March 3rd, 2022 | 11:47 CET
Plug Power, Hensoldt, Saturn Oil + Gas: Will the price rally continue?
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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
Saturn Oil & Gas: Will the knot burst in the record year?
The Saturn Oil & Gas share has not yet benefited from the high oil price and is currently trading at just over EUR 2 on Tradegate. The price target of GBC Research for the share of the Canadian oil producer is CAD 12.17 or EUR 8.64. The production volumes and synergies of the acquisition announced in February 2022 are not yet taken into account. The acquisition - in connection with a capital increase - had probably caught some shareholders on the wrong foot. But in the meantime, it has been completed, and the benefits for shareholders are coming to the fore. CEO John Jeffrey emphasized, "The proceeds from the current equity financing will provide a significantly increased capital expenditure budget for 2022 and enable the Company to accelerate its production ramp-up in the current environment of high oil prices. We expect the Company's incremental cash flow growth to far exceed the dilution from the financings and be to the long-term benefit of all shareholders."
With high oil prices and the acquisition, Saturn Oil & Gas - which, by the way, has all of its oil fields in Canada - is headed for a record 2022. In the third quarter of 2021, the Canadians had generated more than CAD 48 million in revenue, with operating earnings (EBITDA) of more than CAD 17 million. At the time, oil prices averaged around USD 70 per barrel. Saturn has hedged about 60% of its production. The remainder of its current output, totaling about 7,500 barrels per day, is sold freely in the market. The latest acquisition will allow the production volume to rise rapidly above the 8,000 mark. The acquired assets are located in close proximity to Saturn's existing Viking acreage. The strategic acquisition includes 240 bbl/d of light oil, numerous reduced-risk light oil drilling locations and rights to more than a total of 100 Crown land and other properties. Due to the increased production volumes and synergies on the cost side, the acquisition should pay off quickly. There should be concrete news on this in the short term. The Company has announced that it will release a corporate update around March 10, including an investment budget for 2022 and financial guidance.
Hensoldt: Will the US ensure a continuation of the share price rally?
Until a week ago, Hensoldt's stock was not known to many stock market participants. This has now changed dramatically and with it the share price. It has climbed from around EUR 12 to over EUR 26 within days. The sensor and defense specialist, based in Taufkirchen, was created in 2017 from former business units of Airbus Defence and Space. Its main product areas are radars and optoelectronic systems, electronic warfare and avionics. On Monday, JPMorgan had upgraded Hensoldt's share to "Overweight" from "Neutral." The price target was raised from EUR 15 to EUR 22.50. Russia's invasion of Ukraine had fundamentally changed the market environment for the European defense sector. European defense spending is likely to increase significantly more in the future than previously expected. At the same time, a new major customer beckons. The newspaper "Welt am Sonntag" reported that the USA has become aware of Hensoldt's technology. Specifically, the report said, the passive radar developed by Hensoldt was in demand. With it, stealth aircraft could be detected without being detected themselves as a radar station on the ground - an advantage that can hardly be overestimated. Should Hensoldt receive orders from the USA, the share price rally could continue even if profit-taking is possible at any time.
Plug Power: Sales to rise to USD 3 billion by 2025
Since the weekend, politicians from all parties have been referring to renewable energies as "freedom energies". The aim is to make it clear that the expansion of energy from renewable sources is to be accelerated once again. Accordingly, shares such as SMA Solar, Nel and Siemens Gamesa made substantial gains. Germany's energy independence is to be increased by, among other things, two LNG terminals. These should also be capable of being used for hydrogen, which is where Plug Power comes in. Accordingly, the share price of the hydrogen specialist has also risen significantly in recent days. Yesterday, the Company published figures for 2021 and gave an outlook for the coming years. In the fourth quarter, Plug Power turned over USD 162 million, posting a loss of USD 0.33 per share. This missed the average analyst estimates - especially on the earnings side. However, the outlook was positive. Sales are expected to increase from USD 502 million in 2021 to USD 3 billion by 2025. This figure is already likely to be between USD 900 million and USD 925 million in the current year. The operating profit margin is expected to reach 17% in 2025. However, it should not be forgotten that Plug Power is already valued at an impressive USD 14.5 billion.
Russia's war of aggression is keeping the world and the stock market on tenterhooks. Defense sector shares like Hensoldt and renewable energy shares like Plug Power will remain in demand - whether the valuations are still attractive is another question. Saturn Oil & Gas has catch-up potential after the takeover and has set the course for a record operating year.
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