March 1st, 2022 | 10:32 CET
Between war profits and peace dividends: ThyssenKrupp, Memiontec, BP
Table of contents:
ThyssenKrupp: Profiting from rising defense spending?
ThyssenKrupp's stock shot straight up on Monday morning. The reason: The German government wants to invest massively in defense. The past few days have shown that diplomacy is quickly at an end when dealing with uncompromising and, at the same time, powerful despots. While the arms deliveries to Ukraine can hardly be more than emergency aid and a warm gesture, a powerful army under the protective mantle of NATO would possibly curb further aggression by Russia. But to what extent do ThyssenKrupp shares benefit at all from rising defense budgets?
ThyssenKrupp is no longer the arms manufacturer of days gone by. However, the steel group does produce important basic materials for weapons construction. Every tank, every gun barrel - all of these are made of steel. Often special alloys are needed for this. In this respect, ThyssenKrupp can look forward to more business in the long term. However, in the short term, the steel group is likely to suffer from rising energy prices. Hopes of an upturn in business may therefore be premature. Although EUR 100 billion is to flow into the defense budget in 2022, it is not yet clear how the funds will be used. The market is, therefore, rightly cautious on ThyssenKrupp.
Memiontec: Grab the peace dividend here
One share that has nothing to do with the war in Ukraine and its consequences, even indirectly, is that of the Asian water utility Memiontec. The Company takes care of drinking water, industrial water and wastewater and provides municipalities with all-round solutions, including long-term support. In addition to its home market, the Singapore-based Company is particularly well-positioned in Indonesia. The figures for the past fiscal year show that business is booming. The Company recently reported record sales of SGD 45.6 million, which corresponds to an increase of 17.7%. As part of the improved figures, Memiontec wants to increase the dividend and pay out a dividend of SGD 0.209 per share.
The full order books also support that things are continuing positively around Memiontec. The Company had orders with a total volume of SGD 78 million on its books at the end of 2021. "With the increasing demand for water in Asia, we look forward to future opportunities in our core markets as we continue our multi-pronged growth strategy through our synergistic business model," said Tay Kiat Seng, Executive Director and CEO of Memiontec. Given the ongoing urbanization in Asia, the growing importance of clean water and the awareness to prevent epidemics, Memiontec can be considered a defensive value with growth potential. The share is in a stable upward trend, and the business model appears coherent. Unlike many "war stocks", Memiontec is already sitting on tangible orders.
BP: Speculation upon speculation
The BP share demonstrates that war can accelerate and suddenly reverse many processes. Over the weekend, it became known that the British oil company had been urged by the government to sell its stake in the Russian energy company Rosneft. As the flow of capital to Russia is likely to be restricted at the same time due to the sanctions, this transaction is ill-starred - the possible group of buyers is likely to be very small, and BP will certainly suffer drastic losses. BP is already expecting write-downs in the billions. And the share price? It is holding comparatively steady despite some losses. Observers see the exit from Rosneft as a catalyst for BP's climate-neutral orientation, which is planned anyway. Some market participants also hope that the state could compensate BP for the losses - after all, the exit followed pressure from London. Even though this is rather unlikely, BP is the subject of much fantasy. What will become of it, however, is uncertain.
Armaments shares are on the rise, as are steel stocks. What will happen to BP, in the end, remains unclear. It seems like shares connected with the Ukraine war are pawns in the turbulent events. For investors, it is like roulette. What will happen in the end is uncertain. The only clear thing is that anything is possible - especially in this constellation. The Memiontec share is staying out of the turmoil of war and instead benefits from the increasing demand for water in Asia. It is a solid business that promises growth and substance simultaneously. Those who find war stocks too hectic will find Memiontec a possible alternative.
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