Billion-Dollar Poker, Margins & Cash Machine: Siemens Energy, Evonik and RE Royalties Could Be the Real Winners!

Siemens Energy: A Comeback Full of Energy

Siemens Energy has delivered a truly impressive comeback. After months of negative news surrounding its crisis-stricken wind power subsidiary, Gamesa, a noticeable breath of fresh air has swept through the group. The massive problems with onshore turbines seemed to be dragging the company to the brink of collapse and left shareholders breaking into a cold sweat. But management has impressively turned the ship around and restored profitability. The order books are literally overflowing, as the insatiable global appetite for energy, driven in part by AI, is forcing governments and corporations to invest in grid infrastructure.

Operationally, the rigorous restructuring is delivering encouraging results, reflected in the financial statements. The order backlog recently climbed to an all-time high of over EUR 123 billion, providing a substantial cushion for the future. This also provides crucial long-term planning certainty, and the company posted a remarkable profit after taxes of over EUR 1.3 billion in the past fiscal year. Crucially, the operational trend is clearly pointing upward. Above all, the traditional gas and electricity grid business is booming and more than compensates for the wind sector's previous weaknesses.

For investors, the question now is what further upside the stock may have. Over the past few months, it climbed to a high of around EUR 195, reached in April this year. A correction then set in and has continued ever since.

One positive factor could be that a sustainable dividend might finally be within reach again, thanks to the extremely positive cash flow and strong annual profit. If the EBIT margin gradually climbs toward 3% to 5% over the next few years, as planned by the Executive Board, the stock still has room to rise. Investors looking to capitalize on the megatrend of the global energy transition and grid expansion will find it hard to ignore Siemens Energy in the future as well.

Siemens Energy appears to have weathered the worst and, with its order books brimming, is looking toward a bright future.

From the exciting turnaround in the energy sector, we now turn our attention to specialty chemicals. Here, the focus is currently less on green grids and more on a takeover battle.

Evonik: The Billion-Dollar Poker Game for Specialty Chemicals

The European chemical industry is currently engaged in a no-holds-barred battle, as pressure on companies has been mounting noticeably for quite some time. A major wave of consolidation could be on the horizon, and Evonik has suddenly found itself in the spotlight, at the centre of a takeover thriller. The catalyst was a non-binding offer from industry giant BASF, which apparently intended to completely swallow up the Essen-based specialty chemicals group. ButEvonik'ss management gave its competitor the cold shoulder and resolutely rejected the multi-billion offer. The public rationale was clear and self-assured: they simply considered the offered price far too low to even enter into formal negotiations.

The figures behind this takeover bid are nonetheless interesting and are fueling market discussion. According to reports, BASF had offered around EUR 10.3 billion for the acquisition, which corresponded to a price of approximately EUR 22.15 per share. Although this price represented a premium of just under 29% over the previous share price, it was apparently not enough for the self-assured Essen-based company. As a result, Evonik's stock surged and briefly traded at just under EUR 20, reflecting investors' expectations of a soon-to-come improved offer. Operationally, Evonik is in the midst of a tough but necessary restructuring to boost its profitability in an increasingly challenging market environment.

The RAG Foundation now plays the decisive role in this takeover poker game; with a stake of over 40%, it effectively holds a veto right over any potential deal. Without its blessing, absolutely nothing happens in Essen. In addition, the IGBCE union is demanding binding commitments regarding investments and the long-term preservation of jobs. For speculative investors, however, the current situation offers an interesting opportunity and the prospect of a higher bid, possibly toward EUR 25. But this is speculation for now; if BASF withdraws out of frustration, the current price gains could evaporate just as quickly.

Evonik is currently a bet for bold investors who are banking on an improved offer from BASF. Ultimately, however, major shareholders such as the RAG Foundation will tip the scales.

From the DAX and MDAX stocks, we now turn our attention to North America, where a smaller company is "carving out its margin" in renewable energy through clever financing structures.

RE Royalties: The Profit Machine of the Renewables Sector

RE Royalties recently fell below the key support level of CAD 0.35. However, it then held up perfectly at the even more important support level of CAD 0.30, and from there, it is now trading at CAD 0.32. The stock now needs to decisively break back above CAD 0.35. Then it can regain momentum toward CAD 0.50—which would be the first expected price target according to technical analysis—before levels between CAD 0.60 and 0.70 could come into focus.

RE Royalties operates a profitable royalty model in the renewable energy sector and has secured a strong "first-mover advantage" in this field. To date, the company has already invested over CAD 82 million in 27 successfully completed transactions and approximately 135 projects. Loans are often granted at 12% to 13%, and when paired with royalties, this can lead to a target return of a remarkable 12% or more. Revolve Renewable Power's recent full repayment of a CAD 2.4 million loan further demonstrates that this system works reliably, underscoring the company's strong capital position.

Additionally, the company has fresh, fundamental momentum from a newly announced partnership in the United States. The company has signed a comprehensive memorandum of understanding worth up to USD 67.5 million with Solaris Energy to establish an expanded financing partnership for several future US solar projects. Coupled with the ongoing strategic review to optimize shareholder value, the stock currently offers an attractive risk-reward ratio. The recurring revenue from diversified royalty agreements makes the stock an attractive core investment in the clean energy sector.

In terms of price, RE Royalties is trading slightly lower than recently, which could turn out to be an attractive entry opportunity in a few weeks or months, because if the stock breaks above CAD 0.35 again, the market could continue to reward the solid business model.

Siemens Energy demonstrates that a turnaround is possible even after a deep crisis, while its record order backlog continues to attract investor attention. At Evonik, investors are currently circling the bubbling volcano of takeover speculation, which brings the prospect of rapid gains but also carries downside risk. RE Royalties, meanwhile, could be an interesting addition to a diversified portfolio. The company operates efficiently and with a clear vision in the growing renewable energy sector. For investors seeking diversification, all three stocks could serve as compelling portfolio building blocks.