March 14th, 2022 | 11:24 CET
BASF, Globex Mining, Deutsche Post - Undervalued stocks belong in the portfolio
Table of contents:
"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
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.
BASF - High dividend yield
The situation at BASF is somewhat confusing at the moment. On the one hand, there is cost pressure due to increased raw material prices, which should ultimately reduce profit margins. If, in addition, the economy were to deteriorate due to the Ukraine conflict, this could lead to lower demand for BASF's products. The biggest Ukraine impact on the Ludwigshafen-based Group is likely to be the stake in Wintershall Dea. The subsidiary has been active in Russia for decades and has, among other things, co-financed the Nord Stream 2 pipeline. These projects will probably have to be written off.
The parent company had announced as recently as February that it would float the subsidiary on the stock market. Even then, the Russian billionaire and co-owner Fridman was against this decision. Since the Ukraine crisis, an IPO is likely off the table for the time being. Especially since the effects on Wintershall Dea have to be awaited first. Otherwise, the analysts at JPMorgan see the impact on the Group as relatively low. According to the analysts, bottlenecks could even occur for some chemical products, from which the Group would then benefit. For the future, BASF is investing in a battery materials and recycling plant in Canada. In Belgium, a plant for the production of alkylethanolamines is being built.
The recent slide in the share price seems to have been exaggerated. From EUR 69.15, it went down to EUR 47.23. Fundamentally, the price-earnings ratio was just 8 and is currently only slightly above this after the rise to EUR 53.88. For a well-positioned and long-term big player in the chemicals sector, this valuation is considered favorable. Especially since the dividend, estimated at EUR 3.40, brings a yield of over 6%. Most analysts regard the share as a buy, with price targets between EUR 72 and EUR 85. These recommendations came out after the start of the Ukraine conflict.
Globex Mining - Commodity conglomerate
The prices for many commodities such as oil, gas, nickel, aluminum, palladium, gold and others have partly exploded since the Ukraine conflict broke out. Commodity companies such as Globex Mining can profit from this, whereby the Company, unlike others, covers a vast spectrum. Its portfolio includes base metals such as copper, nickel, zinc, lead and precious metals such as gold, silver, platinum, palladium, as well as specialty metals and minerals such as manganese, antimony, titanium, iron, feldspar, talc, magnesium oxide, molybdenum, bismuth, silica, lithium, cobalt, uranium, diamonds and rare earths. The Company owns a staggering 200 projects located in Canada, the US and Germany.
The business model is to buy promising projects cheaply, for example, when companies run out of money and then add value to them through their exploration. The Company records revenues through project sales, licensing income and options to companies that take over the projects. Globex Mining now receives royalty income from 89 projects. On February 28, the Mooseland gold mine was ceded for 1,745,408 NSGold shares and 2% royalties. On March 7, the Company announced that Cartier Resources had signed a letter of intent to acquire the East Cadillac property. The terms have not yet been determined. In exchange, Infini Resources made an initial payment of 100,000 Canadian dollars (CAD) to acquire a uranium property.
Business is booming, as can be seen from the latest news. Another fact that makes the Company unique is that the company shares have never been diluted. Other explorers always need fresh capital. Globex generates enough cash from royalty income to continue exploring existing projects. Everything is paid for, including the office space, the drilling equipment and the vehicle fleet. The Company currently has more than CAD 20 million cash on hand, and management holds over 11% of the shares. The market capitalization is only CAD 75.9 million, which is clearly too little considering the many promising projects. The share is quoted at CAD 1.37 and is in an intact upward trend.
Deutsche Post - Strong year 2021
Deutsche Post has benefited from Corona, as since then, more people place their orders on the Internet and thus, more and more parcels are sent; a large proportion of these with the Bonn-based logistics group. The share price weakened towards the end of the year and then really collapsed with the onset of the Ukraine crisis. As a result, business in Belarus, Russia and Ukraine is no longer available to the Bonn-based company, but sales from these three countries account for just 1% of total sales.
With the published annual figures, the share was at least able to push itself away from the lows for the time being. The Group achieved a new record result in 2021, with sales at EUR 81.7 billion, up a whopping 22.5%. Pre-tax profit was around EUR 8 billion, compared with just EUR 4.8 billion in the previous year. One of the sales drivers was the freight business, which boomed due to disrupted supply chains. This trend is expected to continue for the time being in 2022. The forecast for the current year was nevertheless cautious. It is expected to be in line with 2021, with a margin of around 5%.
Nevertheless, the share has lost considerable ground since its 2021 high of EUR 61.29. It reached a low of EUR 38.49 on March 7. After the figures, however, the share price rose to EUR 44.72 and is currently trading at EUR 42.90. Management has proposed a dividend of EUR 1.80, which currently corresponds to a dividend yield of almost 4.2%. It can be assumed that the number of parcels will tend to increase further in the future, and therefore this setback is a real opportunity to invest in one of the largest logistics groups in the world.
For a long time, one had to wait for bargains on the stock market, as the market knew only one direction. Now some distortions in the market can be used to enter. BASF is and remains a big player in the chemical business. Globex Mining is diversified and will benefit from the significant price increases in commodities. Deutsche Post is also a globally positioned group operating in a growth market. In the long term, you can hardly go wrong here.
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") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
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