February 8th, 2023 | 11:42 CET
More than 100% possible: Analysts on Nel ASA, Saturn Oil + Gas and the Tesla chaser BYD
Table of contents:
"[...] 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.
Analysts on Saturn: Over 100% share price potential after takeover
Saturn Oil & Gas has continued its transformation into a major oil producer with the acquisition of Ridgeback Resources Inc. for CAD 525 million. Analysts at Paradigm Capital rate the transaction positively and recommend Saturn shares as a buy. The price target is CAD 5.50. The share is currently trading at CAD 2.38. From the analysts' perspective, the acquisition significantly boosts the Company's scale while lowering its cost structure and significantly increasing its free cash flow (FCF). Compared to its peer group, Saturn Oil & Gas' valuation is extremely attractive. The enterprise value relative to discounted cash flow for 2023 is 1.4x versus the median of 2.5x. The same is true for the FCF yield. Saturn Oil & Gas, for example, has a fully diluted FCF yield of 58%. The median of the peer companies is only 15%.
There is currently no threat from the oil price, which should remain stable. At least, this is the view of Commerzbank. Its commodities analyst Carsten Fritsch commented positively on the oil price in an interview with WirtschaftsWoche. Currently, the market is still slightly oversupplied. Russian oil exports have yet to decline noticeably despite the EU oil embargo. However, it is only a matter of time before this happens. Together with rising global demand, this should cause the price to rise: By the middle of the year, Commerzbank expects the oil price for Brent crude to be around USD 95 per barrel. Towards the end of the year, the oil price could reach the USD 100 mark again.
Event alert: Saturn Oil & Gas will present at the 6th International Investment Forum - IIF next week (February 15, 2023). Registration for the virtual event is free.
BYD full throttle for 2023
According to the experts at researchanalyst.com, a correction is imminent for the BYD share. The market environment for operational development is also likely to become more uncomfortable for the time being. Both the discontinuation of subsidies in the main market of China and the price cuts of the competitor Tesla would put pressure on the margins. Accordingly, analysts, on average, "only" expect growth of 30% in the current year. That would still mean that the Company would grow faster than the industry.
Last year, BYD significantly exceeded analyst forecasts. According to preliminary calculations, a net profit of between EUR 2.19 billion and EUR 2.33 billion was achieved, corresponding to a growth of 425.4% to 458.3% compared to the previous year. BYD increased revenues by around 94% to EUR 57.54 billion. According to Bloomberg, analysts had expected revenues of EUR 54.80 billion and a net income of EUR 1.81 billion.
BYD is now focusing on foreign expansion in the current year. The first dealership in Japan was inaugurated at the end of January. At least another 100 new openings are to follow by 2025. Expansion in India is also planned. BYD has already invested USD 200 million there and aims to achieve a market share there of around 40% for e-cars by 2030. Sales are also set to start in Germany and other European countries this year. According to media reports, it is interested in buying the Ford plant in Saarlouis. The full report from researchanalyst.com can be found here.
Nel: Morgan Stanley provides a small bang for the buck
Nel subsidiary Nel Hydrogen Electrolyser AS has closed an order from HyCC to supply 40 MW of alkaline electrolyzer equipment. The order is worth around EUR 12 million. HyCC is planning the H2eron project in the Netherlands. The project will produce sustainable aviation fuel (SAF) derived from industrial by-products and residual streams, such as used cooking oil. The energy needed to run the plant will come from green hydrogen.
"H2eron will have a very positive impact on emissions reduction in the aviation sector, and we are proud to have been selected as a supplier of our proven electrolyzer technology for this exciting and important project," says Nel CPO Hans Hide. Electrode production is scheduled to start in Q4 2025. "A reliable supply of green hydrogen is key to decarbonizing sectors such as the aviation industry. We are building on decades of experience in large-scale electrolysis and are excited to enter the project's next phase with these strong partners to lay the foundation for the new hydrogen economy," said Marcel Galjee, HyCC's CEO.
After analysts have been reluctant to comment on Nel in recent weeks, Morgan Stanley now provided a small bang for the buck. The analysts have raised their price target for the hydrogen specialist's shares from NOK 13 to NOK 22, thus almost doubling the target. The rating was changed from "Equal-weight" to "Overweight". Currently, the Nel share is trading at just over NOK 18.
After several acquisitions, Saturn Oil & Gas has become a serious junior producer. If the free cash flow succeeds in massively reducing the debt in a short time, the valuation discount compared to the peer group should also narrow. Nel is anything but cheaply valued. Nevertheless, the stock has gained 80% within a few months. The Company has yet to prove whether its operating performance justifies this in the current year. BYD is also expected to grow this year and become one of the most successful e-car builders. Foreign expansion holds many opportunities but, of course, also risks.
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.
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.