July 27th, 2023 | 07:15 CEST
BioNTech, Defiance Silver, Vonovia - Waiting for the turnaround
Table of contents:
"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
BioNTech - Waiting for the next blockbuster
BioNTech won the race for the Corona vaccine. That was followed by billions in revenue and record profits. The stock was soaring. Since the pandemic was officially declared over, sales and profits have been falling. For the 2nd quarter, the figures of which are to be published on August 7, analysts even expect losses. Much more important than the figures, however, is the update on the operating business. Recently, good news failed to drive the share price, such as the start of the Phase III trial of ONC-392/BNT316 in metastatic non-small cell lung cancer.
In other biotech companies, such an announcement would be a share price driver, but in the case of the Mainz-based company, buyers have failed to materialize. Yet a cancer therapy could be the next blockbuster, and it is the first step in BioNTech's collaboration with OncoC4. Moreover, BioNTech's oncology pipeline is well-stocked, and they plan to initiate further studies with potential for approval in 2024. In addition, a building covering an area of 25,000 sqm is currently being constructed in Mainz to support further research, where cancer therapies will be the focus. It is scheduled to be operational from 2025. The success of the Comirnaty vaccine has opened the door for mRNA therapies.
With Comirnaty's sales not expected to grow, even though it has submitted joint applications with Pfizer to the US FDA for the Omicron XBB.1.5-adapted monovalent COVID-19 vaccine, the focus is on the product pipeline. In Germany, the stock has been running sideways between EUR 91.62 and EUR 110.20 since mid-May. The share is currently trading at EUR 96.88. On the NASDAQ, the psychologically important mark of USD 100 has been held so far. If the mark breaks, the share could drop further.
Defiance Silver - Awaiting the conclusion of the legal proceedings
Defiance Silver is active in Mexico, where it owns the Zacateca Silver Project, consisting of four properties named San Acacio, Lucita, Lagartos, and Panuco, as well as the Tepal Gold-Copper Project. On June 7, initial results from the San Acacio drill program were released. The 4 holes evaluated had the highest grades and widest widths of mineralization on the property to date. Of particular note is hole DDSA-23-66, which returned the widest width to date: 41.83 m at 157.30 g/t silver. Peak silver grade was 5,510 g/t or 6,014 g/t silver equivalent. The original initial resource estimate was for 16.9 million ounces of silver, and since then, additional significant discoveries have been made outside the original drill area. The Veta Grande vein system, in particular, appears to have very high-grade mineralization.
The other 3 Zacateca properties are still at an early exploration stage, but again, initial drilling has already found very high grades of silver. The facts and figures speak for themselves, yet the share has been under pressure since May 2021. The reason for this is the Tepal project, which according to a NI 43-101 resource estimate, hosts over 1.8 million ounces of gold and 813 million pounds of copper and has a completed pre-feasibility study. Work has been unable to continue here for some time because fraudsters have managed to transfer the mineral concessions to a third party using forged documents. A legal dispute has been ongoing ever since. Douglas Cavey, the Executive Vice President, stated at the gold conference in Frankfurt that the Company has the support of the Minister of Economy and also enjoys backing from the Mexican mining industry.
He hopes that the process will be concluded positively in the next 10 months and that the project can then be moved forward. If the corresponding announcement comes, the share price should turn around abruptly. **In 2021, the share price was still over CAD 1. Currently, one share certificate can be bought for CAD 0.16, giving the Company a market capitalization of just CAD 36.4 million. Approximately CAD 5.5 million in cash is available for the exploration work this year and for the final payments to bring Lucita and San Acacio into 100% ownership. Risk-averse investors can build an initial position here.
Vonovia - Waiting for the end of interest rate hikes
Vonovia is considered the largest real estate group in Europe. The ECB's zero interest rate policy played into the Company's cards. It grew without paying interest and made acquisitions such as Deutsche Wohnen. As a result, the debts have increased, and since the outbreak of the Ukraine conflict, inflation has been on the rise. The US Federal Reserve (FED) has tried since then to stop the price increase by raising the interest rates. On July 26, the FED will likely raise interest rates by another 0.25%. This, in turn, puts pressure on the ECB because inflation is still stronger in Europe than in the US.
Any upward move in interest rates is poison for the indebted Vonovia Group. Interest expenses for the debt, which could previously be refinanced cheaply for a long time, are now rising significantly. As a result, earnings are falling. The Group has already sold properties for several billion euros and halved dividends to give itself breathing room. In addition, real estate prices are falling, as many people can no longer afford to buy property due to increased interest rates. Vonovia's tenants are also suffering from inflation, and there are fears that some tenants could default on their payments.
There has recently been a tailwind from Deutsche Bank, which believes that the fall in real estate prices has been halted for now. On the one hand, this means there are fewer balance sheet problems. On the other hand, this creates a more favorable environment for buyers, who may now be more inclined to purchase at current levels. EUR 300 million is retained by the Company, as around 45% of shareholders have opted for a stock dividend. The share has bounced off the all-time low of EUR 15.21 and can be had for EUR 20.93. The average price target of analysts is EUR 28.99. As soon as the central banks announce the end of interest rate hikes, this would be an initial spark for real estate stocks.
For all three companies, the outlook is good. In the case of BioNTech, only one preparation against cancer would have to be approved, and buyers would be lining up. Defiance Silver only needs official confirmation from the court that the fraud case will be reversed and can then hit the ground running. Vonovia is dependent on the central banks. The high level of debt is squeezing and must remain refinanceable. However, interest rates are still rising, which is likely to create further pressure.
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