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June 2nd, 2022 | 11:45 CEST

Shares before the breakthrough! News at Salesforce, Barsele Minerals and Rheinmetall

  • Gold
  • defense
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The number season is coming to an end. SAP's competitor Salesforce was one of the last to report and shone in the outlook by raising its annual forecasts. The order books of defense contractor and automotive supplier Rheinmetall are also more than full at the moment. Although another major order has been added, the share price is reacting only slightly. The situation is similar for gold mining stocks. Despite excellent conditions and undervalued assets, prices continue to correct - a long-term, anticyclical entry opportunity.

time to read: 4 minutes | Author: Stefan Feulner
ISIN: SALESFORCE.COM DL-_001 | US79466L3024 , BARSELE MINERALS | CA0688921083 , RHEINMETALL AG | DE0007030009

Table of contents:

    Bill Guy, Chairman, Theta Gold Mines Limited
    "[...] Both the geology and the infrastructure around the project make for a very attractive cost structure. We expect to be able to produce at 50% of the current gold price. [...]" Bill Guy, Chairman, Theta Gold Mines Limited

    Full interview


    Major order from the automotive sector

    All that can currently be heard on the premises of Rheinmetall Platz 1 in Düsseldorf is jubilation and champagne corks popping. Following the agreement reached between the CDU/CSU government on the EUR 100 billion special fund for the German Armed Forces, Germany's biggest defence contractor, Rheinmetall, is likely to be awarded a large slice of the pie. Weeks ago, Rheinmetall CEO Armin Pappberger already issued a corresponding list for the supply of tanks, helicopters and ammunition worth EUR 42 billion for the Bundeswehr. Of course, no one knows yet how much of this will actually be packed into actual orders.

    In addition to the defense sector, the Düsseldorf-based company is an international technology group for mobility and security. For example, a major order from a German premium car manufacturer for secondary air systems was announced yesterday. According to Rheinmetall AG, the total order value is in the mid three-digit million euro range. Between 2025 and 2032, the Automotive Emission Systems business unit of Rheinmetall's Sensors and Actuators division will produce over 4 million blowers and more than 4.5 million valve modules for secondary air systems, as well as fulfilling further development services for customer-specific adaptation.

    There were no significant fluctuations in the share price after the agreement on the special fund or after publication of the major order. The share lost momentum after the steep rise. The relative strength indicator and the trend following indicator MACD gave a fresh sell signal. The first short-term correction target would be the March high at EUR 162.95.

    Explosive environment

    Gold is in correction mode despite the geopolitical situation. Accordingly, the change in the monetary policy of the US Federal Reserve, which announced several interest rate steps this year, is proving to be a brake. However, this increases the risk of a recession. Further interest rate hikes would further slow down the already sputtering growth engine. Thus, the Fed has little room for manoeuvre to make more significant hikes. However, the situation is even worse in the eurozone, where the ECB is still sticking to its historically low key rate of 0%. Although calls for a stricter monetary policy are growing louder, the European monetary guardians remain inactive. Given the high debt levels of the southern EU countries, in particular, this is not too much of a surprise. A rapid, stronger sequence of hikes could bring down a house of cards.

    Barsele Minerals with treasure in Sweden

    From a portfolio diversification perspective alone, around 10% of the total value should be in precious metals. In addition to buying physical coins and bars, shares of gold producers or exploration companies are also suitable. An investment in Barsele Minerals would also have an advantage in terms of geographic diversification. The Barsele project of the same name is located in the mining region of Västerbottens Län in northern Sweden, 600km north of Stockholm and covers 34,500 hectares in the Fennoscandian Shield. Here, the Belcarra Group-led company, with a 45% ownership interest, is a junior partner in the joint venture to develop the Barsele Gold Project.

    Senior partner Agnico Eagle, with a 55% interest, is conducting and financing exploration on the property. In recent years, Agnico Eagle, as the operator, has advanced exploration and drilled approximately 155,000m, with a total of 404 drill holes completed. In 2019, Barsele released a resource estimate of 2.41 million ounces of gold. The next target is to achieve a resource estimate of 3.5 million ounces through a further 30,000m drill program. The planned acquisition of Agnico Eagle's stake by the Canadians failed in recent months, but the issue is likely to be revisited in the coming months. Looking at the stock market value of Barsele Minerals of EUR 24.76 million, the glaring undervaluation comes to light. Back in 2016, the Royal Bank of Canada valued the project at USD 375 million at a gold price of USD 1,350 per ounce.

    Salesforce exceeds forecasts

    The first-quarter results season is slowly drawing to a close. SAP competitor Salesforce was another company to significantly beat its forecasts. In the first quarter, sales climbed 24% YOY to USD 7.41 billion. However, profits slumped from USD 469 million a year earlier to USD 28 million. Analysts, however, expected even greater downturns.

    For the full year, the US company held out the prospect of higher profits. Thus, earnings per share are expected to hit a range between USD 4.74 and USD 4.76. Experts are expecting an EPS of USD 4.68. On the other hand, in the case of sales, the signs are reversed. While analysts on average expect revenues of USD 32.08 billion, Salesforce expects between USD 31.7 billion and USD 31.8 billion.

    Following the figures, the major Swiss bank Credit Suisse repeated its "outperform" investment rating but lowered its price target from USD 375 to USD 315. Currently, the share price is just under 45% below the price target at USD 160.24.

    While Rheinmetall's share price is not reacting upwards despite the agreement on the special assets of the German Armed Forces as well as a large order, a major correction could be imminent. In contrast, Salesforce's strong quarterly numbers should provide momentum. Barsele Minerals has an undervalued asset in its portfolio with its stake in the Barsele project in Sweden.

    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.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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