May 15th, 2023 | 07:50 CEST
Correction in Greentech shares Varta and Nordex - Manuka Resources becomes a gamechanger
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"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Nordex - In search of profitability
Hamburg-based wind turbine expert Nordex is facing a home-grown problem. The high number of old projects weighed on the Company in the first quarter. What would be a blessing for many companies is a burden for the power plant manufacturer, as the many old contracts were agreed upon without corresponding adjustment factors to the new price world. 50% higher upfront costs and ongoing supply chain problems have pressured the entire industry for many months.
Despite delivering ever more powerful turbines, profitability has hardly improved so far. Although sales rose by a good 30% to EUR 1.2 billion, Nordex posted a loss of almost EUR 215 million on the bottom line, around 40% more than in the same quarter of the previous year. In an initial assessment, analysts described the figures as weak, with Jefferies even calling it a disappointing start to the year. However, they are now positive about the outlook: CEO Blanco expects a stronger second half of the year as the situation improves with each new contract. Accordingly, the EBITDA margin in 2023 is expected to be in the corridor of -2 to +3%, although in Q1, it starts at a low of minus 9.5% compared to minus 4.3% in the final quarter of 2022.
After a rollercoaster ride, the Nordex share is now back at EUR 11.30, a good 27% below its high for the year of EUR 15.58. With a valuation of EUR 2.5 billion, it is currently trading at around 40% of sales, yet only 4 out of 10 analysts on the Refinitiv Eikon platform give it a buy rating with an average 12-month target price of EUR 14.45. From a chart perspective, the value must not fall below EUR 10, otherwise, trouble threatens.
Manuka Resources - The gamechanger in the portfolio
In the current climate debate, the most important thing is to develop marketable products that are already produced under sustainable principles in their creation. This is anchored in the so-called Supply Chain Act and is becoming mandatory for raw material companies. However, only mining companies that implement ESG criteria above and beyond the required level and thus make a voluntary, active contribution to environmental and climate protection will be eligible. Therefore, the metals urgently needed for climate change must be mined cleanly and with the smallest possible CO2 footprint.
The Australian commodities company, Manuka Resources Ltd from New South Wales, not only owns two very promising projects in gold and silver with historical production but is also positioning itself in the area of critical metals with the acquisition of a large vanadium project (STB) completed in 2022. Recently, the new chief geologist, Phil Bentley, was brought on board and is expected to optimise metal exploration so that in the future, they can generate enough cash flow for internal financing with smaller production. Unfortunately, the contract prices for silver are currently below the world spot market prices, which makes production not very profitable.
Manuka's work in 2023 will focus on expanding the STB vanadium project because its extraordinary volume of resources means it could address 15% of the world market in the future. To this end, it has already invested USD 50 million in a preliminary feasibility study, and a mining licence for 5 million tonnes per year is also part of the deal. Drilling at Mt Boppy Deeps to evaluate an underground mine development is expected to begin in the second half of 2023. Manuka's share price has recently suffered somewhat from the general weakness of junior shares in the resources sector. However, at AUD 33.5 million, STB's future battery and Greentech metals project is undervalued. Large producers like Rio Tinto and BHP are constantly on the lookout for promising expansion projects. This puts Manuka Resources clearly in focus.
Varta - Still in correction mode
Varta shareholders now need hope as well as patience because the statements of the management on the last publication of figures sounded anything but positive. Falling prices for microbatteries, stagnation in the e-mobility sector in the V4Drive area, and at the same time, an increased purchase of raw materials are putting pressure on the margin. Now there is also the threat of high-wage settlements. In the meantime, Varta has agreed on a restructuring concept with its major shareholder and the financing banks. Around 800 full-time jobs are to be cut, half of them in Germany over the next two years. Worldwide, Varta employs about 4700 people, but how the announced job cuts will be implemented is still unclear, according to the IG Metall trade union.
The current plight is attracting short sellers. Booth Bay and SHI Partners are now the front-runners among the shorties, with a combined stake of over 3%. One can only hope that a quick turnaround will eventually force these investor groups to cover their positions. However, at EUR 19.35, the Varta share crashed to a new 5-year low last week. Of the 10 remaining analysts on the Refinitiv Eikon platform, none recommend a buy, and the average price target is EUR 23.74. All one can do here is light a candle and hope for improvement.
Not all Greentech companies can shine with profits in the current environment. The framework factors in Germany, in particular, with the world's highest raw material and energy costs, are making business calculations difficult in the face of international competition. From this perspective, Nordex and Varta are very speculative investments. Manuka Resources remains an attractive, hopeful value focusing on strategic metals.
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