October 20th, 2022 | 10:27 CEST
Plug Power, Desert Gold, BYD - Discover the opportunities
Table of contents:
"[...] We can make a big increase in value with little capital. [...]" David Mason, Managing Director, CEO, NewPeak Metals Ltd.
Plug Power - Sales warning ahead
In February, a report had been skeptical about the ambitious visions of leading US fuel cell manufacturer Plug Power. According to CEO Andy Marsh, who is known for his marketing skills, sales should reach USD 900 to 925 million in 2022. The big breakthrough is then planned for 2025. Here, the sales target is USD 3 billion, a gross margin of 30% and an operating profit of at least 17%.
At least for the current year, the Company has had to row back once again, and the 2025 vision is also becoming somewhat distant. Company sales are now expected to be 5 to 10% lower than initially forecast by the Company's management. "The impact on revenue reflects some larger projects that may not be completed until 2023 rather than 2022 due to timing and supply chain issues. While sales in 2022 may be lower than previously anticipated, demand for fuel cell applications and electrolyzers remains robust," according to the Company's release.
Investors acknowledged the "revenue shift" with a sharp sell-off to below USD 18, which broke the upward trend formed since May. Accordingly, the next striking support is at the high from 2020 at USD 14.35.
Desert Gold - In the shadow of the gold correction
The strong US dollar and concerns about further major interest rate steps by central banks worldwide continue to depress the gold price. Fighting inflation at all costs is the strategy of the monetary guardians. Despite recession worries on the financial markets, the players are determined to curb inflation with a tight interest rate. The fact that inflation has already gotten out of hand and can hardly be contained by further interest rate hikes without driving the economy into ruin should not only be apparent to economists. The voices are already increasing that an end to the strict monetary policy is already being heralded, which should give a sustained boost to the shares of gold producers and exploration companies.
The advantage of smaller mining explorers is that they act as leverage in longer-term trend movements in the underlying price, both in one direction and the other. Despite excellent corporate performance in recent months, Desert Gold's stock is feeling the pinch. Since the July 2020 high, the stock has lost nearly 80% of its value and is trading at EUR 0.07 with a market capitalization of CAD 10.51 million.
With the SMSZ project in Mali, Desert Gold owns one of the largest non-producing land areas in West Africa, with 440 sq km. Several producing mines are located in the neighborhood, including those of Barrick Gold, Allied Gold, Endeavour Mining, and B2Gold. The SMSZ property hosts Measured and Indicated Mineral Resources totaling nearly 1.1 million ounces. A total of more than 23 gold zones have been discovered in the area to date, which will be developed and analyzed for economic grades. With the release of results on the recovery rate of gold from crushed rock, Desert Gold was able to report strong results.
This included recoveries of between 86% and 88% of the gold from the freshly drilled rock in samples from the Mogoyafara South projection area. These are excellent results and very important for economic viability if the ore body is later mined. Previous metallurgical tests at the Baranie East project have recovered gold in ratios of 83% to 98.7% depending on the rock strata, between 93.6% to 95.2% at Gourbasse West and 87.6% at Gourbassi East on freshly crushed gold ores.
The next steps are to commence a 35,000m drill program, which includes 10,000m of potential drilling aimed solely at resource delineation. Overall, Desert Gold intends to follow up and expand known gold zones, with plans to focus on Mogoyafara South and Gourbassi West North initially. Desert Gold believes these are the largest gold systems discovered on the SMSZ property to date.
BYD - Strong numbers and position reduction
Major institutional players are partially selling their silverware and continue to shed position in the Chinese market leader in the electric car sector, BYD. After investor legend Warren Buffett decided weeks ago to sell part of his position, the world's largest investment company BlackRock lowered its share quota. A total of 3.92 million BYD H shares with an equivalent value of HKD 187.24 million were sold. As a result, the shareholding ratio fell from 6.21% to 5.85%.
Almost simultaneously, the Shenzhen-based company reported outstanding preliminary results for the third quarter of fiscal year 2022. The "Build Your Dream" company was able to nearly quadruple its net profit compared to the same period last year. Thus, management expects net income to be between USD 765 million and USD 820 million, an increase of about 350%. According to preliminary results, earnings per share will be between USD 0.26 and USD 0.28. In the previous year, the figure was USD 0.06.
The US investment bank JPMorgan continues to see the electric car company on the right track. For the analysts, BYD continues to be a top pick in the sector, and they repeated their price target of USD 35.03 after the publication of the preliminary figures.
The sharp market correction in recent months has created anticyclical entry opportunities for many companies, which could deliver high returns in the long term. JPMorgan continues to see BYD as a top pick. In the case of Plug Power, the sales warning is likely to have an impact still. In the event of a sustained rise in the gold price, the exploration company Desert Gold could significantly outperform the base price.
Conflict of interest
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