November 1st, 2022 | 13:37 CET
These valuation firecrackers will amaze you! Porsche AG, Barsele Minerals, BASF
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Porsche AG: How far does the IPO hype carry?
The hype was great when Porsche's shares went public a few weeks ago. No wonder - the IPO was the largest of its kind in a long time. In the current market environment, getting off to a successful start on the trading floor was certainly no easy task. This is probably one of the reasons why Volkswagen and Porsche Automobil Holding SE brought several partner banks on board to support the IPO. These banks probably also invested a lot of capital in the new share. However, after the share price lost some ground in the first few days of trading, Porsche AG is now outrunning everyone, including its parent companies. The fact that Volkswagen holds 75% of the new Porsche company is hardly reflected in the share price. The fact that Volkswagen also has its own brands on offer is not important. The Porsche SE share is also barely moving. The Company holds 12.5% of the "new" Porsche share and a whopping 31.9% of Volkswagen.
So how can the sole price increase of the new Porsche share during the past few days be explained? The new Porsche share is considered to be a "purebred" sports car share, despite the many interdependencies between Porsche and Volkswagen. Many investors will likely find Dr Ing. Porsche AG simply more attractive - even though the Company is valued at around EUR 94 billion. Although the brand, margin and prospects are right at Porsche AG, the stock probably still has to find its real value. The strong discrepancy between Porsche AG and the two parent companies is striking. The share has reached a certain fall height. One could enter in a bull market, but today one should be warned.
Barsele Minerals: Super project, share in a deep sleep
The polar opposite of Porsche AG is the share of Barsele Minerals. The Canadian company stands for the Barsele Gold project in Sweden. This project is being developed together with the producer Agnico Eagle. For many months, Barsele Minerals has been trying to dissolve the joint venture with Agnico Eagle. The reason: Agnico is setting its priorities in Canada. Although Agnico continues to inject capital into the exploration of the Barsele project, Barsele wants to make a big splash. "We are convinced we could exploit great potential with a drilling program of around 35,000 meters. But to finance this, we need a decision," said Barsele Minerals CEO Gary Cope last December.
Since then, the joint venture around the Barsele project has been developing according to plan. In the summer, Barsele also completed a small capital increase in order to remain able to act. The capital measure was expanded due to strong demand. At Barsele, the Company is convinced that it has a multi-million ounce project in its portfolio: "If we very conservatively assume 2.4 million ounces, we have a valuation of CAD 450 million. Since we only hold 45% of the project so far, the amount is halved, but still, the upside becomes obvious when measured against the current valuation of CAD 60 million," Cope said almost a year ago. Today, the stock is valued at just under CAD 50 million. If the joint venture can be dissolved and exploration expanded, the market should reward the approaching production. Currently, Barsele is in a deep sleep. Measured against the expected potential of the Barsele property, the valuation is likely too low.
BASF: Too much uncertainty
Analysts are also torn when it comes to BASF shares. Recently, some observers raised their rating for the share. Only UBS takes a critical view and rates the share as "Sell". The recent quarterly figures were better than expected, so analysts assume that the worst could already be priced in for BASF. At the same time, reports of a power struggle in BASF's upper management are making the rounds. The impending job cuts at the Company's main plant in Ludwigshafen are also causing a stir. On the one hand, austerity programs are always positive, but it remains to be seen to what extent the strategy, which relies heavily on China and other emerging markets, will be successful. BASF is moderately valued with a P/E ratio of 10. However, this is offset by uncertainty. The share remains a hot potato.
If it turns out in the coming months that the crisis will be less drastic, opportunities could arise for stocks such as BASF - after all, the market has already anticipated much of the negative news. The stark opposite of this is Porsche AG - here, there is still a lot of IPO euphoria in the share price. The market's assessment of the situation at Barsele Minerals is even more negative than that of BASF. The deadlock with joint venture partner Agnico Eagle is a burden. On the other hand, a certain persistence of Agnico Eagle in negotiations around the dissolution of the joint venture also speaks in favor of the Barsele project - the raw material producer does not want to sell below value. Investors with patience and staying power can take a closer look at the Barsele share.
Conflict of interest
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