15%. Sales are expected to fall by EUR 10 million to EUR 320 million. Profits are expected to reach EUR 50 million in 2022, which is EUR 9 million less than in 2021. The Company cited the anticipated decline in the number of home office jobs as the reason. In addition, investments are to be made in employees and new technologies.

Growth-addled investors sold their shares in rows. On November 9, there was still a new all-time high of EUR 608. After the announcement, the share price slid to EUR 435.50. Since then, the share price has moved sideways and is currently quoted at EUR 449. The IT security sector is certainly a growth market in the long term due to the increasing number of hacker attacks and ever more digitization. However, even after the share price slide, the current price-earnings ratio is still over 58. That is still expensive.

All three companies have seen their share prices fall. Alibaba is investing, and so the profit is getting smaller. Also, there are always problems because of the Chinese government. Troilus Gold is significantly undervalued, and the new resource estimate is not even available yet. Secunet is in a growth market but fundamentally very expensive. Caution is advised here.