July 19th, 2023 | 08:25 CEST
Nel share is unstoppable, but money is being made at BYD and Saturn Oil + Gas
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"[...] 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.
Saturn Oil & Gas debt-free in 2025: Is the monster dividend coming?
Due to targeted acquisitions, Saturn Oil & Gas has risen to become a serious Canadian oil producer in just a few years. The Company is now also playing with the big players on the stock exchange and is thus becoming more interesting for institutional investors. Just recently, for example, it was uplisted from the TSX Venture to the Toronto Stock Exchange ("TSX"). The numbers are impressive: in the first quarter of 2023, adjusted EBITDA climbed 332% to CAD 70.4 million. Free cash flow was CAD 30.2 million. Both are record figures for the Company but are expected to increase further. Full-year EBITDA of CAD 475 million is forecast for 2023. Due to the high profitability, the debt used for the acquisitions can be reduced quickly. By the end of the year, debt is expected to be reduced to about CAD 350 million. By the end of 2025, the Canadians then want to be debt-free. The sales price of the oil needed to achieve this has been secured. Will the cash flow then be used to pay a dividend? Based on the current share price of CAD 2.28, the potential dividend would likely be substantial. After all, the 2023 EBITDA forecast significantly exceeds the current market capitalization of CAD 323 million. And in the coming years, earnings should be able to increase further.
The analysts at Canaccord Genuity recommend buying the shares of Saturn Oil & Gas. They say Saturn is trading at a 50% discount compared to other mid-sized oil producers. Therefore, a re-rating of the Company is only a matter of time. The analysts' price target is CAD 6.50.
BYD: No sign of a price war
BYD is also earning brilliantly at the moment. The Company seems to be coping brilliantly with the price war with Tesla & Co. in the electric car sector. According to preliminary figures, the Chinese will likely have achieved a net profit of 10.5 to 11.7 billion yuan in the first half of the year. This would be an increase of 192% to 225% YOY. During the first six months of 2023, BYD has sold 641,350 electric vehicles. Most vehicles are still sold in China, where they have overtaken market leader Volkswagen. UBS analysts reacted by confirming their buy recommendation, setting a target price of HKD 320. Currently, the BYD share is listed at HKD 265.
In the future, BYD also wants to sell more vehicles outside China. To this end, the group is investing massively along the entire value chain - from silicon production to new plants. Plans for a new site in India have just been announced. It is also starting sales in Chile, Ecuador and Morocco.
Nel: Stock market focused on sales growth
Nel ASA has not yet turned a profit. The Danish company posted an EBITDA of NOK -138 million and a net loss of NOK 342 million in the second quarter. For the entire first half, EBITDA amounted to NOK -258 million (H1 2022: NOK -350 million) and net loss NOK -535 million (H1 2022: NOK -191 million). On the stock exchange, however, the red numbers do not seem to bother anyone and instead, growth was celebrated yesterday. Sales in Q2 2023 increased by 159% to NOK 475 million. In this context, the Electrolysers business segment recorded a disproportionate increase in sales of 202%. Order intake was NOK 428 million, up 81% YOY. At the end of Q2, the order book stood at NOK 2,964 million, up 106% compared to Q2 2022. At the end of the quarter, Nel still had a solid NOK 4.12 billion in cash.
"We continue to see a positive development due to increased production volumes and revenues from contracts with significantly improved terms," says Håkon Volldal, CEO of Nel. "Electrolyser projects are getting bigger and order intake will therefore fluctuate from quarter to quarter. However, overall demand is increasing, and customers are increasingly turning to suppliers with available capacity and a track record of delivering reliable, high-quality equipment."
Nel remains a hot potato. While sales growth is finally picking up, investors are overlooking the high losses. However, this may change again. In contrast, Saturn Oil & Gas is earning brilliantly - despite a relatively low oil price. If part of the cash flow after debt repayment is used to pay a dividend, then the dividend yield should be pleasing when looking at the current share price. At BYD, things are going well at the moment. The price war is not leaving any traces, and investments are being made worldwide. A global market leader could emerge here.
Conflict of interest
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