09. July 2021 | 10:58 CET
GSP Resource, Steinhoff, K+S - Commodities, gambler stocks and traditional companies
Commodities have had a hard time finding lovers in recent years, and when the oil price turned negative in the wake of the Corona Crisis, hardly anyone would have expected such a revival. Despite the crisis, almost all commodity prices exploded. Another trend emerged as a result of the pandemic - the so-called meme stocks, where private investors meet on Reddit and pick a stock to buy, no matter what the fundamentals say. Traditional companies didn't have it easy during the crisis either, and many found that their business models were not crisis-proof. Today we have picked out three stocks that belong to the above mentioned divisions.
time to read:
ISIN: GSP RESOURCE CORP. | CA36249G1090 , STEINHOFF INT.HLDG.EO-_50 | NL0011375019 , K+S AG NA O.N. | DE000KSAG888
"[...] 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
GSP Resource - Takeover candidate
GSP Resource (GSP) is a Canadian junior explorer that owns two projects in southwestern British Columbia. Both projects are historic mining properties. The Olivine Mountain project, only fully acquired on May 19, is located in the Similkameen mining district and is 3,021 hectares in size. The property is located 25km southeast of the producing Copper Mountain copper mine. Other copper discoveries have also been made in the vicinity. Full Metal Minerals Ltd. has been granted an option to acquire 60% of the project.
However, the main project is the Alwin Mine, from which copper, gold, and silver have been mined in the past. GSP has the option to acquire 100% of the area. In mid-May, a 3D model of the area was created as several underground structures allowed for more efficient planning of drill targets. The drilling program was started on June 3 and is designed to test the unmined areas of the deposit. Management is confident that an open pit operation can be operated economically due to rising copper prices.
A private placement of CAD 350,000 was announced on June 23 to manage upcoming exploration efforts. The Company has a very small market capitalization of just CAD 5.24 million. Considering that the Alwin Mine is located just 2.5km west of the Highland Valley Mine, owned by Teck Corp, takeover fantasies come to mind. Once the drilling program results are available, it will be even easier to estimate the resources. Already after the announcement in May, the share jumped from CAD 0.27 to 0.50. Currently, the price has fallen back to CAD 0.28. Speculative investors can participate with a first position.
Steinhoff - Balancing act between the Netherlands and South Africa
Whether the struggle for survival of the Steinhoff Group since 2017 can be made successful in the end will be seen in the coming months. On September 3, the creditor negotiation will take place in Amsterdam. However, even a positive outcome of this date does not guarantee the Company's continuation because the creditors' meeting in South Africa must also approve the plans. If only one meeting of creditors votes against the plan, the restructuring will have failed.
The group's main problem is its over-indebtedness of EUR 11.185 billion. Interest is altogether eating up the Company's profits. The management has actually done a good job. Despite the Corona Crisis, the group increased sales by 3.5% in the first half of the fiscal year and reported a profit of EUR 271 million, compared to EUR -655 million in the same period last year. The Company has divested itself of less lucrative lines of business and brought its existing stores back into profit. Interest is at EUR 597 million, pushing the figures into the red.
Added to this are the complex negotiations and court cases. While a victory was achieved in Amsterdam and an appeal by Hamilton was shot down, there was a setback in South Africa. It is also the reason why the share price has plummeted. It is not easy to classify the ruling from South Africa correctly. It is a setback in any case. The Steinhoff share is only something for hardened gamblers who do not shy away from losses.
K+S - The potash price is boosting the share
The K+S share has been in a clear upward trend since the end of March. Since the end of June, the share has again gained more than 10%, until profit-taking began on Tuesday. The share is supported by news, such as the possible sanctions against a Belarus competitor, or positive analyst opinions, such as most recently from Kepler Cheuvreux, which issued a price target of EUR 22.
Above all, however, the Company is being helped by the ever-increasing price of potash. Within seven months, the price of potash has increased by 140%. Most recently, more than USD 600 per ton was paid in Brazil. Even if there is consolidation after the rapid increase in prices, the high potash price helps the Company. The Company's 2012 expansion in Canada has built up high debt, which has been squeezed by EUR 560 million through a bond buyback.
As long as the potash price remains high, the outlook for the commodity company is rosy, and the Company could reduce the debt faster than planned. Investors should pay attention to the EUR 10.92 mark, as the uptrend is broken if the share price closes below this level. We would wait for the consolidation to be completed and only then get in.
Commodities continue to be on the upswing, also due to inflation. The European Central Bank wants to loosen monetary policy, thus further fueling inflation. This news is from July 8. No sooner had the news crossed the ticker, the price of gold jumped. GSP Resource is a potential takeover candidate because it owns an area right on the edge of a major commodity producer, and even without that takeover, commodities are valuable. In Steinhoff's case, the interest burden is so crushing that there will likely be little left for shareholders in the end. It remains a hot bet. K+S was founded in 1889 and benefits from high commodity prices; one should keep in mind that the share has already gone a long way.