September 21st, 2022 | 12:33 CEST
BYD, Varta, Globex Mining: Shares with diversification
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"[...] We can make a big increase in value with little capital. [...]" David Mason, Managing Director, CEO, NewPeak Metals Ltd.
For more than twenty years, the Cologne native has been intensively involved with the stock market, both professionally and privately. He is particularly passionate about national and international small and micro caps.
Globex Mining: High cash position and exciting investments
Commodity stocks do not have it easy at the moment. But this can also be an opportunity. Investors can pick up shares in attractive companies at the lower levels, and companies with filled coffers can invest. Both are true of Globex Mining (GMX). The Canadian company, with interests in over 200 resource projects, is currently valued at only about CAD 44 million - cash is already a good half of that. The investment portfolio is broadly diversified: gold, silver, copper, platinum and palladium, as well as base and speciality metals. As a result, there is no cluster risk. Because of the high cash balance, GMX can continue to invest, and there is also positive news from the portfolio.
For example, Radisson Mining Resources has reported numerous high-grade gold intercepts at the Kewagama mine. Further drilling is expected to expand the potential of the property. And Globex Mining is also involved in an interesting project in Germany, namely, Excellon. This company owns prospecting licenses with a total area of 340 sq km over a significant epithermal silver system with many high-grade intercepts. This very project could be taken public as a spin-out under the name Silver City. GMX welcomes the plans and sees the possibility that a European-focused exploration company like Silver City could achieve a high valuation. If you are curious, you should register for the virtual investor conference IIF (link ii-forum.com ) on September 27, 2022. Besides Globex Mining, Varta AG will also present at the conference, among many others.
Varta: When will the news come?
At the IIF, Bernard Wolf, Head of Investor Relations of Varta, will report on the current development in the Live Zoom Call, and investors can ask questions. Hopefully, Wolf has more information in store regarding expansion in the field of electromobility. After all, the battery manufacturer's diversification has been surprisingly slow - investors have been waiting for details and partners from the automotive sector for months. In the core business for micro-batteries, things are also going anything but smoothly at the moment. Varta is struggling with supply chain problems and high raw material prices. As a result, the sales forecast for the current year had to be reduced from EUR 950 million to EUR 880 to 920 million. Management also had to reduce its operating profit (EBITDA) targets from between EUR 260 to 280 million to EUR 200 to 225 million. From a chart perspective, there is also little hope for improvement in the near future. Yesterday, the Varta share slipped below the EUR 60 mark and thus to its lowest level in over two years. Already weeks ago, the experts of researchanalyst.com had pointed out the high valuation of the Varta share. At that time, the price-sales ratio for the current year was 3. Due to the melting profits, the P/E ratio would probably also increase. In the event of a strong recession, the negative trend in the core business should continue. For the expansion in the field of batteries for electric cars, the Company will need considerable capital to build up production capacities in the coming years.
BYD: Steps on the gas internationally
BYD shows how diversification works successfully. The Chinese company is primarily known for its electric cars - but it can do much more. The Chinese not only offer their own batteries - with Tesla already being discussed as a customer this year - but also electrically powered commercial vehicles and a monorail system (SkyRail) comparable to the German Transrapid. The latter division was even described in an analysis on the financial portal seekingalpha.com as an important asset for the share. After extensive investments, the rail transport division could now finally bear fruit. BYD could leverage its strengths in vertical integration and its geographic network. It is no coincidence, he said, that the first overseas orders for SkyRail come from South America, where the Company is already well established with its other product lines. In addition, BYD continues to step on the gas in the internationalization of its car division. Not only are the first showrooms to be opened in Germany and other European countries this year, but further models are also to be launched on the market in India. The all-electric Atto 3, for example, is set to shake up the market. The compact SUV has a front-mounted engine with a maximum output of 204 hp. The product launch is accompanied by further branches. BYD has opened showrooms in five other Indian cities. And BYD will, of course, also be represented at the IAA Transportation. In Hanover, the Chinese will present a whole range of commercial vehicles for the German market - from buses to city transporters to heavy trucks.
Diversification reduces risks. But the example of Varta shows that the road there can be rocky for companies. However, there are also positive examples. These include Globex Mining and BYD. Both shares do not appear expensive.
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