OHB Caught in the SpaceX Trap! Buy Rheinmetall Now? Almonty Shares Added to the Russell Index Today - Tungsten Outperforms Gold!

Almonty: Tungsten Shortage Intensifies

While Almonty shares have weakened somewhat in recent weeks and are trading about 20% below their all-time high, tungsten prices show no signs of weakness. The price for a metric ton unit (MTU)—equivalent to 10 kg—of ammonium paratungstate on the Rotterdam exchange remains above USD 3,000. At the beginning of this year, the price was around USD 900 per MTU, and in mid-2023, it was less than USD 300 per MTU. Tungsten is thus easily outshining the precious metals gold and silver.

The tungsten shortage is intensifying. "Reuters" already summed up the situation with the headline "Every missile fired over Iran is burning through US tungsten stocks." The high consumption of missiles and precision munitions is thus increasingly straining US stocks. Tungsten is needed, among other things, for armor-piercing ammunition, heat-resistant components, and missile and weapons systems. At the same time, the West's supply chain is structurally vulnerable because China dominates the global market and strategically controls exports. A few weeks ago, the "South China Morning Post" also reported on shortages of tungsten hexafluoride, a key precursor for the semiconductor industry. Prices have risen by more than 200% within a year. As a result, the defense, aerospace, machine tool, and AI chip industries are increasingly competing for limited supplies.

NBC News has also recently covered the tungsten shortage, focusing on Almonty. The network describes tungsten as an indispensable raw material for armor-piercing ammunition, fighter jets, and AI-powered missile systems. Following the high consumption of Tomahawk, Patriot, and precision-guided missiles during the Iran conflict, the US defence industry is under pressure to replenish its stockpiles. "NBC News" points out that the US itself does not mine tungsten on a commercial scale and that China controls more than 80% of the global market. As part of the Western response, the report highlights the Sangdong mine in South Korea, which Almonty has ramped up in recent months. In addition, Almonty is developing a tungsten mine in the US State of Montana. This mine is of strategic importance, as the US has so far been 100% dependent on tungsten imports.

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Given these market developments, it comes as no surprise that analysts expect Almonty's revenue and profits to skyrocket. Bank of America forecasts that the tungsten producer will generate revenue of approximately CAD 670 million this year. By 2027, that figure is expected to reach CAD 1.32 billion. Earnings per share are projected to reach CAD 1.75 this year and climb to CAD 3.50 by 2027. Currently, the stock, which is also actively traded on German exchanges, is trading at around CAD 23. This puts the 2027 P/E ratio at 6.6.

Incidentally, Almonty shares are now included in the Russell 1000 and Russell 3000 indices as of today. This could generate additional demand from ETFs and funds and is likely to further increase the company's visibility.

Rheinmetall: Analysts Reassure Investors

It was a disastrous week on the stock market for Rheinmetall. Over the course of five trading days, the stock lost more than 20% of its value. The market capitalization has shrunk by more than EUR 11 billion and now stands at just EUR 44 billion. It used to be more than EUR 90 billion. The reason was the definitive cancellation of the F126 program. Rheinmetall had positioned its naval division as a potential savior of the severely delayed project and had hoped for a contract worth billions. Instead, the German government is halting construction of the six F126 frigates due to skyrocketing costs and high project risks and is likely to opt for up to eight smaller Meko A-200 frigates from TKMS. For Rheinmetall, this is not only a lost contract but also a significant setback in its strategic expansion into the naval business.

Looking at analysts' reactions, the stock's plunge presents a buying opportunity. Although price targets have been lowered, they remain well above the current level. DZ Bank lowered its price target from EUR 2,188 to EUR 1,705. Warburg Research and JPMorgan still see Rheinmetall shares reaching EUR 1,500. Jefferies slashed its price target the most. The analysts no longer see the fair value at EUR 1,890 but rather at just EUR 1,300

Overall, analysts consider the financial consequences of the canceled F126 contract to be manageable. The lost revenue and earnings contribution are considered manageable for Rheinmetall, given its well-filled order book. The damage to the company's reputation is likely more serious. This is because Rheinmetall had intended to make a major entry into the naval business with the acquisition of Naval Vessels Lürssen (NVL).

OHB: Below Offering Price

OHB's stock also plummeted by over 20% last week. Since hitting a 52-week high of around EUR 590 in May, the German aerospace group's stock has since even halved in value. This is partly because the space hype triggered by the SpaceX IPO has cooled off. Furthermore, not only has OHB announced a major capital increase, but its major shareholder, KKR, also intends to cash out as part of the placement.

The private placement has now been completed. Investors subscribed to 1,605,388 new shares as well as 1,394,612 existing shares from KKR at a price of EUR 300 per share. OHB will receive gross proceeds of approximately EUR 482 million from the issuance of new shares, while KKR will realize around EUR 418 million from the sale of its shares. The subscription rights offering for existing minority shareholders will remain open until July 8, 2026. You can subscribe to new shares at EUR 300. However, the OHB share is currently trading at around EUR 271 on the stock exchange.

The industry environment continues to point to strong operational performance at Almonty. The stock should benefit from this again. In any case, based on analyst estimates, the share appears to be anything but expensive. Rheinmetall continues to lack clear momentum. A rebound cannot be ruled out, but the road back to previous highs is likely to be rocky. This probably applies even more to OHB. A buy does not seem warranted at this point.