August 15th, 2022 | 11:48 CEST
Rheinmetall, Kleos Space, Palantir - Is the Ukraine war spreading?
Table of contents:
Rheinmetall - Order intake on the rise
Rheinmetall has two business sectors. In addition to the defense industry, the Group produces mainly for the automotive industry. Since the start of the Ukraine crisis, the Düsseldorf-based Company's defence business has soared. Forecasts for the current year were for sales growth of up to 20%. The forecast was revised downward to 15% on July 27. The reason given was the high risks in global automobile production. Despite this, earnings are expected to be as forecasted due to rising margins.
The half-year figures were presented on August 5. Group sales climbed by EUR 92 million to EUR 2.67 billion, and operating profit increased to EUR 206 million, up 8% YOY. The margin increased by 0.3% to 7.7%. The order backlog also increased. Executive Board member Armin Papperger said, "We are recording rising order intake - also in our civil business. Here, we are making important contributions to the technological shift toward climate-friendly mobility and new forms of energy supply, for example, with the help of hydrogen technology."
Investors were dissatisfied and sold the shares down to EUR 159.80. Yet the signs are pointing to growth. Sales in the defense sector are expected to more than double this year. Order intake is rising, and assuming the bureaucratic mills grind slowly, the pace may accelerate again. After the figures, there were four buy recommendations from Goldman Sachs, Berenberg, UBS and Warburg Research, with price targets between EUR 211 and EUR 290. Only Deutsche Bank downgraded the stock to Hold with a price target of EUR 200.
Kleos Space - The launch of the 4th cluster is approaching
The Australian Company Kleos Space has branches in Luxembourg, Great Britain and the US. The focus of the Australians is on collecting radio frequency (RF) signals using nanosatellite clusters. This data is analyzed using artificial intelligence and provides real value to the customers of Kleos Space. The technology makes it possible to visualize activities on land and water, which can also be useful in times of war. The application areas are diverse and range from defense against pirates to illegal fishing or smuggling. It can also be used to monitor borders and thus increase border protection. Since 2020, 3 satellite clusters have been launched into orbit. The 4th cluster is scheduled to launch with the next SpaceX Transport Mission between September and November.
Currently, the 3 clusters, each with 4 satellites, cover about 253 million sq km. With the new cluster, another 119 million sq km will be added, and every spot on Earth can be checked 5 times a day. A total of 5 clusters are planned. The Company offers its customers two product options. The first is Mission-as-a-Service, where customers receive solutions tailored to their needs. The second is Data-as-a-Service, where customers get data, including analytics and intelligence services, on a subscription basis. The infrastructure is getting better, and so is the data quality. The Company was able to report orders of EUR 1 million for Q3. In addition, data is being analyzed with the US Navy's Naval Surface Warfare Center. Here, orders could beckon in the future.
The share can be classified as a growth stock and has accordingly fallen back significantly with the overall market. Positive for shareholders was the announcement on August 12 that the Company was able to secure AUD 10 million from PURE Asset Management. Thus, there was no dilution of shareholders, and the operation and growth in the coming years is secured. When the investment was announced, the share price rose from EUR 0.26 to EUR 0.37. A consolidation then set in, and the share price is currently EUR 0.31. The commercialization is slowly gaining momentum and the infrastructure has been almost completely built up. In the past, it was often the case that the share price jumped with the launch of a new cluster. Those convinced by the concept should now add a first position to their portfolio.
Palantir - Analyst expectations missed
Palantir Technologies Inc. makes software that enables companies to effectively integrate their data, decisions and operations on a large scale. In total, Palantir has 3 software platforms in its offering. Specifically, the "Gotham" product is used by defense agencies, intelligence agencies, and other government institutions to analyze massive amounts of data and translate it into actionable intelligence. In addition to the Gotham platform, there are Foundry and Apollo, also used by the private sector.
On August 8, the Group presented its figures for the second quarter. Revenues climbed 26% YOY, but analyst expectations for earnings were disappointed. Instead of USD 0.03 earnings per share as expected, the Company had to report a loss of USD 0.01 per share. Management also scaled back its full-year guidance slightly. Only USD 1.9 billion in sales are expected. On the positive side, customer growth was up from 169 to 304, showing that the business community is relying more and more on Palantir's software. Because customers have signed up for a subscription model, revenues are recurring.
In a conference call, CEO Alexander Karp confirmed that the US government had postponed some large orders. If those orders come in, the Group's numbers will improve. The stock plunged to USD 9.01 after the numbers but has recovered slightly to USD 9.91. In order to close the gap, the share must rise to USD 10.85. Analysts are divided on how to proceed with Palantir. The price targets range from USD 6 to USD 20. In the long term, the stock has potential, but the market capitalization of around USD 20.5 billion is already very high.
Even though the Ukraine conflict and rearmament will still be with us for a while, one can see that the great euphoria has faded for the time being. Rheinmetall has strong growth in the armaments sector, but the automotive sector is weakening. Kleos Space has occupied an exciting business area that is now beginning to bear fruit. The infrastructure is almost complete and the business models are scalable. Palantir is getting closer to its big goal of becoming profitable but still has to cope with setbacks.
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