02. July 2021 | 12:15 CET
Freenet, Almonty Industries, Lufthansa - Setbacks offer entry opportunities
The stock markets have been on the rise for a long time, undoubtedly due to the loose monetary policy and the resulting inflation. Nevertheless, there is no hype as before the bursting of the dot-com bubble. Back then, people subscribed to Infineon and did not even know what the Company was doing. Despite Corona, the markets are higher than before the crisis, and the good news continues. In July, US President Biden is expected to launch his USD 1.2 trillion infrastructure package. Originally, more was planned. But this money will ultimately increase the corporate profits of the subsidized industries. The only important thing for investors is not to buy stocks at the high but to wait for consolidations to get in. That way, one increases the profit potential, and the stop loss is much smaller. Today we look at three companies that have recently suffered a setback.
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ISIN: FREENET AG NA O.N. | DE000A0Z2ZZ5 , ALMONTY INDUSTRIES INC. | CA0203981034 , LUFTHANSA AG VNA O.N. | DE0008232125
"[...] 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
freenet - High dividend yield
On June 18, the day of the Annual General Meeting, consolidation set in. The Company's Management Board was unable to convince shareholders of its new compensation model. Two-thirds of the capital present decided against the proposal. That was somewhat surprising, as there was even a special dividend of EUR 0.15 in addition to the normal EUR 1.50 dividend.
The share has fallen from EUR 22.90 at its high to EUR 19.75 and is now consolidating at the critical EUR 19.78 support level. The losses cannot, therefore, be blamed solely on the dividend discount. Analysts at Goldman Sachs complained that EBITDA is currently only rising due to growth in the IPTV business. There were also difficulties with the freenet FLEX app recently so that it was even removed from the Google Playstore. These problems have since been resolved.
On June 24, the Company reported that a total of 232,977 shares had been acquired via the share buyback program. Analysts at Warburg Research see the fair value of the stock at EUR 25, citing evidence of the business model's resilience in the Corona Crisis. Dividend hunters can put the first position in the portfolio thanks to the setback.
Almonty Industries - The groundbreaking is done
Almonty Industries is mining and processing tungsten at the Los Santos mine in western Spain and the Panasqueira mine in Portugal. The current primary focus is on the development of the Sandong Mine in Korea. Last December, the Company received a loan commitment of USD 75.1 million. The increase of equity by USD 10.1 million was agreed as a condition. Listing of the Company on the Australian stock exchange ASX will raise between USD 11.5 and 19.2 million. The executing bank has guaranteed USD 11.5 million, and nothing now stands in the way of the loan. In related news, Andrew Frazer was appointed to the board on June 1.
First Berlin Equity Research confirmed its BUY recommendation on June 16 and raised the price target to CAD 1.55. It was justified by the inclusion of the molybdenum deposits at the Sangdong Mine. The rationale is based on an estimate from the 1980s when a resource estimate of 17 million tonnes containing 0.4% molybdenum disulfide was published based on drill results. Confirmation drilling is expected to start in the area in the coming weeks. On May 28, ground was broken at the Sandong Mine site. That is a milestone because currently, China has a virtual monopoly on tungsten, and the Sangdong Mine is one of the highest-grade and longest-lived in the world. Added to this is the 15-year offtake agreement with Plansee.
Although the stock has come under some pressure since mid-June, the issuance of the new shares is a crucial step to significantly increase the Company's value in the long term. Deutsche Rohstoff AG is one of the anchor shareholders with 12%. On June 30, the critical CAD 1 mark was defended. With this setback, one can therefore buy with a clear conscience because, in the long term, Almonty will become one of the largest tungsten producers in the world.
Lufthansa - Too many uncertainties
Now that the summer vacations are starting in more and more German states, one would think that Lufthansa would benefit. But the share price is not making headway for various reasons. On the one hand, the Delta mutation has already forced Portugal vacationers to cancel their vacations early. No one knows whether the German government will add more countries to the list. In the short term, many return flights will then be booked, and the airlines can demand high prices, but for the time being, Germans will no longer want to vacation in risk areas. On the other hand, many flights will be canceled.
CEO Spohr is trying to spread confidence and believes that lucrative business travel will increase again. He hopes for a decline of only 10%. The Group wants to transfer the aid money back to the German government before the end of September and therefore announced a capital increase. According to the resolution of the Annual General Meeting, up to EUR 5.5 billion is possible, but probably only around EUR 3 billion will be collected. With a current market capitalization of around EUR 5.4 billion, this is quite a dilution.
The share has broken the psychologically important EUR 10 mark downward without much resistance. In addition, the 200 moving average and a support level of EUR 9.46 have been undercut. The next support area is at EUR 8.80. Bankhaus Metzler recently downgraded Lufthansa to Hold. We cannot recommend this setback as a buy under the given conditions of the capital increase and the uncertainty due to the delta mutation.