Takeover fever and buy recommendation! Evotec, Nel ASA, Barrick Gold, Desert Gold

Desert Gold: Buy recommendation and increasing takeover speculation

Desert Gold appears to be an ideal takeover candidate. Gold production is scheduled to start next year on the 440 km2 site in West Africa. The project is strategically located between well-known gold companies such as B2Gold, Barrick Gold, and Endeavour Mining. Calls for acquisitions are growing louder, particularly at Barrick Gold and Newmont. Despite record-high gold prices, the two industry heavyweights have disappointed in the last quarter. A project on the verge of production – as with Desert Gold – would be an excellent fit.

Desert Gold currently has a gold resource of 1.1 million ounces. At the current share price, this is valued at just over USD 10 per ounce. The gold deposit is likely to be significantly larger since only 5 of 27 gold zones have been analyzed so far. While the PEA is currently being prepared, the desert management has provided key data for production. According to this, gold production is expected to start in the second half of 2025 in two open-pit mines with a total of approximately 200,000 ounces. Due to the efficient mining by heap leaching, production costs per ounce of gold are expected to be in the range of USD 800 to USD 1,300. To put this in perspective: At the current gold price of over USD 2,700 per ounce, the profit margin should be over 50%. Production would enable Desert Gold to explore further sections, distribute a dividend, and/or buy back its own shares. So the stock is extremely interesting even without a takeover.

This is also confirmed by the analysts at GBC Research, who recommend Desert Gold shares as a "Buy" with a target price of USD 0.31. This fair value is based on a gold price of around USD 2,300 – currently over USD 2,700. Desert Gold's shares are currently trading at USD 0.08. For more detailed research and insights, the full report is available here.

Evotec: Buckle up for November 6

Evotec presents a more complex situation than Desert Gold for any potential acquirer. After a challenging year, it is still unclear what legacy issues the biotech company has to deal with. The quarterly report could provide clarity. This is scheduled to be published on November 6. Investors and analysts anticipate that the new CEO will provide details on the Company's realignment and present target figures for the coming years. If it becomes clear that the legacy issues have been resolved and that profits will rise again, the stock may become attractive to pharmaceutical and biotech companies again. With a market capitalization of EUR 1.27 billion, Evotec could offer a compelling opportunity despite its size.

Warburg Research also believes that Evotec will present weak figures on November 6. Although the analysts continue to recommend the stock as a "Buy" with a target price of EUR 14 (the current price is just over EUR 7), a sharp drop in earnings will likely be reported for the third quarter. Sales are expected to decline slightly. In the future, Evotec wants to focus more on profitability, even if this means lower sales growth. So the stock is not a growth story for the time being.

Nel: Rescue from India?

Unfortunately, Nel is still far from profitability – despite great efforts and announcements in recent years. The latest quarterly figures have once again been disappointing. The Norwegian company cannot get a grip on its losses and the weak order intake shows that growth is also likely to weaken in the future. Even the spin-off of the subsidiary Cavendish Hydrogen has not provided the hoped-for breakthrough.

The hope for shareholders lies almost exclusively in a takeover of the former hydrogen high-flyer. After all, there is already a potential buyer. In the first half of 2024, the Norwegians announced a collaboration with India's largest private company, Reliance Industries. The partnership will give Nel access to a rapidly growing market and is intended to meet Reliance's global demand for electrolysers. Since the announcement of the collaboration, takeover rumours have repeatedly arisen, even though it is currently quiet on this front. The fact that no joint project or update on successes in India has been reported does not suggest a quick takeover either.

Desert Gold is likely the most attractive takeover candidate of the three presented. The upcoming gold production could drive the stock up even if the Company remains independent. With Evotec, investors should exercise patience. The core of the Company is attractive. Once it has freed itself from its legacy issues, the share price should rise. Otherwise, a takeover is likely sooner or later. Should Nel be taken over after all, the operational development does not suggest that a significant premium can be expected. Therefore, Nel does not currently present a compelling buy.