March 16th, 2022 | 11:04 CET
K+S, MAS Gold, Hensoldt - Shares around fertilizers, gold and armaments on the upswing
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"[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited
K+S - Critical analysts cannot stop the trend
Kassel-based fertilizer producer K+S outperformed the MDAX last year. This year the rally continues, with the share gaining almost 63% at its peak since the beginning of the year. The Company owes its recent upswing to the Ukraine crisis. Due to the sanctions, no competition is expected from the major competitor from Belarus in the near future. In addition, Ukraine and Russia are no longer available as wheat suppliers. If we want to compensate for this loss, we need fertilizer for good harvests. And, raw materials were already in short supply last year when there were repeated crop failures due to natural disasters.
The explosion in raw material prices can be seen in the annual results. The Kassel-based Company generated EUR 969 million, up from just EUR 220 million in 2020. What is important to classify this figure is that year-on-year sales were almost EUR 500 million less. Management also expects operating profit to double this year to between EUR 1.6 billion and EUR 1.9 billion. With these targets, it should be easy for the Group to reduce its weak point further, its debt. In 2021, this was achieved very successfully by selling the US salt business.
The share price has now more than tripled, and analysts are becoming more cautious. The share has done too well, and consolidation could start anytime. Despite the critical voices of JPMorgan and Berenberg, demand for the shares remains high. Investors can stay invested, but newcomers should wait first for a consolidation. Currently, the share is quoted at EUR 24.47.
MAS Gold - Further land acquisition in sight
MAS Gold Corp. is a Canadian gold explorer focused on exploring mineral properties in the La Ronge belt. This area has been known to host gold deposits since the 1940s, evidenced by numerous historic gold mines. The Company owns various mineral properties covering 33,860 hectares. Proven gold deposits exist primarily at the Greywacke, Preview North and Contact Lake properties. As of March 7, all signs are green with the addition of another prospective property.
Comstock Metals shareholders have approved the sale of the Preview SW project. As a result, the total acreage increases by 843 hectares. The transaction should close on March 22. In conjunction with this news, the Company also issued an update on its 8,000m drill program. The drill plan calls for 2,700m on the Preview SW project. Mineralization extension was planned for 4,500m at the North Lake deposit. On March 8, the Company announced the completion of 34 drill holes with a total length of approximately 4,123m. A further 800m are planned at the Point deposit.
Things are not only moving forward operationally but the team has also been strengthened in recent weeks. As of March 1, Laurie Thomas was hired as Vice President of Investor Relations and Business Development. Karen Frisky has also become the new CFO and Corporate Secretary effective March 1. With gold reserves of about 1 million ounces assumed by management, the Company is no longer a small explorer. The high gold price makes the deposits more attractive, but this has not yet been reflected in the share price. Since June of last year, the shares have been trending sideways between CAD 0.095 and CAD 0.13. Currently, the share is trading at the lower end of the range at CAD 0.10.
Hensoldt - High premiums due to fantasy
Thanks to a special fund of EUR 100 billion for the German Armed Forces and, in the future, a budget greater than 2% of gross domestic product, the shares of defense companies have shot up. Many had not expected this due to the Green government's participation. One of the beneficiaries is Hensoldt, which, together with its subsidiaries, offers electronic sensor solutions for defense and security worldwide. The product portfolio ranges from air, ground, water and space-based radar solutions to optical sensor devices for surveillance, which can also be used anywhere, to rifle scopes or night vision devices. Various software solutions round off the portfolio.
Therefore, the Company will also benefit from the investment push for the German armed forces. The share debuted on the stock market in 2020 with an issue price of EUR 12. Since December, the share has risen to the SDAX. Once the German government's plans were announced, there was no stopping the stock. It climbed to a peak of EUR 29.85. That is a lot of advance praise for a company that has been bobbing along for the last few months. The future will show how much the Company can ultimately profit.
The share is currently trading at EUR 23.95. The first analysts have raised their price targets for the stock. JPMorgan sees the fair value at EUR 22.50, i.e. still below the current price level. Warburg Research has even called for EUR 30. This price target seems very ambitious, especially since no major orders have been announced yet. If there is positive news, the share may still be able to gain. Rationally, the premium is too high based on price fantasies. We would wait for the gap to close.
While K+S has already proven that it is profitable in the long term, the other two candidates have yet to prove their profitability. MAS Gold has about 1 million ounces of gold on its properties. This number is expected to increase significantly this year. Hensoldt shares have been flushed upwards by the political decisions. Now it must prove this premium is justified.
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