June 15th, 2023 | 08:30 CEST
Deutsche Telekom, Saturn Oil + Gas, TUI - Which share has the most potential?
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"[...] The Oxbow Asset now delivers a substantial free cash flow stream to internally fund our impactful drilling and workover programs. [...]" John Jeffrey, CEO, Saturn Oil + Gas Inc.
Deutsche Telekom - Is Amazon becoming a competitor?
On April 5, all was still right with the world for Deutsche Telekom shareholders. On this day, the annual general meeting took place, and it was announced that the Bonn company had taken over the majority of T-Mobile US. The share marked its high for the year at EUR 23.125 in Xetra trading. Since that day, one share has lost 19% of its value at its peak. The sell-off began after T-Mobile US reported disappointing earnings on April 28. The Company fell short of analysts' expectations in terms of new customer additions and revenue.
At the end of May, another blow came as Amazon considered entering the mobile phone business. By expanding its Prime offering, Amazon could attract and retain customers while also gaining new ones. Amazon is reportedly conducting price negotiations with various providers, including T-Mobile US. Regardless of whether the US subsidiary of the Bonn-based company wins the race, it is likely to have a negative impact on revenues and customer numbers. This would be a heavy blow for Deutsche Telekom because the US subsidiary is the group's cash cow.
It is unclear whether Amazon will go ahead with its plans. Despite the good figures for the 1st quarter, in which the group's net profit almost quadrupled to around EUR 15.4 billion with almost the same turnover, the share is not getting back on its feet. Uncertainty about the impact of a possible Amazon entry into the market is causing caution. The dividend yield is currently 3.6% if the payout remains the same. For courageous investors, the price decline can be an opportunity. Otherwise, one should watch from the sidelines for now.
Saturn Oil & Gas - Goes public on the TSX
Saturn Oil & Gas has been a growth rocket over the past few years. From a few hundred barrels, it went up to 30,000 barrels of light oil equivalent. The first quarter thus also set some records. Average production was 17,783 barrels per day. Adjusted EBITDA was CAD 70.4 million, up 332% year-on-year. Free cash flow was CAD 30.2 million, also a new high. As the latest Ridgeback acquisition was only finalized at the end of February, the figures do not reflect Saturn's true capacity yet. The upcoming Q2 figures will also not yet show the full potential due to the wildfires.
According to a report on June 13, production in Alberta, which is 10,000 barrels per day under normal circumstances, is now back to over 90% after the forest fires. According to the information available, the fires have not caused significant damage. Accordingly, the shortfall amounts to about 350,000 barrels. The Company also announced that it has received approval to list on the Toronto Stock Exchange (TSX) as of June 15. This should pave the way for larger institutional investors and give the Company more exposure than before. On June 4, 13.4 million warrants expired, increasing the value for existing shareholders. On July 7, another 13.6 million warrants will expire.
At the end of the quarter, net debt after the Ridgeback acquisition was approximately CAD 556 million. 60% of cash flow is going towards debt repayment. By the end of the year, the debt is expected to decrease to about CAD 350 million. The debt repayment is secured through hedging. Saturn should be debt-free by the end of 2025. The projected EBITDA this year is CAD 475 million. The drilling programs are also going well. Here, the Company is 37% above its forecasts. Despite all the growth, the share has yet to be able to profit and is quoted at CAD 2.20. This gives the Company a market capitalization of just CAD 305 million. It is only a question of time until the share starts to climb.
TUI - Facing a record summer
TUI was brought through the Corona Pandemic by state aid. The Hanover-based company needed a total of 4 capital increases to repay the state aid. On April 28, the last repayment was made. On May 10, the group presented its figures for the 2nd quarter, which showed a significant improvement overall compared to the previous year. 2.4 million guests were handled, and the turnover climbed from EUR 2.1 billion in 2022 to EUR 3.2 billion. Even if the figures are not yet in the black, things are clearly moving in the right direction.
The summer business is just around the corner, and the 3rd quarter is traditionally the strongest for the Company. So the report of June 14 is not surprising, according to which guest numbers are in part above the pre-Corona level again for the first time. This is good news, as many experts had assumed restraint in bookings due to inflation, which has also increased travel prices. Greece, Majorca and Turkey are at the top of the travel list, the US is the preferred long-haul destination, and Thailand is making a comeback.
Germany boss Stefan Baumert expects a record summer. In June, 90% of the allotments have already been sold. So despite last year's problems, travel enthusiasm remains high. This year, the airports are also expected to run more smoothly than last year, when chaotic conditions sometimes prevailed. Deutsche Bank has recommended the TUI share as a buy this month with a target price of EUR 9.80. Currently, the share is trading at EUR 6.818, well off the April lows of EUR 5.63.
There is currently uncertainty at Deutsche Telekom due to a possible entry of Amazon into the mobile market in America. According to management, Saturn Oil & Gas has completed its growth phase and is now entering the earnings phase. However, the Company plans first to pay off its debts, for which repayment is secured. At TUI, the turnaround may have been successful, and the conditions for good numbers in the next quarterly report are in place.
Conflict of interest
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