17. September 2021 | 10:41 CET
Steinhoff, Tembo Gold, Nikola - Strong rebound potential
Which investor does not dream of investing in a stock anticyclically during strong price setbacks to earn disproportionately from the rebound? But the anticyclical investment strategy, in which one bets against the broad mass, is associated with considerable risks. Because of this, one should analyze the object of one's desire carefully to see the reasons for the rapid sell-off. Are they self-inflicted problems, as was best observed in the Wirecard example, or is the impulse coming from outside.
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ISIN: STEINHOFF INT.HLDG.EO-_50 | NL0011375019 , TEMBO GOLD CORP. | CA87974N4057 , NIKOLA CORP. | US6541101050
"[...] We can make a big increase in value with little capital. [...]" David Mason, Managing Director, CEO, NewPeak Metals Ltd.
Seven years to wait
As can easily be seen from the chart, one rebound candidate is the Canadian mining Company Tembo Gold. At the beginning of March 2012, the Company, which has prospective deposits in Tanzania, was trading at CAD 6.87. The current price is CAD 0.20, equivalent to a stock market value of EUR 12.90 million. Reasons for the decline are obvious, and the conditions for a successful future could hardly be better.
The highly prospective Tembo gold project is strategically located in the Lake Victoria goldfield in Tanzania next to one of the largest high-grade gold deposits in the world, Barrick Gold Corp.'s Bulyanhulu mine, with more than 20 million ounces of gold mined or contained to date. Due to the previous government, the entire industry experienced a slump in Tanzania's mining industry and a flight of investments. Thus, exploration work at Tembo Gold was also dormant for a full 7 years. However, after the election of a new president, there is now a gold rush mood in the East African country.
In the current year, investment projects have increased by almost 40% to currently 92, and new investments have exploded by 725% to now USD 2.65 billion. In addition, the state is providing considerable funds for power and water supply and infrastructure in order to attract further international donors.
Tembo Gold is also looking to capitalize on the momentum. Starting in October, it is to resume a 7,000m drilling program to follow up on previous drilling totaling 50,000m. Before the maintenance shutdown, the deposit adjacent to the Bulyanhulu mine was 110 sq km; it has now been expanded to 174 sq km. The experienced management team was also able to expand its drilling targets greatly. Using its proprietary AI technology, partner Goldspot Technologies generated 54 new drill targets for Tembo for follow-up exploration on its concessions. Tembo now plans to explore these in addition to the three core targets defined by previous drilling.
To finance its planned activities, the debt-free Company raised CAD 2.3 million in the capital markets. Given a long-term rising gold market and the revival of the mining industry in Tanzania, Tembo Gold has good chances for a rebound. The takeover fantasy by its great neighbor Barrick alone could give the share price wings.
Steinhoff has to go into overtime
The crisis-ridden Steinhoff Group continues to struggle. After all creditors' meetings had initially signaled their approval of the multi-billion euro settlement offer, the highly indebted Group filled its settlement pockets by raising a total of EUR 400 million through the sale of 370 million Pepkor shares to institutional investors. In the event of approval by the Amsterdam District Court, this should get the settlement over the line.
Now, however, the German-South African Company is threatened with another blow from South Africa. The former owners of Tekkie Town see themselves as having been deceived by the former management, and they want to force the liquidation of the Company in court, which is hindering the settlement that is about to be concluded. Steinhoff intends to prevent the worst-case scenario and is now taking the matter to the Constitutional Court. It is and remains a roulette game with the Steinhoff share. The Group's enormous debt burden is crushing and prohibits a serious investment on fundamental grounds.
Light at the end of the tunnel
Although Nikola, the developer of hybrid trucks, has also had a difficult few months, the situation cannot be compared with Steinhoff. However, what is comparable is that allegations of fraud arose against the former management, particularly against the founder and ex-CEO Trevor Milton, which got the Company into serious trouble. General Motors withdrew an originally planned strategic investment. Milton was recently criminally charged, and the new management is working on the rocky road to rebound.
In contrast, Iveco continues to hold on to its cooperation with Nikola. A new production plant for the NIKOLA TRE electric tractor unit has opened in Ulm, Germany. At the beginning of next year, the first NIKOLA TRE models produced are to go to selected customers in the USA. For Nikola, this is a milestone in implementing its strategy to become a leading global provider of zero-emission transport solutions. The share is still subject to risks but offers considerable potential if future plans are adhered to.
Anticyclical entry requires a lot of nerve. At Steinhoff, the problems are homemade. The ongoing legal proceedings and the high level of over-indebtedness are likely to make survival difficult. In contrast, both Tembo Gold and Nikola, combined with risks, have good chances of a share comeback.