May 31st, 2023 | 09:00 CEST
Electrification wave! How investors can benefit: Siemens Energy, Vonovia, Defiance Silver
Table of contents:
"[...] In our experience, the local communities are supportive and friendly. [...]" Steve Cope, President, CEO and Director, Silver Viper
Siemens Energy: Is the market too optimistic?
Siemens Energy is considered the German electrification stock. Why? The spin-off of the Siemens Group stands for solutions for energy transmission and power generation. These include turbines, generators, transformers and compressors. The Company is also well positioned in the field of renewable energy and recently integrated the wind turbine manufacturer Siemens Gamesa into the Company. A glance at the figures for Siemens Energy could be somewhat puzzling. The Company has been making losses for two years - in 2022, it was EUR 404 million. At the same time, the share price has been rising significantly for months. The reason is the ever-higher order intake - in the last quarter, the number of orders increased by more than 50% and the total volume reached an unprecedented level of EUR 102 billion.
In addition, Siemens Energy is very solidly positioned with a liquidity reserve of around EUR 6 billion and could cope with many more years of losses. This does not seem to be the case, given the order intake. On the contrary, the market is playing out an extremely optimistic scenario and is already pricing in a golden future for Siemens Energy. Analysts are also extremely confident that the Company can profit from the ever-increasing investments in power grids and regenerative solutions. Handelsblatt recently quoted a Deutsche Bank analyst who recently raised the target price for Siemens Energy from EUR 24 to EUR 26. With this, however, the analyst is barely keeping up with the market sentiment - already today the share is scratching the EUR 25 mark. After a rapid price increase of around 55% in six months, investors in Siemens Energy may consider taking profits.
Vonovia: Debts weigh heavily
The Vonovia share paints an entirely different picture these days. The real estate company is losing more and more ground on the stock market. In the past six months it has lost 25%, and over the course of a year, it has even lost around 50%. The background to the drop in the share price is the crisis in the real estate market. High interest rates have brought the market to a standstill. Investors now believe that Vonovia's portfolio could be worth less in the future. Added to this is the pressure of debt. However, Vonovia has made progress in reducing its debt and recently sold properties worth the equivalent of EUR 1.5 billion. The share of debt is still high at EUR 44 billion. Although the sale of the properties is only a drop in the ocean, the transaction shows that real estate packages are not entirely illiquid. The share is in free fall. Investors should wait for a bottoming out first.
Defiance Silver: Exciting mix in Mexico
The Defiance Silver share has already formed a solid bottom and is currently trading at around EUR 0.10. Even if the share price suggests it, the Company is by no means only active in the early stages of exploration: The Tepal project in Mexico already has a resource estimate of 1.8 million ounces of gold and 813 million pounds of copper at grades of 0.3 g/t gold and 0.2% copper. There are also silver deposits of 1.54 g/t silver and minor grades of molybdenum. A preliminary feasibility study from 2013 sees potential for an open pit mine at the time's precious metal prices. In addition to the Tepa project, Defiance Silver has four other properties in the Zacatecas district. Three of these are at an early stage, and San Acacio has a resource estimate (inferred) of 16.9 million ounces of silver.
Several multinationals are active in the vicinity of Defiance Silver's projects: Pan American Silver, Newmont, Orla Mining, Fresnillo and Teck Resources. This can be advantageous for the Company at a later stage - as the number of potential cooperation partners is large. Defiance Silver sees its current drilling activities as solidly financed and aims to advance its projects in 2023. Given rising precious metal prices and the fact that Defiance Silver calculates internally with lower prices, the projects contain a safety buffer despite their speculative character.
At EUR 0.10, a long-term, anticyclical entry could offer itself. In addition to the bull market in precious metals, Defiance Silver should also benefit from increased industrial demand in the wake of the electrification wave.
Conflict of interest
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