August 10th, 2023 | 08:00 CEST
Caution with Nikola share! Are Vonovia and Desert Gold bargains?
Table of contents:
"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
Desert Gold: Is the course set for a takeover?
Although gold prices are sustainably above USD 1,900 per ounce, gold shares are surprisingly quiet. Gold explorers, especially, are currently available at bargain prices. Desert Gold belongs to this group. The Company regularly delivers convincing drill results for its SMSZ project in West Africa. On the 440 sq km property, not all areas have been explored, and yet there is already a measured and indicated mineral resource totaling 310,300 ounces, as well as an inferred 769,200 ounces of gold. Desert plans to drill approximately 30,000 meters in the current year alone. Additional momentum is expected to come from a new manager. Doug Engdahl has been recruited as the new director. The Canadian has 15 years of geological experience in the exploration and mining sector in North America and Africa. He should, therefore, also be very well-connected in the industry. Engdahl certainly seems convinced of Desert Gold's potential. His stock options only become interesting at a price of CAD 0.07. Currently, the share is quoted at CAD 0.045.
Engdahl should help increase the resource estimates through further drilling programs and make the Company pretty for a takeover. After all, industry giants such as Barrick Gold, Endeavour Mining and B2 Gold are active in the area. M&A activity in the region is correspondingly large. Sale prices of around CAD 91 per ground ounce were paid on average. In contrast, Desert Gold is an absolute bargain with a valuation of about CAD 11 per ounce. With patience, continued good drilling results and takeover fantasy, significantly higher prices should be possible in the coming months. After all, the Desert Gold share was quoted at EUR 0.10 in January 2022 (currently CAD 0.045).
Vonovia: Depreciation weighs, but analysts optimistic
The Vonovia share has seen significantly higher prices than the current EUR 20.50. Since its all-time high of EUR 60 a good 2 years ago, the stock has fallen by two-thirds. There are good reasons for this. Due to falling real estate prices, the housing group has had to write down its portfolio in the current year alone from EUR 94.7 billion to EUR 88.2 billion. In addition, the rising interest rates and the transition to sustainable heating systems could lead to high renovation costs. The operating result (EBITDA) was a solid EUR 1.3 billion (-5% YOY). FFO 1 decreased by 9.5% to EUR 965 million. For the full year, the DAX-listed group expects adjusted EBITDA of between EUR 2.6 billion and EUR 2.85 billion. FFO 1 is projected to be between EUR 1.75 and 1.95 billion.
Nevertheless, several analysts have recently recommended the stock as a buy. Warburg is particularly optimistic. Their analysts had expected even higher depreciation and amortization in the second quarter. On the other hand, rental income was higher than expected. They, therefore, rate the Vonovia share as a "buy" with a price target of EUR 38.60. Our colleagues at DZ Bank are more cautious. For them, the quarterly report did not paint a clear picture. Their price target is EUR 27.50.
Nikola: End of share price fireworks
Nikola shareholders certainly cannot complain about the share price performance in the past two months. After a rally of around 500% to EUR 3, the share plummeted to almost EUR 2 last week. That ends the share price fireworks, at least for the time being. There are several reasons for the share price weakness: Weak quarterly figures, a capital increase and the departure of the CEO.
In the second quarter of 2023, the developer of electric trucks generated sales of USD 15.4 million. This compares to a quarterly loss of a whopping USD 217.8 million. In the year-ago quarter, the loss was USD 173 million. So far, there is no sign of substantial sales and falling losses. And Nikola had cash and cash equivalents of "only" EUR 226.7 million at the end of June. So another capital increase is needed. And in such a situation, the CEO is also disembarking. Thus, it was announced with the quarterly figures that Michael Lohscheller will resign from his positions as President and CEO with immediate effect. As of August 31, 2023, he will also leave the Board of Directors. Thus, the former Opel CEO was only active at Nikola for about one and a half years. Family reasons were cited as the reason for his resignation.
The Nikola stock is likely only suitable for speculative investors, given its market capitalization of around USD 1.6 billion, low trading volumes, and significant losses. Moreover, a significant capital increase – leading to the dilution of existing shareholders – seems inevitable. There are also many question marks surrounding Vonovia. Is there a threat of further write-downs on the portfolio? How much will financing costs rise? How many billions will have to be invested in the refurbishment of residential properties in the coming years? On the other hand, at Desert Gold, the positive outlook seems to outweigh the negative. The upcoming drill results should continue to be positive, and the new director should bring new momentum to the Company. He may even set the course for a takeover - if the price is right.
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") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
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 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.
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.