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June 7th, 2023 | 08:45 CEST

Buy (concrete) gold below value: Vonovia, Aroundtown, Desert Gold

  • Mining
  • Gold
  • RealEstate
Photo credits: pixabay.com

Real estate was the Germans' favourite asset class for years - until the interest rate hammer came. In the meantime, prices for many residential properties have fallen back. There was simply hardly any demand left. Here we explain why the shares of real estate companies are still under pressure and which asset class could soon overtake real estate.

time to read: 3 minutes | Author: Nico Popp
ISIN: VONOVIA SE NA O.N. | DE000A1ML7J1 , AROUNDTOWN EO-_01 | LU1673108939 , DESERT GOLD VENTURES | CA25039N4084

Table of contents:


    Bradley Rourke, President, CEO and Director, Scottie Resources Corp.
    "[...] The transaction offers benefits to all parties: Shareholders now have three promising projects in their portfolio. [...]" Bradley Rourke, President, CEO and Director, Scottie Resources Corp.

    Full interview

     

    Vonovia: Rental market gives hope

    Vonovia generates around 95% of its sales by renting out residential properties. In fact, the stock should be performing much better than it currently is: in the past six months alone, its value has declined by nearly 24%. However, experts anticipate good years ahead for rental properties, as fewer people can afford to buy a house while an increasing number of people are immigrating to Germany. At the same time, construction activity is at rock bottom. Construction companies would have to charge around 20 euros per square metre in rent today to make construction worthwhile in the first place. The result: the stock is becoming more expensive. Why do stocks like Vonovia or Aroundtown not benefit from this?

    The high level of debt is what makes investors uncertain about Vonovia. If interest rates remain high while property prices tend to be relatively low, refinancing could become expensive. This scenario is currently weighing on the share price. Although Vonovia recently succeeded in selling a real estate package, this has only calmed the market somewhat. The prospect of falling interest rates will likely help the Vonovia share to get back on its feet.

    Aroundtown: These figures are reassuring

    Aroundtown is in an even worse position than Vonovia. The share has lost a whopping 55% in the past six months. Recently, however, the value jumped by double digits within a week. What happened? For months, the market worried about Aroundtown's future. Thanks to long-term loans, the Company is able to withstand the current situation quite well, but it operates in the commercial and office property sector. Here, trouble could threaten from the USA. For months, industry experts have been warning of a bubble. Many offices are still empty after the COVID-19 pandemic. Even though many CEOs of DAX-listed companies are calling for a team spirit and want to bring employees back to the offices, the world in 2023 is different. The same goes for travel and shopping in the city centres. Given the share's recent comeback, investors can still keep Aroundtown in their sights - average interest rates of 1.4% and an average fixed-interest period of 5 years give the Company breathing space.

    Desert Gold: A topsy-turvy world in Mali?

    The Desert Gold share also has a lot of room for improvement. The Company operates in Mali and is advancing a promising gold project in an exciting mining region. The SMSZ project is 440 sq km and is located in the immediate vicinity of Barrick Gold, B2Gold and Allied Gold projects. The latter company is to go public with an expected valuation of USD 1.2 billion. If the IPO goes through, it should also put a spotlight on the Desert SMSZ project.

    SMSZ contains initial proven and indicated mineral resources of 8.47 million tonnes grading 1.14 g/t gold totalling 310,300 ounces, and suspected mineral resources of 20.7 million tonnes grading 1.16 g/t gold totalling 769,200 ounces, as well as more than 21 gold zones and numerous other high-quality exploration targets. Given its proximity to producing mines, Desert Gold, valued at only around CAD 11 million, is likely to be a potential takeover candidate. Many large gold companies are already active in Mali. Securing a new promising project there could fit into the picture for Barrick, B2Gold and Co.


    Now that concrete gold is less in demand, precious metals could once again take on a more important role in investors' portfolios. In recent months, gold has again reached prices above the USD 2,000 mark. Quite a few gold bulls expect new highs in the medium term. Small gold stocks, such as Desert Gold, offer leverage to the gold price, as their gold deposits in the ground have yet to be extracted. Although this indicates an increased risk, it offers experienced investors the opportunity to build up speculative positions from small amounts. The obvious valuation anomaly between Desert Gold and its neighbours can be seen as an additional argument in favour of the gold company from Canada.


    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") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
    For this reason, there is also a concrete conflict of interest.
    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.

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    Der Autor

    Nico Popp

    At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.

    About the author



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