September 6th, 2021 | 10:44 CEST
Defense Metals, Nordex, Rheinmetall - These shares benefit from megatrends!
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The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.
DEFENSE METALS CORP - Step by step
Rare earths are indispensable raw materials for the production of laptops, cell phones, electric motors or wind turbines. Strictly speaking, rare earths are metals and also occur in large quantities in the earth's crust. However, their extraction is complicated, which is why the supply is relatively low. China is the world's dominant supplier. This is only changing slowly, as the development of new rare earth projects takes a long time. But there is a consensus in the Western world that rare earth mines are being developed outside China.
In on this race is Defense Metals. The exploration Company is developing the Wicheeda Rare Earth Project, covering about 1,700 hectares in British Columbia. Past drill programs from 2019 delivered good results with indicated mineral resources amounting to 4.89 million tonnes at an average grade of 3.02% light rare earth elements (LREO) and suspected mineral resources of 12.1 million tonnes at an average grade of 2.90% LREO. Currently, preparations for the 2021 drill program are in full swing. It is planned to drill 2,000 to 5,000m. In the run-up, the Canadians have procured sufficient funds with CAD 5 million from a capital increase to carry out the campaign.
The Company is currently valued at CAD 21 million at a share price of around CAD 0.26. The high for the year was just over CAD 0.70 in mid-February. The last few months have seen rising commodity prices and shortages of materials. So the scenario of higher rare earth prices and critical raw materials in the medium term is already proving plausible in the present. Defense Metals can benefit from this price trend. Several industries with civilian applications play a role on the demand side, but the defense industry demands vast quantities. A fighter jet requires over 400 kg of rare earths, while a submarine or warship requires several tons.
For this reason, Defense Metals focuses on the defense industry as a customer. Characteristically, it takes years for explorers to become producers. Along the way, significant added value can be created for shareholders through project progress. For example, this could be the case soon, with the start of the 2021 drilling program and good results for shareholders of the Canadians. The big picture speaks for rising rare earth prices. The global will to build mines outside China provides strong backing.
NORDEX SE - Management Board buys
A successful capital increase with which strengthened growth can be implemented, and good half-year figures would have led to the assumption of rising prices for the shares of the North German wind turbine manufacturer. Nevertheless, the price did not get going and is currently hovering around EUR 16. Most analysts see a price potential of well over EUR 20. What could further curb the buying mood of investors? The half-year figures clearly show that the Group struggles with logistics, supply chains, and rising raw material prices. However, the quarterly and half-year losses were reduced significantly, and the order books are full. The figures of competitors Siemens Gamesa and Vestas showed that things are still not quite running smoothly in the industry. The Danish Vestas recently had to cut its forecast for the current fiscal year significantly. From a long-term perspective, the current share price level is appealing. CEO Blanco Diéguez also sees it that way and recently bought Nordex shares.
RHEINMETALL AG - Record results
The strategic reorientation of the Group is underway, which was also reflected in the half-year figures. The defense group and automotive supplier is saying goodbye to the combustion engine. The pistons business, which is up for sale and has been managed as a discontinued operation since the second quarter, resulted in a further write-down of EUR 110 million.
Looking at the continuing operations, Rheinmetall achieved a record result in the first half of the year. Sales increased by 9% to EUR 2.6 billion, while operating earnings grew enormously disproportionate and doubled to EUR 191 million. Earnings per share from continuing operations multiplied to EUR 2.50 (up from EUR 0.32).
In the future, Rheinmetall intends to expand its business with defense and security technology vigorously. The high profitability possible is underpinned by the half-year figures of the continuing operations. Analyst forecasts calculate a P/E of around 9 and a dividend yield of over 4% for 2022. It looks like a moderate company valuation. The stock also has a mostly buy recommendation from experts. However, the lack of an ESG-compliant business model makes itself feel with discounts to the price targets.
The trend is your friend - This is not only true for stocks that are rising. Provided the company valuations are right, investing in a trend or megatrend can be advantageous for investors. With the Nordex share, investors profit from the expansion of renewable energies. With Defense Metals, investors participate in the trend of higher rare earth prices in the long term, as demand from civilian sectors and the defense industry significantly exceeds supply. Rheinmetall will operate a much more profitable business with the implementation of its strategic repositioning. However, the failure to meet ESG standards could also lead to a permanent undervaluation.
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