Close menu




March 16th, 2023 | 11:57 CET

Interest roller coaster! This is how you profit! K+S, Saturn Oil + Gas, Deutsche Telekom

  • Mining
  • Oil
  • Inflation
  • fertilizer
  • Telecoms
Photo credits: pixabay.com

Interest rates will remain high for longer - that was the expectation last week. After two bank failures, interest rate expectations have recently collapsed. Some investors in the USA are expecting the first interest rate cuts as early as June. Whether these scenarios are set in stone and what they mean for investors - we provide an analysis using three stocks as examples.

time to read: 4 minutes | Author: Nico Popp
ISIN: K+S AG NA O.N. | DE000KSAG888 , Saturn Oil + Gas Inc. | CA80412L8832 , DEUTSCHE TELEKOM ADR 1 | US2515661054

Table of contents:


    K+S: Where is the journey heading?

    Key interest rates strongly influence the economy's development; after all, key interest rates set the price of capital. Companies that need to refinance debt or make investments naturally prefer low-interest rates. Companies with strong cash flows also do well in high-interest phases. The shocks in the US banking system have recently completely turned around the market's expectations of further interest rate steps by the US Federal Reserve: Instead of rising interest rates into the fourth quarter, the markets are now pricing in an abrupt turnaround in interest rates. But will it happen? The US economy is proving extremely robust, with the labour market leading the way. That would be a strong signal if it were not for inflation. Inflation thrives particularly well in a robust economy and is the most important construction site for the monetary guardians. If it were only a matter of currency stability, interest rates would have to continue to rise. But for many companies, conditions would worsen if interest rates continued to rise - and for some, the lights would even go out. So what does this mean for investors?

    Shares such as fertilizer producer K+S are traditionally considered good inflation investments. The more commodity prices rise, the more K+S's business hums. But despite the high demand for potash worldwide, even K+S cannot pass on prices to customers indefinitely. K+S has also traditionally always been suspected of having too much debt. But the Company has brought the latter shortcoming under control in the course of divestments of business segments and the recent bubbling profits. Today, K+S is no longer so sensitive to the threat of rising interest rates. Conversely, there is also less relief when, as recently, interest rate cuts become more likely. K+S is an inflation play largely independent of the interest rate level. However, the business is not expected to grow endlessly over the next few years. The share price potential remains limited.

    Saturn Oil & Gas: Valuation cracker with strong key data

    Canadian oil producer Saturn Oil & Gas is also comparatively relaxed about the actions of the central banks. According to the latest figures, the Company currently generates a cash flow of around CAD 232 million annually. 60% of this is used to service debt, while the Company intends to invest 40% in growth. What is unique about Saturn Oil & Gas is that just a few years ago, the producer was a designated micro-cap: back then, every well was like a hit-or-miss bet. Today, several multi-million-dollar acquisitions later, Saturn Oil & Gas expects to produce more than 30,000 BOE per day in the second half of 2023 and is much better able to manage production volumes and organic growth thanks to multiple projects and large volumes. Nevertheless, Saturn Oil & Gas' valuation still lags behind this operational performance: fully diluted, the current market capitalization is around CAD 470 million. It remains uncertain whether some subscription rights will expire in July 2023. When measured against the current cash flow, the share is extremely favourable.

    The research portal researchanalyst.com agrees. The authors write about Saturn Oil & Gas: "Saturn is currently trading fundamentally at an EV/adj EBITDA ratio of about 1.3. If the factor is set to the industry average of 5, then a fair value per share of about CAD 10.00 would be appropriate from today's perspective. Prior to the Ridgeback transaction, research house Velocity had already rated the stock a "buy" with a 12-month target of CAD 8.00." Moreover, with the Company recently reporting a net asset value of just under CAD 7, Saturn should become more of an option for value investors. Given the Company's size, the key for Saturn now is to appeal to new groups of investors. The conditions are good for this to succeed in the medium term.

