May 23rd, 2024 | 09:00 CEST
Caution with Hensoldt and Siemens Energy? Record numbers for Saturn Oil + Gas!
The shares of Hensoldt and Siemens Energy are among the stars of the current year. However, analysts are advising caution with both. Although the order intake at Hensoldt is convincing, there are also disappointments. Analysts see a significant risk to Siemens Energy's share price, which is not mitigated by their intention to sell in India. In contrast, Saturn Oil & Gas' record figures for the first quarter are convincing and offer share price potential. With the latest takeover, the oil producer aims to move up into the league of mid-sized producers and, thus, into a new league. Analysts are likely to raise their estimates upward soon.
time to read: 3 minutes | Author: Fabian Lorenz
ISIN: HENSOLDT AG INH O.N. | DE000HAG0005 , SIEMENS ENERGY AG NA O.N. | DE000ENER6Y0 , Saturn Oil + Gas Inc. | CA80412L8832
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Author
Fabian Lorenz
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.
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Saturn Oil & Gas: The next milestone after strong Q1 figures
Saturn Oil & Gas reported several records in the past quarter: While production volume and revenues are raised to record levels, liabilities are reduced substantially.
In the first quarter of 2024, Saturn Oil & Gas increased its average daily production volume to 26,394 barrels. In the same quarter of the previous year, this figure was just 17,783 barrels. Despite relatively low oil prices, revenue increased from CAD 131.4 million to CAD 168.2 million. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) climbed from CAD 69.9 million to CAD 88.2 million. The reduction in liabilities was also impressive, falling from CAD 556.6 million to CAD 386.4 million in the first quarter of 2024 compared to the same period of the previous year. This highlights how Saturn Oil & Gas has become a cash cow in recent years.
In addition to the figures, the Company reported on the ongoing takeover. This transformative acquisition aims to make the leap to a mid-sized oil producer and, thus, into a new stock market league. The acquisition of further oil and gas assets in the Saskatchewan region will increase Saturn Oil & Gas's production capacity to 38,000 to 40,000 barrels of oil equivalent per day. This represents a good 50% increase over the first quarter of 2024. The new drilling rigs are located close to existing Saturn Oil & Gas sites and can, therefore, be easily integrated into the Group. The acquisition is to take place retroactively from January 1, 2024, meaning the figures for the first quarter of the 2024 financial statements will improve significantly. The acquisition will cost the company CAD 525 million, which is expected to be amortized in 2 to 3 years. Due to the high earnings power, the ratio of net debt to adjusted EBITDA will only increase slightly and be a manageable 1.2 to 1.3.
Analysts should update their forecasts at the latest when the takeover is completed in the coming weeks. Anything less than significant upward revisions would be a big surprise.
Siemens Energy: Analysts skeptical
While the upcoming research studies for Saturn Oil & Gas should be positive, analysts at Siemens Energy are increasingly hitting the brakes. The Company recently announced the sale of its activities in India. As reported by the Indian business newspaper "Mint", the Indian wind turbine division of Siemens Gamesa Renewable Energy is expected to generate sales of around USD 700 million and be valued at USD 1 billion in the transaction.
The analysts at UBS welcome the intention to sell, saying this is the right step towards streamlining the Group. Nevertheless, they are sticking to a price target of EUR 14. The Siemens Energy share is currently trading at around EUR 24. It is difficult to understand why the rating is "Neutral" and not "Sell" despite the price difference. Last week, Bernstein and JPMorgan had already hit the euphoria brakes. For Bernstein, the fair value of Siemens Energy shares is EUR 15. JPMorgan considers only EUR 13 to be appropriate.
Hensoldt: Strong order intake, but...
According to analysts, the stock rally for Hensoldt might be over for now. Despite the recent consolidation, this could be considered healthy after a performance of around 50% this year. Deutsche Bank recently confirmed its "Hold" rating for Hensoldt. The target price of EUR 41 for the shares of the defense electronics specialist was also maintained. The operating development in the past quarter was as expected. Incoming orders and free cash flow even exceeded market expectations, keeping the Company on track.
Warburg Research also considers the Hensoldt share currently "only" a "Hold" with a target price of EUR 39.50. Although the analysts praise the high order intake, they believe the operating result fell short of expectations. The analysts at JPMorgan take a similar view of the quarterly figures. They, therefore, see the Hensoldt share as fairly valued at just EUR 36 and rate it as "Neutral". The defense electronics group's shares are currently trading at around EUR 39.
Siemens Energy and Hensoldt have already performed very strongly this year. A consolidation is, therefore, anything but surprising. Like Rheinmetall, Hensoldt's quarterly figures show that converting high-order intake into revenue growth in the defense sector takes time. The shares in the sector have perhaps already anticipated this development a little too much. Saturn Oil & Gas, on the other hand, certainly has upside potential. With the completion of the takeover, the updated analyst studies are likely to make this potential even more tangible.
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