April 3rd, 2024 | 07:15 CEST
Renk, Super Micro Computer, Royal Helium: SHARES UNSTOPPABLE!
The Renk share is unstoppable. Yesterday, the shares of the defense technology company surged by 7% at its peak. The share is scratching at the EUR 40 mark and has thus more than doubled since the IPO in February of this year. While the share price is being driven by politics, analysts are beginning to lose interest. So, is it time to exit now? The defense industry needs helium just as much as medical technology and quantum computers. Royal Helium is one of the few listed companies in this sector. The Company is currently making the leap from explorer to producer, a move that should benefit the share. Helium is also needed to produce the AI semiconductors used by Super Micro Computer. Microsoft, OpenAI, and Amazon show that the hunger for AI data centers is far from satisfied. They plan to invest over USD 200 billion in new supercomputers.
time to read: 4 minutes
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Author:
Fabian Lorenz
ISIN:
RENK AG O.N. | DE000RENK730 , SUPER MICRO COMPUT.DL-_01 | US86800U1043 , ROYAL HELIUM LTD. | CA78029U2056
Table of contents:
"[...] We expect the first three wells to be drilled, cased, completed and tested by the second week of March [...]" Andrew Davidson, CEO, Royal Helium Limited
Author
Fabian Lorenz
For more than twenty years, the Cologne native has been intensively involved with the stock market, both professionally and privately. He is particularly passionate about national and international small and micro caps.
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Royal Helium: Exciting market, affordable share
Is helium an unfamiliar commodity investment? This is likely the case for many investors and makes the precious gas all the more interesting. Until a few years ago, the price was controlled by the US. Supply and demand now regulate it. As a result, the price has more than doubled. This is because demand from the scientific, medical technology, semiconductor and defense industries is increasing. For example, quantum computers often need to be cooled with liquid helium. However, the production of semiconductors and rockets is also only possible with helium.
In this exciting environment, Royal Helium is currently taking the step from explorer to producer. The Canadian company is currently only valued at around EUR 30 million and is one of the few "pure plays" on the stock market. The first two wells were brought into production in 2023. Five more wells are to follow this year. And this is just the beginning. Royal Helium plans to operate 39 wells on its 400,000-hectare site in the medium term, making it one of the leading helium producers in North America. The Canadian government is supporting the expansion with CAD 3 million. Purchase agreements have already been concluded with companies from the aerospace industry for three years at an average price of USD 538 per mcf.
The food- and beverage-grade carbon dioxide produced during the purification and processing of helium can also be marketed. Last week, Royal Helium announced its first three-year offtake agreement to supply supermarkets in the northern United States. Royal Helium President David Young comments: "This agreement represents a significant extension of the economics of Royal's first plant and demonstrates the Company's commitment to growth and innovation. This agreement not only moves us forward in our endeavour to sell a diversified supply of value-added gases but is also a testament to the diverse commercial products produced at our facility that provide multiple economic cash flow streams to shareholders."
Super Micro Computer: Microsoft, Amazon and Co. invest billions
Helium is, therefore, also needed for semiconductors, data computers, and other related products. Demand from these sectors should continue to increase. Various media outlets reported at the weekend that Microsoft and OpenAI, the Company behind ChatGPT, are planning to build a new supercomputer. Microsoft would provide around USD 100 billion for the construction of the data center. The supercomputer is intended to drive forward the development of artificial intelligence.
This is the latest example of the demand for AI chips and data centers being far from over. A few weeks ago, analysts at JP Morgan caused a stir with their forecast that the market for "AI inferencing workloads" will multiply from USD 41 billion in 2023 to USD 283 billion by 2028. Criticism has been voiced that these expectations have arisen from the general AI euphoria and are too optimistic. However, it is not just Microsoft investing billions; Amazon is, too.
Bloomberg has reported that Amazon's cloud division AWS plans to invest around USD 150 billion in the expansion of its data centers over the next 15 years in order to provide the necessary cloud infrastructure for the next generation of AI developments. The search for land and the supply of energy required is already underway.
In their forecasts, the analysts at JP Morgan recommend buying Super Micro Computer shares. Over the next four to five years, the specialist in AI data centers could grow by an average of 43% per year. However, the target price of USD 1,150 is not far off the current level.
Renk share: Politics drive the share price
Renk has undoubtedly had a thoroughly successful IPO. The armaments company only went public at the beginning of February 2024 at EUR 17.50. Since then, the share price has more than doubled. Yesterday, the Renk share - like its industry peers Rheinmetall and Hensoldt - was again one of the day's winners on the German stock market, trading just below the EUR 40 mark. The sector's share prices were driven yesterday by statements from Christian Lindner. The Federal Minister of Finance declared that Germany is poised to meet the NATO objective of allocating 2% of its budget to defense in the coming years. There will also be room in the budget from 2028 to increase the defense budget by up to EUR 9 billion.
With the recent rise, however, the air is getting thinner for the share. Even Berenberg's highest price target of EUR 30.60 has practically been reached. The analysts are Renk optimists and are the only ones still recommending a "Buy". At Deutsche Bank and Goldman Sachs, the stock is only a "Hold".
Both AI and defense stocks have been on fire, and despite all the positive future prospects, both Renk and Super Micro shares could benefit from a consolidation. It is worth taking a look at the second tier. Royal Helium is benefiting from numerous megatrends, and the share is anything but expensive if the news flow remains positive.
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