    Deutsche Telekom: Solid, but hardly any esprit

    The Deutsche Telekom share is also considered solid in times of high inflation. The telecommunications group is benefiting from the fact that mobile communications and Internet connections are now basic amenities for almost everyone. As a result, monthly charges to mobile operators are also reliable. In Germany, the network could be better, especially in rural areas. Many customers have no choice but to be customers of the market leader Telekom. Business in the United States has been particularly positive for Telekom shareholders recently. More and more customers there are signing contracts with Deutsche Telekom. In Germany, business could have been more dynamic. The share remains a solid value for conservative investors - but highs are virtually out of the question. On the other hand, the Deutsche Telekom share offers a solid dividend yield of more than 3%.


    Inflation, rising interest rates, or interest rate cuts in the wake of a burgeoning market panic? To cope with all possible scenarios, investors should focus on solid companies. K+S has become increasingly stable in recent quarters. However, the share price is already at a high level. At Deutsche Telekom, too, the potential seems limited. Saturn Oil & Gas currently offers the right mix of growth prospects and solid key data. The Company has entered new spheres and grown strongly in recent years. Due to the lack of a listing in major indices, professional value investors are still left out due to formal investment requirements. For private investors with staying power, this can be an opportunity.


    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
    For this reason, there is also a concrete conflict of interest.
    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.

    The acquisition of financial instruments involves high risks, which can lead to the total loss of the invested capital. The information published by Apaton Finance GmbH and its authors is based on careful research. Nevertheless, no liability is assumed for financial losses or a content-related guarantee for the topicality, correctness, appropriateness and completeness of the content provided here. Please also note our Terms of use.


    Der Autor

    Nico Popp

    At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.

    About the author



    Related comments:

    Commented by Armin Schulz on February 21st, 2024 | 07:30 CET

    Barrick Gold, Desert Gold, Renk - Golden times everywhere?

    • Mining
    • Gold
    • Defense

    The world is full of economic uncertainty and geopolitical tensions. These are ideal conditions for gold, which is still considered a safe haven. There are now several factors that point to a sustained upswing in gold prices. One factor is the increased involvement of central banks, which are increasing their reserves to an extent not seen for decades. Another factor is the discussion within the BRICS nations about introducing a new currency backed by gold as a counterweight to the dominant US dollar. Therefore, today, we look at two gold companies and shed light on Renk, a representative of the defense industry, which is also experiencing golden times.

    Read

    Commented by Juliane Zielonka on February 21st, 2024 | 07:15 CET

    Saturn Oil + Gas, Plug Power, Deutsche Pfandbriefbank - Energy shares and falling knives - where is it worth getting in?

    • Mining
    • Oil
    • Hydrogen
    • greenhydrogen
    • Banking

    The Canadian company Saturn Oil & Gas has announced its capital and operating budget plans for 2024. The main focus is on sustainable oil and gas production with high capital returns, a structured capital allocation and continuous rapid debt repayment. Plug Power is also gaining momentum and taking strong cost-saving measures to maintain its position at the forefront as a green hydrogen provider. Deutsche Pfandbriefbank (pbb) came under the spotlight last week as investors dumped shares due to its involvement in the US office real estate market. Is this bank a falling knife, or does this week offer a potential entry point? We provide the background.

    Read

    Commented by Fabian Lorenz on February 21st, 2024 | 07:00 CET

    Top news: BYD, Bayer and Globex Mining

    • Mining
    • Gold
    • Commodities
    • Electromobility
    • chemicals

    Bayer shocked investors yesterday with the announcement of its dividend cut, which shouldn't have been much of a surprise. The Company is burdened with high debt, endless legal fines, and an empty pharmaceutical pipeline. In an initial reaction, analysts have lowered the share price target. BYD, on the other hand, is doing well operationally. Only the share price is not picking up. Will a share buyback turn the share price around? For those who want to profit from the commodity boom with reduced risk, then Globex Mining's stock is attractive. The news flow is strong, and those who act quickly can still register and follow the live presentation of the mining incubator at the 10th International Investment Forum, IIF, today.

    Read