October 2nd, 2023 | 08:10 CEST
Rheinmetall AG, Almonty Industries, Commerzbank - A run-up to the end of the year
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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
Rheinmetall AG - Hanging by a thread
The chart situation of Rheinmetall stock is still hanging in the balance. After the share price failed last week to break the short-term downtrend established in April at EUR 269.00, it has since been heading downwards on rising volumes. Overall, the loss since then amounted to around 9% at a quotation of EUR 243.90. It becomes dangerous if it falls below the current level, where the still rising 200-day line is located. In such a case, the first setback could be towards the June low at EUR 232.80.
Analysts continue to be positive about the integrated technology group. For instance, the US investment bank Goldman Sachs reiterated its Buy rating and a target price of 319 EUR. Thus, the outlook for the second half of the year is optimistic, with the management seeing a margin potential in the mid-teens range for the Group during a Goldman Sachs conference. The private bank Berenberg also voted a "buy" rating and confirmed the price target of EUR 300 following a meeting with CEO Armin Papperger.
The CEO was optimistic about the medium-term opportunities for the DAX member company. In the coming years, Hungary will be an important growth driver in the military sector. In addition, due to the launch of the special fund for defense spending, a record order intake would be conceivable.
Almonty Industries - Alternative-free opportunity
Critical commodities are also currently in correction due to further recession fears. Lithium, which is essential for battery technology, has fallen in price by around 70% since the beginning of the year, while nickel has fallen by almost 40% in the same period. Only the price of tungsten, 1 metric ton unit of tungsten corresponds to 10 kg, has been stable for around 2 years in a range between USD 300 and USD 350. The global tungsten market is mainly determined by China, which will continue to dominate both supply and consumption.
The Chinese government's tightened regulations and restrictions on the export of tungsten ore and increased domestic demand from the manufacture of tungsten products have made China a net importer of tungsten concentrate. These factors, along with China's high growth in the automotive, aerospace, mining, and electronics industries, are also important reasons for its dominant market position.
For shareholders of Almonty Industries, a Canadian company with a market capitalization of CAD 113.93 million, this could create a unique long-term opportunity. While production facilities in rare earths are scarce in the Western world and politicians are frantically trying to promote alternatives through high subsidies, a tungsten production facility is being built in South Korea, driven by Almonty Korea, the 100% subsidiary of Almonty Industries, which aims to be responsible for about 30% of the world's tungsten supply ex-China at full capacity.
It is expected to be fully commissioned by the end of 2024. The Sangdong deposit has a potential life of 90 years and will expand in two phases, with annual production of 2.3 million tons to 4.8 million tons of tungsten oxide. The estimates show that the deposit has significant resources that play an important role in global supply. Germany's state-owned KfW-IPEX Bank is supporting the project with USD 75 million in financing, of which USD 40.2 million has already been drawn.
Commerzbank AG - With momentum above the 200-day line
The chart condition of the Commerzbank share looks much better than that of the Rheinmetall defense group. With an upward gap, the paper of the Frankfurt universal bank shot up at the end of the week by almost 12% to EUR 10.79 under large trading volume. The reasons for this were complex. Thus, the estimates for the pre-reorganization period after 2024 were increased. The returns on equity are expected to grow more strongly, and a significantly more favorable dividend policy is also to be pursued for shareholders. Instead of half, at least 70% of profits are to go to shareholders.
The plan is to distribute EUR 3 billion to shareholders via dividends and share buybacks for the fiscal years 2022 to 2024. In addition, the Frankfurt-based bank's stated goal is to distribute more than 50% of its profit adjusted for interest payments on certain bonds and minority interests in the following years, 2025 to 2027. The bank is also pursuing ambitious profitability targets. It aims to achieve an after-tax return on equity of more than 11% by 2027.
Based on the news, DZ Bank raised its price target to EUR 13.50 from EUR 13.20 with a buy rating. Thus, Commerzbank would have "fired the payout rocket". In addition, the raised profitability target should also. "Now, in the upcoming strategy update, the financial house must credibly demonstrate how net interest income will sustainably benefit from the interest rate turnaround," said analyst Timo Dums.
Commerzbank AG ignites dividend rocket. Rheinmetall cannot maintain its share price level despite further orders. Development work on the main Almonty Industries project in South Korea continues to proceed according to plan.
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