April 5th, 2022 | 12:10 CEST
New major trend determines share prices: BASF, Saturn Oil + Gas, Nordex
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
BASF: A lot is at stake here
If you stroll through the streets of Ludwigshafen, you cannot avoid one Company: BASF. Almost everything is reminiscent of the chemical giant. Although, even today, higher earners tend to look across the Rhine to live in the somewhat more chic Mannheim, it is hard to imagine what would become of Ludwigshafen without BASF. And yet the thought is closer today than it was six weeks ago. Why? The ever-escalating war in Ukraine and the ever-increasing pressure on Germany to agree to even more drastic sanctions that embargo oil and possibly gas supplies from Russia. Eastern European countries have long been convinced that Putin's invasion of Ukraine will not stop at NATO's borders. For this reason, Europe should already use all available means to resist the aggression.
Some economists believe that such a supply freeze for energy from Russia would be feasible - at the cost of a recession, which could probably be controlled by interventions in the labor market. But what is a severe dent in the economic curve for Germany could be a disaster for a city like Ludwigshafen and BASF. The BASF plant in the Rhineland-Palatinate city alone requires nearly as much electricity as Denmark. The already energy-hungry industry could suffer from an embargo. While a measure of a few months should be manageable for BASF, it remains unclear whether the embargo genie can be put back in the bottle once it has been let out. BASF shares have lost 15% in the past three months. The interim recovery is a thing of the past, and it does not look good for the stock in the long term.
Saturn Oil & Gas delivers energy with a clear conscience - Live talk on Wednesday
While companies like BASF have been hit hard by the discussions about an embargo, shareholders of Saturn Oil & Gas can rejoice. A year ago, the Canadian oil producer implemented a groundbreaking acquisition and, on favorable terms, took over a huge oil field called Oxbow. In addition, with the Viking property, the Company has acreage where Saturn demonstrated strong organic growth years ago. Saturn Oil & Gas has now issued guidance for 2022, which calls for significant increases in production, EBITDA, and cash flow. But why isn't that leading to an increase in the stock price?
About a month ago, Saturn completed a capital increase that is expected to enable the Company to achieve stronger organic growth in addition to faster debt reduction. The new shares were issued at the current price level, which has cemented the share price at the current level despite the positive underlying data. However, the Company itself is convinced that its current strategy is the right one at the right time. On Wednesday, April 6, Saturn Oil & Gas, presented by CEO John Jeffrey, will discuss the importance of geopolitical independence for industrial companies, economies and investors at the International Investment Forum (IIF) Industry-Talk. The panel will also include corporate leaders from the gold, rare earths and mining services sectors. The free panel discussion will start at 7:00 pm CEST via Zoom and will be moderated by equity analyst and commodities expert Julien Desrosiers. Event Registration
Nordex: More hope than knowledge
Even if it is hard to believe, companies like Nordex are also suffering from the current market environment. Wind turbines have to be manufactured and transported to the installation site. Months ago, the increased freight costs were already seen as one of the reasons why Nordex can only offer extremely low margins. And today? The Company sees itself confirmed in its growth course, even though the year 2021, which has now been reported in full, is still characterized by a disappointing EBITDA margin of only 1%. Since the share has risen significantly in recent trading days, investors could become cautious again in the meantime. Only a sustained rise above EUR 17.50 should initiate a trend reversal from a chart perspective.
Instead of focusing on industrial companies now and speculating that these companies will "somehow" get their act together, investors should start at the root of the problem. Commodities from safe regions, such as Europe or North America, offer a way out of the supply chain chaos. In addition, they have a better ESG profile. Industry representatives will discuss how commodity companies from North America can provide a remedy in the short term on the free IIF Industry-Talk via Zoom on Wednesday from 7:00 pm CEST. Saturn Oil & Gas will also provide an insight into the energy business in Canada following the outbreak of the Ukraine war.
Conflict of interest
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