August 22nd, 2023 | 07:30 CEST
Full speed ahead - Continental, Globex Mining, Rheinmetall
Jackson Hole casts its shadow ahead. On Thursday, leading central bankers, including ECB Chief Christine Lagarde, will meet again to discuss the further interest rate strategy, taking into account the current inflation figures and the still looming recession. Positive signals concerning an easing of monetary policy could thus help the markets back into rally mode.
time to read: 4 minutes | Author: Stefan Feulner
ISIN: CONTINENTAL AG O.N. | DE0005439004 , GLOBEX MINING ENTPRS INC. | CA3799005093 , RHEINMETALL AG | DE0007030009
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Author
Stefan Feulner
The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
He is passionate about analyzing a wide variety of business models and investigating new trends.
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Continental with spin-off fantasy
A report published by "Manager Magazin" about Continental AG brought investors a price increase of about 7% to EUR 70.40. As reported by the business magazine, there are prospects for significant upheavals at the automotive supplier. It seems that Continental wants to initiate a strategic shift back to its core business: the rubber business.
According to insiders, ContiTech's non-automotive sector, which specializes in products such as belts and sealing systems and generates revenues of over EUR 2 billion, is up for divestment. At the same time, the targeted focus on the tyre business and the non-automotive sector signals a clear intention to streamline the business portfolio and concentrate on what has historically given the Company strength and identity.
Despite weak figures from its automotive supplier division in the second quarter and a cut in its business outlook, Continental's shares have maintained relative strength in recent weeks. In its current study, analyst firm Warburg Research lowered its price target from EUR 102 to EUR 92 but left its rating at "buy." After the second quarter, Conti needs a strong second half to achieve its full-year targets in the auto business, analyst Marc-Rene Tonn wrote.
Globex Mining - Deals, deals, deals
Several deals were reported by mining incubator Globex Mining in recent weeks, impressively demonstrating the viability of its business model. The diversified portfolio of 224 investments has a particular geographic focus on Eastern Canada, the US and Germany. It includes 117 projects in precious metals such as gold, silver, platinum and palladium. Furthermore, 45 Globex Mining projects have direct interests in critical metals and minerals, including iron, rare earths, uranium, lithium and cobalt, which are key to the energy transition.
A unique selling point of Globex Mining is that, in addition to owning projects, it generates a steady cash flow by optioning land packages at 89 projects. In doing so, the Canadians receive regular royalties. In addition, the licensee bears both the exploration risk and the obligation to pay royalties, whether in the form of shares or cash.
The Company, led by CEO Jack Stoch for some four decades, received a cash payment of CAD 2 million from Agnico Eagle as its third payment for the purchase of the Francoeur/Arntfield property, west of Rouyn-Noranda. A further CAD 6 million in payments are also due over the next 23 months.
In addition, an option agreement was entered into with Tomagold Corp. for its Gwillin Lake gold property, consisting of five claims located in Barlow Township, Quebec, allowing Tomagold to earn a 100% interest in the claims. In addition, the Canadians have sold a 100% interest in six lithium claims and claim fractions in Fiedmont Township, Quebec, to Jourdan Resources Inc.
The debt-free company holds approximately CAD 25 million in cash, shares in publicly traded companies and assets available for sale in the near term, in addition to the previously mentioned investments. The stock market value currently stands at CAD 42.68 million.
Rheinmetall expands its territory
The integrated technology group continues to expand its role as a supplier to Ukraine as well as NATO and its allies. On August 18, Rheinmetall opened its newest production facility in Zalaegerszeg, Hungary, highlighting it as a major milestone for the Company. Rheinmetall CEO, Armin Papperger, emphasized the significance of this opening, calling it an expression of the close ties between the Company and Hungary. This factory in Zalaegerszeg specializes in producing the Lynx KF41 infantry fighting vehicle and support armour for the Hungarian army.
In addition, the Düsseldorf-based company plans to start servicing tanks in the Ukraine war zone as soon as possible. "We will start servicing this month," CEO Armin Papperger told the "Frankfurter Allgemeine Sonntagszeitung" newspaper. The first twelve Ukrainian employees have already started their technical training in Germany, and another twelve are expected to follow. This training initiative is in the context of supplying Leopard main battle tanks to Ukraine to strengthen its defense strategy against Russia. Given the potential wear and tear of these tanks in combat operations, the importance of regular maintenance is stressed.
In a recent development, the CEO of the Düsseldorf-based company reaffirmed their plans to advance tank production in Ukraine. He pointed out that Ukraine already has a series of Soviet-era tank factories. The Company intends to lease these factories and produce tanks according to NATO standards. The aim is to make Ukraine self-sufficient in the armaments industry in the long term.
In addition, Rheinmetall expects a significant increase in the cost of armament projects from the so-called "special assets" for the Bundeswehr.
Papperger emphasized in the FAS: "If we conclude a five-year contract today, then we must agree on inflation compensation; otherwise, we will be facing up to 40% additional costs at 6% annual inflation."
The current trajectory of the Rheinmetall share price is viewed critically. At EUR 248.60, the stock is only just above the upward trend formed since the beginning of June. A drop would generate a sell signal down to the EUR 232.10 range.
Automotive supplier Continental intends to focus on its traditional rubber business in the future. Rheinmetall is venturing into tank repair activities in Ukraine. Globex Mining successfully closed several transactions and appears undervalued, considering the multitude of its holdings.
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