November 29th, 2023 | 10:00 CET
Sell Varta shares? Positive news from JinkoSolar and Manuka Resources
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"[...] In our experience, the local communities are supportive and friendly. [...]" Steve Cope, President, CEO and Director, Silver Viper
Manuka Resources: Too cheap?
Over EUR 100 million invested in raw material projects, but only worth EUR 14 million on the stock market? And despite massive investments, the Company has even become cash flow positive. How can this be? Sometimes the stock market is like that, but there is a good chance that the discrepancy between operating performance and stock market valuation at Manuka Resources will turn out to be positive. The Australian raw materials company is not only expanding its flagship mine but is also working on uncovering further "treasures".
Manuka Resources' flagship is the Mt Boppy project. In the past, the open pit mine was one of the richest gold mines in Australia. Manuka has revived it and brought it back into production. The third quarter report (PDF) shows that this project alone dwarfs the market capitalization. A total of 2,118 ounces of gold were sold in the three months. Turnover rose to AUD 6.5 million. The trend is rising, as in September, it was already AUD 3.86 million. As a result, the operating cash flow at the Group level was also positive for the first time in the month. At the same time, drilling was carried out to increase expansion. An update on the resource estimate - most recently 160,000 ounces - is expected in the first quarter of 2024.
In the coming years, Mt Boppy and the Wonawinta Silver project should ensure strong sales at Manuka. This should provide enough money in the coffers to unearth a real "treasure": the South Taranaki Bight project. It is located off the coast of New Zealand and the sand there contains vanadium, titanium and magnetite. The resource estimate already stands at a total of 3.8 billion tons. According to Manuka, it is said to have the lowest CO2 footprint of similar projects worldwide. The Company is currently awaiting approval from the environmental authorities. Then the huge potential can be tapped. In the quarterly report, the management again emphasized that the metals are urgently needed worldwide to reduce dependence on China and Russia.
Anyone who is now curious or has already invested should register for the 9th IIF on December 5. Manuka CEO Dennis Karp will report on current developments at the virtual investor conference. German companies such as K+S, aixtron and Vectron will also be there. You can register for free here.
Varta: Party over?
Manuka's battery raw materials could also be of interest to Varta in a few years. After the Company made a mistake by entering the market for e-car batteries and got into financial difficulties, the worst seems to be over for now. Although Group sales and EBITDA declined, sales in the "Energy Storage Systems" segment rose by 86.2% to EUR 122 million in the first nine months compared to the same period of the previous year. The division's adjusted EBITDA increased from EUR 1.7 million to around EUR 16 million.
Varta CEO Dr. Markus Hackstein commented on the quarterly figures:
"Our measures are taking effect. We have effectively reduced costs. The current Christmas business is developing as planned, and we have been able to pass on our increased costs to our customers in some areas. We are confident that we will achieve our forecast for the current year. For the future, we will continue to consistently pursue our restructuring and thus return to a profitable growth course."* So Varta is getting back on track operationally, and consequently, the share price has risen by a respectable 30% over the past six months.
But is the party over again? At least, that is what DZ Bank believes. From the analysts' point of view, while Varta exceeded market expectations in the third quarter, and the forecast for the year as a whole is also realistic, the experts find the revenue projection for the next year to be very ambitious, considering the economic environment. They, therefore, continue to recommend selling the Varta share. Although the price target has been raised from EUR 15 to EUR 17, the share is currently trading above EUR 20.
JinkoSolar: Upward trend due to dividend?
In the coming week, JinkoSolar shareholders' tills will finally be ringing. On December 6, the solar group will pay a dividend to shareholders who have held the shares since November 22. Holders of the ADS (American Depositary Share) will receive USD 1.50 per share. At a current share price of USD 31.33, this corresponds to a yield of 4.79%**.
With the distribution, the management is presumably trying to boost the share price. Although Jinko is developing successfully in operational terms compared to other solar companies, the share is disappointing. It is around 50% lower than in January. Even the dividend announcement at the end of September has yet to lead to the hoped-for turnaround.
Shares in the renewable energy sector are currently not the focus of investors. However, this is expected to change again. Although JinkoSolar is performing well operationally, the "China risk" and the issues within the peer group weigh too heavily. At Varta, not everything is in order yet, and the share is, therefore, more for traders. Manuka Resources appears simply too cheap. The Company is increasingly generating revenue from the sale of precious metals and, at the same time, developing a pearl in the battery metals sector.
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 hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
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