July 22nd, 2021 | 11:57 CEST
SAP, Deutsche Rohstoff, Bayer, Condor Gold - Better than expected
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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
SAP - Slight forecast increase
Due to a solid second quarter, driven by the faster migration of customers to the cloud, software giant SAP raised its forecasts for the second time this year. Adjusted for currency effects, the Walldorf-based Company now expects operating profit of between EUR 7.95 billion and EUR 8.25 billion. Previously, EUR 7.8 to 8.2 billion had been expected for the full year 2021. For earnings before interest and taxes adjusted for special effects, management expects a decline of zero to minus 4% for the full year in its latest estimate.
The previous calculation assumed a loss of minus 1% to minus 6%. Overall, the latest estimates are still below 2020 earnings, too conservative for SAP investors. The share lost at times more than 4.5% and was thus by far the day's loser in the German leading index DAX. The share price is quoted at EUR 116.40. At EUR 114, there is a broad support zone that could be used anti-cyclically to buy. Various analyst firms were more positive. Goldman Sachs sees the share as a buy candidate and leaves the price target at EUR 141. Warburg also rates the software company as a "buy" and continues to see a target of EUR 135 after the figures.
Deutsche Rohstoff AG - Less debt, more profit
We have been recommending the Deutsche Rohstoff AG share for some time now. One reason is the experienced management with its flexible trading strategy. Probably no company from the oil sector can see itself as a winner of the Corona pandemic. Deutsche Rohstoff did and came out ahead by acting quickly. It cut production to a minimum during the oil crash in the spring of 2020. It bought countercyclically at rock-bottom prices, significantly increasing its earnings forecasts for the current and full year 2022.
Initially, management planned for a revenue range between EUR 57 million and EUR 62 million. Now they are aiming for revenues of between EUR 68 million and EUR 73 million, and in 2022 it could even be as high as EUR 75 million. On the EBITDA side, between EUR 42 million and EUR 47 million were planned, now Deutsche Rohstoff AG is aiming for EUR 57 million to EUR 62 million. In 2022, it could be up to EUR 52 million in the best-case scenario.
The excellent result of the first half of the year and the strong cash flow naturally positively affected the faster debt reduction of the Mannheim-based Company. A maturing bond issued in 2016 with an outstanding volume of EUR 16.7 million was repaid on schedule. In the last two years, EUR 50.0 million has already been repaid or exchanged for the bond, which has a term until 2024. Overall, the Group's debt amounts to EUR 101 million, down from EUR 128 million at the turn of the year.
Cash and cash equivalents, on the other hand, rose to EUR 70.9 million, up from EUR 46.9 million at the end of 2020. The bulging cash position can now be used for further acquisition targets. Strategic investments in critical metals around electromobility, such as copper or lithium, are at the top of the shopping list. We remain positive for Deutsche Rohstoff AG. In the event of setbacks, we recommend buying in the long term.
Bayer - Upgrade before the numbers
Only on August 5, the pharmaceutical and agricultural giant Bayer presents its figures, yet analysts are stalking forward and recommend the stock as a buy. Goldman Sachs, for example, has raised the price target from EUR 74 to EUR 76 and sees good chances for a forecast increase due to the solid past quarter.
Meanwhile, the Leverkusen-based Company announced that it can sell its cardiac drug Verquvo in the European Union. The drug was developed in cooperation with Merck & Co. Approval has already been granted in the USA and Japan. Bayer Pharma CEO Stefan Oelrich expects peak annual sales of around EUR 1 billion for Verquvo. Bayer and Merck & Co each share 50% of the revenues.
Condor Gold - Positive surprise
Successful drill results were delivered by AIM and Frankfurt-listed gold mining explorer Condor Gold. The Company is exploring for gold in Nicaragua and is focusing on its 100% owned La India project. Back in August 2018, Condor received an environmental permit for the development, construction and operation of a processing plant with a capacity of up to 2,800 tonnes per day and associated mine site infrastructure at La India. Initial production is expected to be between 80,000 and 100,000 ounces of gold per year based on a nominal capacity of 2,300 tonnes per day.
Results have been announced from an additional 12 core holes located between and on strike of the proposed La India high-grade starter pits. These starter pits are within the fully permitted La India open pit, including a Mineral Reserve estimate of 6.9 million tonnes at 3.1 g/t gold for 675,000 ounces of gold. In this regard, results from three drill holes were much better than expected. According to management, the area was previously interpreted as a lower grade zone within the fully permitted La India main open pit. The positive discoveries will now be incorporated into a revised feasibility-level mine plan and should positively impact the project's economics.
Positive figures and a forecast increase at SAP disappointed investors. On the other hand, the expected strong figures of Deutsche Rohstoff AG were outstanding. Deutsche Rohstoff AG emerged as a Corona winner as an oil producer due to its flexible and anti-cyclical actions. Both shares are worth buying at the current level, as is Bayer, which will present its figures at the beginning of August.
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