30. August 2021 | 11:22 CET
Huge opportunities at Steinhoff, Saturn Oil + Gas, MorphoSys
The second-quarter reporting season is drawing to a close and was exceptionally strong. Earnings estimates had already been raised in the run-up to the quarter and were even exceeded again due to the economic recovery following the disastrous Corona year 2020. Looking at the forecasts of most companies for the full year, these were also raised. As a result, some stocks are facing a revaluation that the broader market has yet to realize.
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ISIN: STEINHOFF INT.HLDG.EO-_50 | NL0011375019 , SATURN OIL+GAS O.N. | CA80412L1076 , MORPHOSYS AG O.N. | DE0006632003
"[...] The Oxbow Asset now delivers a substantial free cash flow stream to internally fund our impactful drilling and workover programs. [...]" John Jeffrey, CEO, Saturn Oil + Gas Inc.
Saturn Oil & Gas in a new league
Energy Company Saturn Oil & Gas set the stage for a revaluation on June 7, 2021, when it completed the transformative acquisition of light oil assets in the Oxbow area of southeastern Saskatchewan, one of the most economically viable oil plays in North America. With this move, the Canadians rose to become one of the region's leading petroleum producers.
Production increased twentyfold
Saturn Oil & Gas previously produced only 350 barrels of oil per day. With the acquisition, this will now be increased by a factor of TWENTY to up to 7,000 barrels per day. At the same time, by selling large parts of its oil production for the next four years, Saturn Oil & Gas ensured that the repayment of the loan plus debt service is fully secured until summer 2023. For the next three years, the Company also identified the potential to generate annual free cash flow by optimizing and re-completing more than 500 existing wells.
Not perceived by the market
The attractiveness of the deal is reflected in the valuation. Saturn Oil & Gas paid 1.4 times cash flow for only the approximately 280,000 net acres, equalling approximately CAD 14,000 per flowing BOE. Industry peers currently pay an average of about CAD 30,000 per flowing BOE. Despite the excellent prospects and the hedging income secured, the price of Saturn Oil & Gas remains at the level of the capital increase at CAD 0.12.
Quarterly figures show potential
With the publication of the figures for the second quarter, which will be released today after the close of trading, the fog is likely to lift, and for the first time, at least in part, revenues from the "new Saturn Oil & Gas" will emerge. The first revenues from the acquisition should be visible, and the figures should be dominated by the takeover, which should once again highlight the deal's potential.
In addition to the announcement of the figures, the Company, led by CEO John Jeffrey, plans to hold a conference call on Tuesday at 18:00 CET. In addition, investor relations activities are likely to be significantly expanded as a result. Analyst research, increasingly from the North American area, is also planned, according to the Company. If it is confirmed that sales and margins will result in a price-earnings ratio of below 2 for 2022, then there should be an initial spark.
Tension at boiling point
While German-South African retailer Steinhoff continues to face uncertainty over the broader impact of the pandemic, the Company says trading conditions were encouraging in the third quarter as the effects of the pandemic waned. With the announcement of figures for the first nine months of the 2020/2021 fiscal year, hope continues to germinate for a revival of the struggling Company. Sales increased by 15%, from EUR 5.91 billion to EUR 6.81 billion.
Things get really serious for Steinhoff on September 3 and 6. Here, votes are scheduled to decide on a settlement proposal in the amount of EUR 1.4 billion. In the wake of the encouraging figures, the share price rose to a high for the year of EUR 0.14. If the required majority approves the settlement, another short-term upward swing is likely. In the long term, however, the Group is still far from out of the woods.
MorphoSys with sign of life
The shares of MorphoSys have been badly shaken in recent weeks. With the announcement of conditional approval for the blood cancer drug tafasitamab (Minjuvi) in combination with the drug lenalidomide for a specific cancer problem, the turnaround could have been heralded for the biotech company. After bottoming out in the area of EUR 45, a breakout above the resistance level of EUR 50 would generate further price potential.
Due to increases in forecasts or acquisitions, companies face revaluations that market participants partly fail to realize. In the case of Saturn Oil & Gas, the transformation into a major oil producer should become apparent in the upcoming quarterly figures. MorphoSys offers an attractive trading opportunity at the current level, while Steinhoff is a risky investment.