July 28th, 2021 | 13:24 CEST
Tencent, Prosus, Troilus Gold, Baidu - The big China slump!
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"[...] 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
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Tencent and Prosus - China's regulators get serious
When China's regulators aim for an industry, they usually regulate with the proverbial sledgehammer: after fintech companies and online driving service providers, it is now hitting the booming tutoring market. Experts speak of a downright execution of an entire industry. On Sunday, China's state media published the rules that will apply from now on: in the future, tutoring for students during vacations and weekends will be forbidden on principle! But: Beijing's plans to transform the privately organized providers of e-learning services into non-profit institutions is the last thing shareholders want to hear now.
Chinese technology stocks that deal with major digitization issues have come under massive pressure in this mix. Shares of online gaming and social media giant Tencent Holdings have fallen massively out of favor with investors. The sell-off pushed the market value to about USD 540 billion - meaning the Company has lost nearly USD 400 billion in market capitalization since its mid-February peak.
Prosus NV also took a hit. The Dutch holding company is one of the world's largest technology investors and is part of the South African Company Naspers Ltd. The group focuses on developing major Internet companies in online classified ads, payments, fintech, travel and food delivery. Its best-known investments include Chinese internet company Tencent, Russian email provider Mail.ru, and international food ordering and delivery service Delivery Hero.
Both Tencent and Prosus are currently trading about 40% and 25% below their February highs, respectively. Those who do not want to dismiss the Asian growth story altogether are betting that the investment giants will invest in exciting new digitization models, making their focus less vulnerable to regulators. Collect!
Troilus Gold - Consistently good news from Quebec
Far from contentious Chinese market intervention, an interesting precious metals project is developing in the middle of Quebec, owned since 2017 by Canada's Troilus Gold Corp. The former Troilus mine, located northeast of the Val-d'Or district, produced 2 million ounces of gold and nearly 70,000 tonnes of copper between 1996 and 2010. An active mine is expected to be operating here again in the coming years.
At mid-year, Troilus Gold was able to increase its investor base significantly. After closing a private placement with the government of Québec, the Company is pleased to announce proceeds of CAD 11.15 million. The pricing terms of the placement of CAD 1.10 are in line with the recent "bought deal" placement with prospectus, also attached are half warrants each at a subscription price of CAD 1.50. The Company intends to use the net proceeds from the placement for further engineering design and feasibility studies at its Troilus Gold Project and as working capital for general corporate purposes. With these steps and the government's positive vote, Troilus is also tapping into the possibility of a long-term strategic financing framework for its projects.
The Minister of Finance, Economy and Innovation, Eric Girard, has cited the mining potential in the Nord-du-Québec region as the key to a sustainable recovery of the Québec economy. Of course, with that comes the expectation for new job creation. It all sounds like a well-rounded proposition. Led by an experienced team with a proven track record in mine development, Troilus is thus well on its way to becoming a flagship project in North America.
The new share count is 185.8 million shares, representing a market capitalization of approximately CAD 156 million. After the recent price correction, the project offers itself as an entry point, as Troilus Gold is already one step further than many other junior miners.
Baidu - Taken into custody
Back to China again. The popular Baidu stock has also been hit by the regulator virus, despite cooperating with the authorities. The company, founded in 2000, is based in Beijing in the People's Republic of China and has repeatedly come under public criticism from liberal Internet users for behaving in a very state-compliant manner.
Baidu operates in many areas and is similar to a NASDAQ 100 company in its setup. Its main business is operating the search engine of the same name, which allows users to scan for maps, images, videos or news. In addition, the Company offers community sites such as Baidu PostBar, a query-based, searchable online community platform, or Baidu Knows for interactive knowledge sharing, as well as a user-generated online encyclopedia.
That Baidu has a formidable search engine in China is well known, as are the Company's ambitions to play a role in artificial intelligence, the cloud and autonomous driving. With the deployment of its first robotaxis in major Chinese cities so far, the Chinese tech company continues to hone its commercial ride-hailing business. Within a few years, it plans to expand its fleet to 1,000 vehicles in 30 major cities. Let's see if there will soon be public objections to this business as well.
We find it surprising that Baidu's stock has now smoothly halved in 5 months, mainly because its valuation has fallen from a price-to-book of 3 to 1.5 in the same move. For a rapidly growing technology stock, this is cheap. Buy!
The stocks under review here offer opportunities for a rebound in Chinese tech stocks in light of perhaps a softer stance by the Chinese government. Troilus Gold will continue to move its property forward regardless of what happens in China; here, the rising gold price could become a trigger.
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