June 7th, 2021 | 10:45 CEST
Mineworx Technologies, BASF, Nestlé - Circular economy investment idea
Table of contents:
MINEWORX TECHNOLOGIES LTD - Recycling goldmine
Recycling is an integral part of the circular economy. If you take a closer look at the recycling of copper, an important industrial metal, Aurubis stands out. The Hamburg-based company processes complex metal concentrates and various recycling raw materials and is a global leader in copper recycling. If the topic is water, then the name of the French Group Veolia may be familiar. Based in Paris, the Company operates primarily in the areas of water and wastewater, waste disposal and energy supply.
But there are often share price opportunities lurking in lesser-known companies. That is the case with Canada's Mineworx Technologies. The Company is getting into the lucrative business of recycling diesel catalytic converters and extracting the expensive precious metals palladium and platinum in an innovative, low-risk way. The Canadians specialize in the circular economy in the mining, electronic scrap and automotive catalytic converter sectors. Interestingly, the Company started as an exploration company and still holds two assets in Spain. But as mentioned, the music is now playing in recycling for diesel catalysts. Mineworx has established an innovative and patented process, addressing a market of more than 100 million catalysts worldwide. Around 80% of the world's production of palladium is used for catalytic converters. The prices for palladium and platinum are several times higher than those for gold.
The Company's fully planned and fully financed pilot plant is expected to be operational early in the third quarter of the current year and generate revenues by the end of 2021. Mineworx's process does not take the conventional smelting route but extracts platinum and palladium specifically from ground core catalyst materials and through a chemical process. The resulting concentrate is then sold to a refinery. Mineworx is forecasting sales of USD 100 million with a gross margin of about 20% once the plant is ramped up. The Canadians' cooperation partner in the commercialization is Davis Recycling. The Company is active in 13 US states and has been recycling catalytic converters for 20 years. Davis Recycling is to supply the necessary core materials. If the initial production ramp-up is successful, facilities are planned throughout North America.
Commercialization of the diesel catalyst recycling business in the US could easily lead to a revaluation of Mineworx Technologies. But the proof of concept has yet to be provided. However, we are optimistic that this will be achieved. Then the share should be valued next year at 2 to 4 times the sales achieved, i.e. at USD 200 million and more. Currently, one can still get in at a stock market value of a modest CAD 23 million.
BASF SE - Sells stake in specialty chemicals group Solenis
The Ludwigshafen-based Company is one of the largest chemical groups in the world. The Company has come a long way since it was founded in Mannheim in 1865 as Badische Anilin & Soda-Fabrik. In the last fiscal year, the Rhineland-Palatinate-based Company generated sales of EUR 59 billion with 110,000 employees at over 390 production sites and in more than 80 countries. Business activities are combined in the six segments Chemicals, Materials, Industrial Solutions, Surface Technologies, Nutrition & Care and Agricultural Solutions. Given the size of the Group and its broad scope, it is not surprising that it publishes news on partnerships, innovations and collaborations seemingly every three days.
Last week, news agency Bloomberg reported that BASF was looking to divest its stake in specialty chemicals Company Solenis. BASF holds a 49% stake in the Company. Solenis was formed in 2019 from a merger of a company bought by CD&R with a BASF division. Solenis primarily makes water treatment chemicals and most recently had annual sales of about USD 3 billion. Investors like the DAX member, which currently has a market capitalization of EUR 63 billion. Analysts like the Company's advantageous strategic positioning, its moderate valuation with a P/E ratio of 15 in 2022, and its generous dividend yield of 5%. On average, the experts give the shares an upside potential of 13%.
NESTLE SA - Reorganization of the water business underway
Nestlé is a leading global food company founded in Switzerland in 1866. The "Nestlé Waters" water division has over 90 production standard locations in 34 countries and includes brands such as S. Pellegrino, Perrier, Nestlé Pure Life, Arrowhead, Deer Park and Vittel. As a result, the issue of recycling bottles and cans is also important to the Swiss. The Group has repeatedly been at the center of several water scandals in recent years. At the end of March, the Group completed the reorganization of its water business in North America by closing the sale of several brands to One Rock Capital Partners for USD 4.3 billion.
In the past financial year, the Group with 273,000 employees achieved sales of CHF 84.3 billion and earnings per share of CHF 4.21, of which CHF 2.75 was distributed to shareholders as dividends. At CHF 112.90, the stock has a 2022 P/E of 25 and a market capitalization of CHF 318 billion. Nestlé aims to make its entire water portfolio climate-neutral by 2025.
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