May 23rd, 2022 | 12:49 CEST
BASF, MAS Gold, Plug Power - Shares with great turnaround potential
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"[...] One focus will be on deposits near the surface. These would be good arguments for a quick production decision using the low-cost heap leaching method. [...]" Brodie Sutherland, CEO, Tocvan Ventures
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 - Heavily sold off
The Ukraine crisis is costing BASF dearly. The Company has many business ties with Russia. First and foremost, there is the Wintershall Dea stake, in which the Ludwigshafen-based company owns around 73% of the shares, with the remainder held by a Russian oligarch via Letter One. Before the war broke out, the plan was to take Wintershall Dea public. In its current form, this is no longer possible, so attempts are being made to sell the Russian business of the holding. The joint venture partner Letter One is a potential buyer. If the spin-off succeeds, an IPO would again be conceivable.
Apart from that, support with technology related to the production of Russian gas is no longer possible. Cheap energy is therefore no longer available in return. The Group fears a supply stop of Russian energy, as the Company is very energy-hungry overall. A foretaste was provided by the first-quarter figures, where adjusted profit rose about 20% YOY, but write-downs of around EUR 1.7bn on Wintershall Dea dented the good result. For 2022, management expects a decline in sales and earnings. Nevertheless, earnings are expected to be between EUR 6.6 billion and EUR 7.2 billion.
That represents a decline of about 15% compared to 2021, but the stock plunged by more than 48% at its peak. From EUR 69.15, it went down to EUR 46.465. The share is currently trading at EUR 48.85. If the Group keeps the dividend stable, the current dividend yield amounts to 6.9%. On a positive note, Goldman Sachs has increased its stake in the Company and now holds 5.32% of the shares. Among analysts, there is a mixed picture between buy and hold. The price targets are between EUR 50 and EUR 74. If the Ukraine conflict is resolved, the share should pick up quickly.
MAS Gold - Results from the winter drilling program
The framework conditions for gold are generally good. High inflation is driving investors into gold as a safe haven, and in 2021 demand for physical gold reached an 8-year high. On average, experts see the estimated 3-year gold price at USD 2,225. With the start of the Ukraine crisis, the price of gold rose sharply but then consolidated again to around USD 1,800. The price bounced off there and is currently quoted at USD 1,842.10. A high gold price helps gold explorers such as the Canadian MAS Gold advance their explorations. The Company reports more than 1 million ounces of gold at its projects in the La Ronge Gold Belt in Saskatchewan. The 2022 target is to increase mineral resources to 1.5 million ounces.
The target is to be achieved through acquisition and drilling. At the end of March, the final acquisition of the Preview SW project was finalized. The first results from the drilling program were then released on April 26. Gold occurrences with a grade of up to 2.81 g/t gold were detected in all 5 drill holes. On May 16, results from 7 additional drill holes followed, all of which were also successful in detecting gold. At the peak, up to 3.06 g/t gold was found. CEO Jim Engdahl expressed his satisfaction, "These results show that mineralization occurs near-surface in previously untested locations and that the North Lake deposit continues to expand along strike." Results from 22 additional drill holes are pending.
Once the results are available, a new drilling program will be planned based on the data. The funds needed for this are expected to come from a private placement. On May 5, the Company announced that a private placement would be made. Eleven days later, it was announced that shares would be issued at 0.08 Canadian dollars (CAD) each. It is expected to raise between CAD 1.5 and 3 million. For this purpose, each investor will receive a warrant that can be exercised at CAD 0.20. Since the announcement of the private placement, the share has been under pressure and is quoted at CAD 0.08. The market capitalization is thus only CAD 14 million. Favorable for the existing gold deposits in one of the best mining regions in the world.
Plug Power - Big orders
The Ukraine crisis has shown Europe again how important it is to look for alternative energies. As recently as mid-May, the German government decided to fund hydrogen research with a further EUR 2 billion. Hydrogen is intended to replace fossil fuels in the long term. In particular, the chemical and steel industries, which require a lot of energy, need an alternative to the status quo. The technology could also become important for transportation. One might think that these are ideal conditions for one of the biggest hydrogen players, Plug Power. But if you look at the share price, the world looks different.
The reason for this is the latest quarterly figures. Analysts, on average, expected a minus of a good USD 0.15 per share and an increase in sales of about 101%. Both expectations were missed, and the loss of USD 0.27 per share was significantly higher than anticipated. Compared to the previous year, the loss was even more than doubled. But there was also good news, as a deal with Walmart was announced on April 19. Plug Power is to supply 20t of green hydrogen for up to 9,500 forklifts. On May 17, H2 Energy Europe awarded the Company a contract to supply the world's largest electrolyzer plant with one gigawatt.
Following the quarterly report, the share price took a dive and reached a new multi-year low of USD 12.70. From there, it went up again to currently USD 16.45. Hydrogen is set to become a future market, and losses are being accepted for growth. But in the current market environment, weak figures are severely punished. There is great interest in helping hydrogen to achieve a breakthrough. As soon as the price of hydrogen drops noticeably, the switch will become more and more interesting for companies. Walmart is just one of the big players that want to become climate-neutral.
There are turnaround candidates in a wide variety of industries. Each has different conditions and problems. BASF is suffering from the Ukraine situation and has already lost almost 50% of its value. MAS Gold is expanding its mineral resources and needs fresh capital to do so, which is weighing on the stock, at least in the short term. In the long term, however, successful drilling will bring an increase in proven resources. Plug Power benefits from the Ukraine crisis, as hydrogen is again coming into focus. Losses are part and parcel of a future technology.
Conflict of interest
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