October 31st, 2022 | 12:25 CET
Deutsche Bank, Globex Mining, Vonovia - Covering basic investments through shares with potential
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Deutsche Bank - Best quarterly figures since 2006
When the head of Deutsche Bank, Christian Sewing, announced in 2019 that the Group would undergo a turnaround by the end of 2022, many investors were suspicious. But things slowly started to look up, even if not all targets could always be achieved. Now, in 2022, interest rates are finally picking up again. Despite a changing economic environment due to the Ukraine conflict, the Company could achieve most of its goals. The final sword of Damocles remains the investigations against the DWS subsidiary, which is suspected of greenwashing.
The figures for the 3rd quarter, which the Group presented on October 26, were convincing. Earnings climbed 15% YOY to EUR 6.9 billion. At EUR 1.6 billion, the bottom line was the biggest pre-tax profit in the 3rd quarter since 2006, while after-tax profits more than tripled YOY to EUR 1.2 billion. The Group achieved growth in all four core businesses. The Corporate Bank was particularly noteworthy, with an increase of 25%. CEO Christian Sewing commented, "We have significantly improved Deutsche Bank's earnings power and are fully on track to achieve our targets for 2022."
The forecast for the current year sees revenues at EUR 26-27 billion and after-tax return on tangible equity at 8%. In the first nine months, the latter is on track at 8.1%. As an investor, one can be quite satisfied with what has been achieved. Since the beginning of October, this has also been reflected in the share price. It has climbed from EUR 7.25 to its current level of EUR 9.82. Goldman Sachs issued a buy recommendation with a price target of EUR 18.20 following the figures.
Globex Mining - Valuation much too low
Globex Mining can be described as a commodity property depository. The Company has 217 commodity projects in its portfolio. Of these, 111 projects have precious metals such as gold, silver, platinum and palladium. 62 properties have non-ferrous metals such as copper, zinc, lead and nickel. 44 projects have deposits of special metals and minerals such as iron, rare earths, uranium, lithium, cobalt and many more. The latter, in particular, plays an important role in the energy transition. 55 projects have historical or NI 43-101 compliant resource estimates. All properties are located in secure jurisdictions in North America and Germany. Globex buys prospective projects cheaply and upgrades them with its own explorations.
The business model lets other companies develop the projects and, in return, receive cash, shares or options, and royalties from them. Royalties have currently been agreed upon for a total of 89 projects. Due to the large number of projects and the different explorers, there is a constant newsflow around the Company. On September 27, Labyrinth Resources increased the gold resource estimate to 500,000 ounces. When production starts, Globex receives 5% royalty at the beginning and, later, 3% royalty. On October 12, Globex optioned the Duquesne West/Ottoman Gold Project to Emperor Metals. Over 5 years, Globex will receive CAD 10 million, a minimum of 15 million shares with a minimum price of CAD 0.20, and 3% royalties.
Only one day later, the explorer Cartier Resources published a resource estimate according to NI 43-101 standards, according to which there are 311,000 ounces of gold on Globex's Nordeau West Gold Project. The royalties are 3%, and per ounce, Globex will receive CAD 64.80. Thus, this 1 project alone is worth over CAD 20 million. Currently, however, Globex is valued at only CAD 34 million at a share price of CAD 0.65. At the same time, there should still be about CAD 12 million in cash. The Company has the option to buy back 1 million shares until August 1, 2023, which would make sense given the current undervaluation. Those looking to invest money in commodities are well positioned with Globex's broadly diversified portfolio. Interested investors can take a look at the Company at the International Precious Metals and Commodities Fair in Munich on November 4 and 5.
Vonovia - Tough times for investors
Last week, Vonovia's investors were primarily focused on the ECB's interest rate decision. Although the 0.75% increase had been expected, the share subsequently fell sharply and exited Xetra trading on Friday with a loss of almost 5%. Rising interest rates are poison for the residential real estate company because the high debt will have to be refinanced sooner or later. The ECB's procrastination in raising interest rates for a very long time is taking its toll. Now inflation has risen exorbitantly, and countermeasures must be taken. At this point, no one knows how far the interest rate screw will have to be turned.
Management is trying to take countermeasures and wants to raise around EUR 13 billion through a partial sale of its real estate. Looking at the half-year figures, the result for funds from operations was decent at EUR 1.34 per share. The book value per share at the end of 2021 was EUR 42.86. In terms of substance, things look good, but rising interest rates will also impact selling prices. Experts assume that many a real estate group will have to downsize. Especially since new trouble may be looming at the beginning of next year, no one knows how many tenants will be able to pay the high service charges.
On November 4, the Group will issue an interim report on the third quarter. Then the development will show whether the funds from operations remain stable. If this is the case, the assessment remains that the share is trading below value. Currently, one pays EUR 22 for one share, which is significantly below book value. However, there are also some uncertainties which should be priced in. If the Company maintains its dividend, the dividend yield at the current share price will be over 7.5%.
The stock market has been "thundering" lately, but at these times, opportunities open up. Second-tier stocks, in particular, have been excessively punished. Deutsche Bank has already initiated the turnaround; the quarterly figures were convincing. Globex Mining is clearly undervalued at the current level. It is only a question of time until the share picks up again. Vonovia is suffering from the interest rate hikes and high inflation. As a result, it has led to sharp markdowns. Fundamentally, however, things are looking good at the moment.
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.
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For this reason, there is a concrete conflict of interest.
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