April 27th, 2022 | 10:17 CEST
Nordex, Triumph Gold, Varta - Which shares are coming through the current crisis well?
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"[...] The processes in Namibia are predictable and the country itself is very safe. [...]" Heye Daun, President and CEO, Osino Resources Corp.
Nordex - Tailwind in Germany
With the outbreak of the Ukraine crisis, it became apparent relatively quickly that decarbonization in Germany must proceed even faster. The German government wants to simplify the testing for wind turbines and thus accelerate expansion. That plays right into the hands of wind turbine manufacturer Nordex, as it means new orders from Germany are in the offing. But the initial euphoria has faded. One of the reasons is the rising cost of materials and the disrupted supply chains. But the fear of rising interest rates is also harming the share at the moment. Higher financing costs could lead to less demand.
However, due to subsidies and government backing, these risks should not be of great importance in Germany. On April 20, the Company published its order intake for the first quarter. In total, orders were received for 229 wind turbines with a total capacity of 1,165 megawatts, just below the previous year's numbers. 91% of the turbines are the high-margin Delta4000 wind turbines. Until now, margins have always been the Company's main problem. At 89%, most orders were received from Europe, with Finland, Germany and Croatia leading the way.
The figures from competitor Siemens Gamesa have put pressure on almost all wind power companies. Last year, the wind power subsidiary hurt Siemens Energy's consolidated balance sheet by failing to hedge against rising raw material costs. Following the order intake figures, the analysts at Jeffries issued a buy recommendation with a target price of EUR 20.00. The Company's share price was EUR 30.00 after the order intake figures. Merrill Lynch even called for EUR 30.00, and only Goldman Sachs advised a hold with a price target of EUR 18.30. The share is currently trading at EUR 14.27, which is a critical level. We have a clean shoulder-head-shoulder formation if a close above EUR 14.31 succeeds on April 26.
Triumph Gold - Awaiting the pending results
Gold has always been an asset used as an inflation hedge. Despite rising inflation over the past year, the breakout in gold prices came only with the Ukraine crisis. The price of gold rose to over USD 2,000 on April 18. Since then, consolidation has pushed the price back down to USD 1,900. Nevertheless, the upward trend remains intact. The high gold price helps gold explorers like Triumph Gold, which has proven more than 2 million ounces of gold, silver and copper on its properties, according to the NI 43-101 report. The focus now is on the Freegold Mountain project, which is located near the Newmont gold deposit in the Dawson Range gold-copper belt.
The latest update is dated February 17, when the Company announced that diamond drilling intersected 46.28 meters of 0.54 g/t gold and 0.53 g/t silver, including 4.50 meters of 2.00 g/t gold and 1.57 g/t silver, in the oxide zone at Nucleus on the Freegold Mountain project. Cyanide solubility analysis returned a gold recovery rate of 83%. The announcement evaluated 57% of the 6,615m drill program from 2021. The next update is to be announced when the remaining results from the drill program at the Nucleus deposit are available. Now that more than two months have passed, the results should not be too long in coming.
Thanks to the existing infrastructure, an open pit mine plan is easily implementable. The Company owns two other gold-copper properties near the main project, the Big Creek and Tad/Toro projects. The fourth project is located further southeast of Dease Lake, outside of the Yukon. The share price is forming a sideways phase between 0.09 and 0.115 Canadian dollars (CAD) this year, forming a bottom for the time being. The share price is currently at CAD 0.095. Positive news from the pending results could provide new momentum. The market capitalization of CAD 13.2 million can be considered low with the reported resources.
Varta - V4Drive the next growth driver?
If decarbonization continues to be implemented consistently in many countries worldwide, cars will be electric in the future, and many other things will also be further electrified. Whether hearing aids, headphones or e-cars, they all need rechargeable batteries and of the best possible quality. Varta produces high-quality batteries and rechargeable batteries, but what is currently missing from its portfolio are batteries for electric cars. The Group presented its V4Drive round cell last year, but series production is not expected until 2024. With a loan of EUR 250 million and the current revenues, the production capacities in the lithium-ion area are to be expanded.
On March 31, the Group presented figures for the past fiscal year. Sales increased by 3.8% to EUR 902.9 million, and adjusted EBITDA climbed 17.4% to EUR 282.9 million. The main drivers were the Lithium-Ion Solutions and Microbatteries segment and the Household Batteries division. The Company struggled with its forecast, as the impact of the Ukraine conflict and the Corona consequences for Varta's customers are difficult to assess. Management expects sales of between EUR 950 million and EUR 1 billion, with EBITDA falling slightly. Further growth is expected to come primarily from the V4Drive cells, which have already been made available to customers from a pilot production.
If the V4Drive cells prove convincing, the Group could play an important role in the area of e-vehicles. Despite the uncertainties in the current year, the Company will pay a dividend of EUR 2.48 after its Annual General Meeting on June 17. That corresponds to a dividend yield of a reasonable 2.7% at the current share price of EUR 90.22. Some analysts take a very different view of the stock. While Berenberg has put the stock on hold, JPMorgan and Warburg Research are much more optimistic and have issued buy recommendations with price targets between EUR 110 and EUR 113.
Picking the right investments is not easy these days. Nordex has a tailwind in Germany, but higher material and transport costs, supply chain problems and interest rate fears weigh on the stock. Triumph Gold has proven resources of 2 million ounces and is cheaply valued to boot. Those who want to hedge against inflation with non-physical gold can consider an investment. At Varta, it will depend on the new V4Drive cell. If a blockbuster succeeds, the share will rise significantly.
Conflict of interest
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