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August 25th, 2021 | 12:02 CEST

Saturn Oil + Gas, Gazprom, K+S - Watch out: Single-digit P/E ratios here!

  • Oil
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Several ratios exist to quickly understand whether a stock is cheap or expensive when analyzing stocks. The list of limitations why this is no more than a rule of thumb is long. The following companies with strong substance and good operating businesses are certified by analysts to have very low valuations with single-digit P/E ratios. Which stock has the greatest potential?

time to read: 3 minutes | Author: Carsten Mainitz
ISIN: SATURN OIL+GAS O.N. | CA80412L1076 , GAZPROM ADR SP./2 RL 5L 5 | US3682872078 , K+S AG NA O.N. | DE000KSAG888

Table of contents:

    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] 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

    Full interview


    SATURN OIL & GAS INC - Quarterly figures ahead

    The Canadian oil and gas producer has entered a new league with this summer's completed acquisition of the Oxbow property in southeast Saskatchewan. Oxbow's facilities currently produce nearly 6,700 BOE per day. That multiplies Saturn's output. Also advantageous is extensive existing infrastructure on the site and direct pipeline connections to the global distribution network. The Oxbow property covers 11,484 sq km of land with over 1,000 producing wells, 2,500 km of connected pipelines and 244 wells ready to drill. The purchase price of the property should be recouped within 2 years at the latest.

    Investors are eagerly awaiting Saturn's next quarterly results. On August 30, the key data for the second quarter will be published, and on November 29, those for the third quarter. The Q2 data will be negatively distorted by one-off effects due to the acquisition and capital measure; from Q3 onwards, investors should then gain a sharper view of the Company's profitability.

    It will also be interesting to see what management has to say about the future outlook in the coming quarters. Are further acquisitions on the cards? Currently, the Company is valued very low at CAD 65 million. The analysts at GBC forecast a P/E ratio of 1 for the stock for 2022 and 2023, respectively! As a price target, the experts formulate CAD 0.46, which should more than triple the share price.

    GAZPROM PJSC ADR - The big picture matters

    The news situation regarding Nord Stream 2 is somewhat irritating. After the US had vehemently opposed the pipeline for several years, there was a positive surprise in July. The German government and the US government announced a breakthrough. Most recently, there were various media reports that construction work on the pipeline would be completed this month.

    Now the US government has recently imposed new sanctions directed against Russia over the Baltic Sea pipeline. Last Friday, the US State Department announced that a new report to Congress lists two Russians and a Russian ship involved in constructing the pipeline from Russia to Germany.

    But this renewed barrage of interference will not change that the pipeline will be put into operation in the foreseeable future. As a result, the world market leader in the natural gas business will be able to significantly expand its market position in Europe in the future. In any case, commodity prices have moved to an attractive level in recent months, even if volatility is increasing. The Group currently has a market capitalization of USD 95 billion. The 2022 P/E ratio is only 4, and that is not all - shareholders can also look forward to a dividend yield of 11%.

    K+S AG - Focus on the competitive situation and potash prices

    The fertilizer group was unable to provide a further improved outlook when it published its final Q2 data. Consequently, this led to profit-taking, which has since depressed the share price by about 15%. The Group had raised its guidance for the current fiscal year some time ago due to rising demand and high potash prices.

    The debt reduction and balance sheet strengthening achieved through the sale of the American salt business raising EUR 2.6 billion is noteworthy. The ratio of net financial debt to operating profit has now fallen to a factor of 2, a moderate level. In addition, the equity ratio has risen significantly to a comfortable 48%.

    However, the share is currently reacting more to the price environment for potash and the competitive situation. In the last few trading days, high potash prices in Brazil boosted the share. Previously, the announcement by the raw materials giant BHP that it would focus more on the potash sector following the separation from its oil and gas business was unsettling. However, it takes several years to build up capacities. Thus, it should be possible for K+S to generate decent profits in the medium term. Based on average analyst estimates, the 2022 P/E ratio of the stock is 8.

    All three companies described have a low company valuation. Gazprom has a superior position as the global market leader, but political risks cannot be ignored. A P/E ratio of 4 and a dividend yield of 11% are very tempting. K+S has a good position in a growth market, and its balance sheet situation has dramatically improved. In our opinion, the most attractive share is Saturn Oil & Gas. The stock market is still failing to recognize the true company value created by the recent acquisition.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may in the future hold shares or other financial instruments of the mentioned companies or will bet on rising or falling on rising or falling prices and therefore a conflict of interest may arise in the future. conflict of interest may arise in the future. The Relevant Persons reserve the shares or other financial instruments of the company at any time (hereinafter referred to as the company at any time (hereinafter referred to as a "Transaction"). "Transaction"). Transactions may under certain circumstances influence the respective price of the shares or other financial instruments of the of the Company.

    Furthermore, Apaton Finance GmbH reserves the right to enter into future relationships with the company or with third parties in relation to reports on the company. with regard to reports on the company, which are published within the scope of the Apaton Finance GmbH as well as in the social media, on partner sites or in e-mails, on partner sites or in e-mails. The above references to existing conflicts of interest apply apply to all types and forms of publication used by Apaton Finance GmbH uses for publications on companies.

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    Der Autor

    Carsten Mainitz

    The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.

    About the author

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