February 25th, 2022 | 11:21 CET
Gazprom, Sberbank, Defense Metals, Airbus: Buy when the cannons thunder!
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Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Gazprom and Sberbank - Into the crisis with good figures
Dealing with the new crisis is not that simple. After all, in the event of further escalation, there is a possibility that American and European banks will be prohibited from trading in Russian shares. There may even be a threat of suspension from the stock exchange. Because by far, the majority of Russian shares are a so-called American Depositary Receipt (ADR). These are securitized rights to the original shares deposited with a major US bank. In the event of sanctions or embargoes, these securities could be put on hold for the time being. There may then be panic selling on the stock market because people want to remain liquid in times of crisis.
Apart from the political dangers, the well-known Russian stocks Gazprom and Sberbank have lost a lot of ground in the last 3 months. In the case of Gazprom, the discount from the high of EUR 9.44 is now almost 40%. Fundamentally, the oil and gas giant is earning splendidly. The dividend has been raised several times and now amounts to a full 18% at a share price of EUR 5.74. However, the issue of Nord Stream 2 is likely to continue to weigh on the stock for some time. In the case of Sberbank, the fall from the top at EUR 18.75 is even greater, with a shortfall of over EUR 10, or 57%. At the same time, the dividend yield is a handsome 10%. However, the bank could be very limited in its business operations in the future due to the pending sanctions. Both Russian stocks are ADRs and thus highly speculative.
Defense Metals - New factual report on REE project at last IIF
In times of crisis like now, the urgency in the availability of strategic metals becomes very evident again. The North American governments have made this deficit a top priority with China, meaning that any available and future resource will be highly valued. From this perspective, one of the few promising rare earth projects outside China is emerging in Canada.
British Columbia-based exploration company Defense Metals is focused on advancing the Wicheeda Rare Earth Project, which covers approximately 2,008 hectares. President Luisa Moreno is an expert in materials management and a leading rare earth analyst. She has held senior positions in many GreenTech companies prior to Defense Metals, primarily in the strategic minerals sector. At the second International Investment Forum (IIF) (www.ii-forum.com), she provided deep insight into Defense Metals' project progress and international market development.
A preliminary economic assessment (PEA) was conducted for the Wicheeda rare earth project in 2021. It provided a solid after-tax discounted net present value at 8% of CAD 517 million. The internal rate of return is a high 18%, but this could be extended if current prices were valid even if the project was implemented. Compared to the prices used in the study, spot prices are currently about 50% higher. A significant advantage of the current REE project is the production of a saleable, high-grade flotation concentrate. The PEA envisions an open pit operation with a mill throughput of 1.8 million tons per year and a stripping ratio of 1.75:1 (waste to mill material) over a mine life of 19 years, producing an average of 25,423 tons of REO (rare earth oxide) per year.
Luisa Moreno commented, "We look forward to the initial assay results from our ambitious 2021 diamond drilling campaign at the Wicheeda REE deposit at 5,349 meters. Drilling in 2021 is expected to contribute to the expansion and upgrading of mineral resources recently demonstrated in our positive PEA for the Wicheeda Rare Earth Project." Defense Metals (DEFN) shares are currently trading at CAD 0.26. With 160.5 million shares, the current market value is just under CAD 42 million. The stock is also actively traded on Tradegate and Frankfurt. In times of crisis, strategic investments in future resources are not a bad idea.
Airbus - Good figures compared to competitor Boeing
Europe's largest aircraft manufacturer and defense contractor, Airbus, reports the highest profit in its history. On the other hand, its American competitor Boeing continues to be in deep crisis. It seems as if Airbus is sailing past the pandemic and will presumably soon finally distance itself from Boeing. The reason is that airlines are once again buying on a large scale, primarily from the European consortium.
The aircraft manufacturer made a profit of almost EUR 4.2 billion last year, following a painful EUR 1.7 billion loss the previous year. In addition to more aircraft delivered, the results also reflect good results from the helicopter and defense and space divisions. US perennial rival Boeing recently presented a loss of nearly USD 4.3 billion due to the severe turbulence caused by the 737 Max disaster jet and the pandemic. The problems have not diminished because now the Dreamliner 787, of all things, is causing concern. This model has not been grounded, as was the case after the two 737 Max crashes, but deliveries have been halted for months due to significant quality problems with important components.
Airbus management, meanwhile, is holding out the prospect of even better figures for the current year. Production is expected to increase by about 20%. With 611 aircraft delivered, the target is around 720 in 2022. Airbus currently has an order book of 7,082 aircraft worth EUR 345 billion, while Boeing's order book is much smaller at 4,200 aircraft. At EUR 112, Airbus shares are only just below the 52-high of EUR 121, while Boeing's gap to the top is a full 25%. As defense stocks, both shares are currently enjoying good attention on the markets.
"Buy when the cannons are thundering" is an old stock market adage. In many crises, there were reasonable entry prices, but the timing proved difficult. Russian stocks are subject to the caveats of a possible suspension. Airbus shows an excellent outlook, and Defense Metals can present a clear plan until the production of rare earths.
Conflict of interest
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