17. September 2021 | 11:23 CET
NEL, Royal Helium, Linde, BASF - This is where it gets highly explosive!
How will the energy transition play out in Europe? With hydrogen is one way. It is costly to produce if you look at the issue sustainably. The raw material itself is seen as an alternative building block of a green future and, according to experts, could become one of the most important energy sources in the coming decades. The water element is available in abundance, but what is lacking is a truly environmentally friendly way to convert it back into hydrogen and oxygen. Even under the best conditions, green hydrogen costs about 10 times as much to produce as Russian natural gas, which also burns fairly cleanly overall. What is next for this sector?
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ISIN: NEL ASA NK-_20 | NO0010081235 , ROYAL HELIUM LTD. | CA78029U2056 , LINDE PLC EO 0_001 | IE00BZ12WP82 , BASF SE NA O.N. | DE000BASF111
"[...] We expect the first three wells to be drilled, cased, completed and tested by the second week of March [...]" Andrew Davidson, CEO, Royal Helium Limited
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Nel ASA - This looks dangerous from a chart perspective
The high production costs are one of the main reasons why no country has yet been able to implement any of the visionary H2 concepts on a large scale. Germany wants to change this in the future and is providing initial funding with a EUR 700 million support program, but it is not a real commitment to this new technology.
By 2030, according to the plans, H2 generation capacities of up to five gigawatts are to be created in this country - that would be 50 times more than the 100 megawatts available today. Whether hydrogen is indeed the problem solver of the clean energy future remains questionable because the overall efficiency calculation, including the efficiency analysis, is still negative.
Nel ASA, one of the prominent protagonists in hydrogen, is currently feeling the skepticism of the markets. Since the big hydrogen hype at the beginning of the year, the stock has been in decline. The growth in orders cannot keep up with the tight valuation. Since the all-time high of around EUR 3.40, the share price has now corrected by more than 65%, and if the line at EUR 1.30 is sustainably undercut, EUR 1.00 is also quickly conceivable. JP Morgan Chase placed the share at "Underweight" in mid-August, but its price target of NOK 15 has already been undershot.
Royal Helium - New drilling results from Climax-4
Away from hydrogen to helium. Canada-based Royal Helium Ltd. (RHC) explores and develops a major helium production project in southern Saskatchewan. With over 400,000 hectares of prospective acreage held under permits and leases, RHC is one of the largest helium producers in North America. Canada has the fifth-largest helium reserves globally and is increasingly in the spotlight of international technology producers.
There are now good results to report from the Climax-4 property. A drilling depth of 2,701 meters has been completed. The completion program is underway and includes analysis of core samples taken and drill stem tests (DST) conducted over a continuous interval of 120 meters. Flow tests were conducted in the original Regolith zone and returned the highest and most consistent helium values to date in the entire Climax block. The new designation of this area is now Climax-Nazare.
Due to the expanded test work, completion and analysis is expected to take an additional 30 to 45 days. Drilling dates for the areas at Ogema and Bengough in southeast Saskatchewan will be announced promptly once regulatory approvals have been received. Initial core inspection indicated that the newly discovered zone is not a true regolith zone but rather a thick sequence of interbedded metasedimentary and igneous rocks previously unknown in the area. Gas tests, DSTs and pressure tests at the bottom of the well indicate that this sequence is gas-laden with consistent detections of helium. DSTs in Climax-4 show a zone of approximately 70 meters of helium that is 80% thicker than that found in Climax-3. Based on the positive outlook, management is accelerating its efforts to a total of 30 square miles.
RHC shares have recently traded slightly lower due to their strong performance since January. At CAD 0.46, the correction from the top is now 50%. With a valuation of CAD 65 million, the Company now has enormous potential again as the project moves forward dynamically.
Linde and BASF - The standard stocks for industrial raw materials
Looking in the extended peer group of blue chips, you will quickly encounter the German giants Linde and BASF in the industrial gases and commodity derivatives sectors. They have a good indicator function for economic development because their intermediate products are essential for manufacturing high-tech products.
Linde became the world leader in industrial gases and process equipment ahead of its French rival, Air Liquide, when it merged with Praxair, a US competitor also founded by Carl von Linde and confiscated during World War I. Linde is now headquartered in Dublin, Ireland, but the Company remains a DAX member. The Badische Anilin- und SodaFabrik (BASF) dates back to 1865 and, like Linde, is also a founding member of the DAX family.
Both Linde and BASF have performed excellently over the past 12 months, up 27% and 20%, respectively. That shows the robustness of the completely misjudged industrial demand since the outbreak of the pandemic. Interestingly, however, there are striking valuation differences. With sales of EUR 22 billion, Linde plc is much more highly valued with a P/E of 5.5 than BASF with a P/E of 0.8. Also, comparing P/E (30 to 10) and dividend yield (1.5% to 5.3%), the numbers favor investment in BASF. The big difference lies in profitability. EBIT margins are in the range of 24-27% for Linde and only 8-10% in the case of BASF. Another striking feature: Linde's market capitalization is twice as high as BASF's, namely an impressive EUR 137 billion versus EUR 61 billion.
Both companies are rock solid; BASF is more cyclical overall and thus carries a higher risk discount. Linde is seen as more dynamic and more cyclically resistant. However, in an environment characterized by scarcity, both stocks should continue to run in the medium term. Technically, a correction could be imminent for Linde, while BASF has been running sideways for several months.
The values presented here provide a good illustration of the state of industrial stocks. The Corona pandemic led to absolute scarcity prices in certain sectors, which caused high markups in purchase prices. Gases are indispensable in technological processes, and this is especially true for the scarce helium. That is why Canadian Royal Helium Ltd. should always be on the radar.