23. August 2021 | 11:03 CET
Rheinmetall, Defense Metals, NEL: What can work in this market
The current events in Afghanistan show that countries will have to invest in their defense in the future in order to meet geostrategic requirements. Currently, the Bundeswehr is fighting tooth and nail against bureaucracy and time to save as many Germans or local forces and their families as possible from the Taliban. Modern equipment is just as necessary for this as efficient decision-making chains. In this article, we look at two defense-related companies and conclude with the current situation with NEL's hydrogen stock.
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ISIN: RHEINMETALL AG | DE0007030009 , DEFENSE METALS CORP. | CA2446331035 , NEL ASA NK-_20 | NO0010081235
Rheinmetall: Solid value with ESG weaknesses
Rheinmetall's stock is benefiting from rising demand for defence equipment. The Defence sector accounts for more than 60% of Rheinmetall's sales. Another mainstay is the automotive sector. The Company imposed austerity measures on itself some time ago, which came to bear in the first quarter of the fiscal year. At the same time, things were going better for the auto industry, and defense budgets also had a stimulating effect. The current situation in Afghanistan, in particular, shows how strongly Europe is still dependent on the USA.
Rheinmetall's stock is considered solid but does not have the best reputation. That is probably one of the reasons why the Company wants to restructure its divisions and focus more on areas such as sensors and electronic products in the future. It is said that this is where growth lies dormant. This price fantasy could soon give the share new impetus. On the downside, however, is the weak ESG profile. Armaments are anything but ethically sound. Investors should keep an eye on these risks.
Defense Metals: The Chinese are putting a foot in the door
Such ESG risks are not present at Defense Metals. The Company operates the "Wicheeda" rare earth concession area in the Canadian District of British Columbia. It is accessible via all-weather roads and connected to the energy grid. In recent months, the project has made significant progress, and the share price has achieved very dynamic gains in some cases. For some months now, the share price has also been at rest in connection with financing. At the same time, Defense Metals continues to make operational progress.
It recently signed a letter of intent with Sinosteel MECC for joint processing tests and studies to build a pilot plant for the Wicheeda project. The Chinese Company Sinosteel has assisted and advanced 400 major metallurgical projects for the Chinese government. Rare earths are essential to many future technologies: besides electronics, they also include rechargeable batteries and other products. Rare earths are also needed in the defense sector. Although Sinosteel has already put out initial feelers in the direction of Defense Metals, it cannot be ruled out that the project will also attract the interest of North American investors. After all, the market for rare earths is already dominated by China and the metals are of great geostrategic importance.
NEL: The numbers are clear
Although the technology can be key to greater climate protection, the hydrogen industry has relatively little geostrategic significance. But the industry is languishing. The Norwegian Company NEL is considered a specialist in the production, storage and transport of hydrogen. But the former stock market star is only a shadow of its former self. Most recently, the Company published figures. In the second quarter, the Company posted a loss of NOK 149.1 million on operating sales of 163.7 million Norwegian kroner (NOK). These figures say it all. The share is currently struggling with the EUR 1.30 mark. If this level can be defended, the share could find a bottom here. However, the trend speaks a different language. The stock is not very promising. The competition for hydrogen is fierce, but its practical use lies in the distant future. There is currently no room on the market for visionary ideas. The share is presently uninteresting.
While NEL is currently "out" and Rheinmetall has yet to establish its new direction while struggling with its image, Defense Metals could be worth considering for speculative investors. The stock has come back and things are progressing operationally. The project is still far from producing rare earths. However, there is no question that these metals are rare and in exceptionally high demand.