April 5th, 2022 | 12:10 CEST
K+S AG, Globex Mining, KWS Saat - Perfectly positioned
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"[...] 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
Globex Mining - Cash cow at a discount
Commodities are rising and rising, added to which the sanctions against Russia are pulling prices up even further by causing shortages. From today's perspective, only a few investments can profit from the global trouble spots as much as Globex Mining, an incubator and asset manager for the commodities sector. Since 1983, the Canadians around the creator, CEO Jack Stoch, have been building a uniquely diversified portfolio with currently more than 200 projects. In addition to gold and silver, the portfolio includes metals such as copper and zinc and minerals and rare earth metals.
In the process, Globex Mining has grown without major dilution because its business model is to option land packages from its portfolio for cash and shares, thereby retaining royalties on future production, which guarantees a running cash flow. In addition, the option partners assume the exploration risk. In addition to acquiring and optioning properties, the Company continues to develop its properties at a minimum rate of CAD 1.5 per year. Globex Mining has CAD 20 million in cash and is historically debt-free.
The asset manager's market capitalization is EUR 58.55 million, with the share price reaching a new 10-year high at CAD 1.43. A breakout above CAD 1.45 could generate short-term follow-on potential to the March 2011 high at CAD 3.06. Given the portfolio's intrinsic value, this should also be justified.
An engaging live event will take place on Wednesday, April 6, 2022, at 7:00 pm CEST as part of the IIF (International Investment Forum) Industry-Talk. Globex Mining CEO Jack Stoch will be joined by Dr. Luisa Moreno, President of Defense Metals Corp, Doug Engdahl, CEO of Axiom Exploration Group Ltd. and John Jeffrey, CEO of Saturn Oil & Gas Inc. to discuss commodity scarcity and the path to geopolitical independence. The Industry-Talk is free of charge to participate.
K+S AG - Undeterred upwards
The share of the Kassel-based fertilizer producer is moving forward like clockwork. With a performance of over 380% since the Corona low in March 2020, the stock has outperformed all benchmark indices. After a short, painful correction last week, the stock was bought up again under high volume in the EUR 25 area and is trading at EUR 28.30, just below its resistance level at EUR 28.54. Although the stock is currently in overbought terrain, the relative strength is still striking. Nevertheless, investors should wait for further developments for the time being.
Fundamentally, K+S benefits from the scarcity of potash products due to the Ukraine conflict. For the current fiscal year 2022, K+S expects a substantial increase in operating earnings EBITDA between EUR 1.6 billion and EUR 1.9 billion. Management sees a continued favorable market environment in the agriculture customer segment and expects a strong increase in the average price in the product portfolio. Sales volumes are also expected to increase slightly once again. Against this backdrop, adjusted free cash flow should rise sharply between EUR 600 million and EUR 800 million. "With the range mentioned above, we would generate the best result in our Company's history to date. Even with a view to the war in Ukraine and the associated dynamics in sales prices and energy risks, we are sticking to this forecast," CEO Dr. Bernhard Lohr said at the annual press conference.
KWS Saat - Sales on fire
KWS is the world's fourth-largest seed producer by sales of agricultural crops. Its core business includes breeding and distribution of vegetable and cereal seeds. In contrast to K+S, KWS Saat was less able to profit; instead, the Einbeck-based company had to adjust its forecasts.
Against the backdrop of the expected negative effects of the Russia-Ukraine conflict, the forecast for 2022 as a whole was cut. Based on a current assessment of the situation, KWS now expects net sales growth of 6-8% (previously: 9-11%) and an EBIT margin of 8-9% (previously: 10%). KWS has its own subsidiaries in Russia and Ukraine with breeding, production, distribution and administrative activities. The sales volume originally planned for the current fiscal year in the two countries corresponded to around 10% of the KWS Group's net sales.
The analysts at DZ Bank subsequently lowered the target price from EUR 83 to EUR 77 but left the rating at "buy". In view of the level of escalation reached and the foreseeable damage to infrastructure, the analysts expect that fiscal 2021/22 and the following year will be negatively affected.
The energy transition requires an enormous amount of raw materials, for which demand already exceeds supply. The asset manager for the commodities sector, Globex Mining, is benefiting disproportionately, and the share chart has already jumped above its 10-year high. K+S is currently in overbought territory, and KWS Saat should be monitored for further developments.
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.
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