February 21st, 2022 | 14:49 CET
E.ON, Nevada Copper, Nordex - The only way it works
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"[...] If we pursue our goals conscientiously, the market will adjust its valuation accordingly, I am sure. Often, all it takes is a trigger. [...]" Ryan McDermott, CEO, Phoenix Copper
E.ON - Outperformer
The Group is one of Europe's largest operators of energy networks and energy infrastructure and thus an important player for a successful energy transition. In the future, renewable energies will play an increasingly important role. Likewise, electromobility will take on a dominant role. For this reason, so-called smart grids are becoming increasingly important. The smart grid is an intelligent electricity network, i.e. an exchange of information takes place within the network, with the help of which electricity generation, consumption and storage can be dynamically controlled. Due to the increasing share of renewables, storage is also becoming increasingly important.
In the last 12 months, the Essen-based Company's shares have gained 23%, clearly outperforming the leading German index. The DAX lost 3% in the same period. However, following the good performance, most analysts now no longer have much confidence in the stock. However, given the good business performance and the valuation, the Company, currently valued at EUR 32 billion, is at least a good hold. The 2022 P/E ratio is 15, falling to 14 in the following year, and the dividend yield for both fiscal years is a good 4%.
Nevada Copper - Turnaround story
The mining company Nevada Copper should also benefit from the price increases of copper, a critical raw material for e-mobility. The Canadians own one of the few copper mines in the US ready for production. However, the share has lost significant ground in recent months. Several project delays and oppressive debts weighed on the share. In addition, there have been frequent management changes at the executive level recently.
With CEO Randy Buffington, who has been in office since October 2021, more calm has returned. Buffington succeeded in restructuring the Company's debt and bringing several new investors on board. Furthermore, the Canadians have a solid major shareholder in Pala Investments, which holds 38% of the shares. In addition, Solway and Mercuria have each invested around USD 30 million.
In the current fiscal year, the development rates are to be further increased. To this end, the Pumpkin Hollow underground mine, which is already partly in production and for which an annual production capacity of at least 77 million tons of copper has been forecast, will be extended by a further adit (Sugar Cube). In addition, an open pit mine will be established directly nearby, which has already been approved. In total, the Pumpkin Hollow property has a size of 60 sq km. Currently, the Company has approximately CAD 314 million on the balance sheet. Given the favorable general conditions, the reduction of risks and the existing potentials, the share certificates should soon move upwards again.
Nordex - Still too much headwind
According to the latest data, Germany has installed the most wind power capacity in Europe with 62,708 megawatts. Over 31,000 wind turbines supply a good quarter of the electricity generated in Germany. With almost 131.7 terawatt-hours, wind made the most significant contribution to electricity generation from renewable energies. Even though the big picture on the demand side is accurate, the industry has a margin problem.
High commodity prices and ongoing supply chain issues are weighing on the operating results of wind turbine manufacturers and causing share prices to fall. At 29%, the shares of the North German Company have lost almost 10 times as much as the DAX in recent months. Following red figures in the past fiscal year, analysts expect further losses in the current year, and the Company is not likely to return to profitability until 2023. Nevertheless, the average price target of the experts is around EUR 18, which corresponds to an upside potential of 40%.
The energy turnaround is a megatrend, also as an investment topic. It can only be successful if several building blocks interlock successfully. The relevant raw materials such as copper play a decisive role in this. Nevada Copper, as a producer, offers a good opportunity to enter the market after the price declines. Renewable energy generation is imperative, but Nordex struggles with rising commodity prices and ongoing supply chain issues. E.ON is a solid stock to benefit from the transition in the long term.
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.
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