June 22nd, 2022 | 10:14 CEST
TUI, Barsele Minerals, Steinhoff - Which share will manage the turnaround?
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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
TUI - New problems again
TUI is still suffering from the Corona problems today. But now that the summer vacations are just around the corner, many people have been vaccinated against Corona, and most of the restrictions are gone. The tour operator's time should have come. But there are new problems. High inflation has led to significant increases in energy and food prices. As a result, people are forced to save because the next utility bill is bound to come, which means gas consumers will likely face high back payments. But even if people have booked a trip, they may face problems. The airlines are cancelling flights in rows, and there are too few staff at the airports. The result is stressed vacationers.
Fact is, in addition, that the Germans thirst more than ever for a vacation after the past Corona years. This was also shown by the figures for the 2nd quarter, which were presented on May 11. Sales in the previous year were only EUR 0.2 billion. This year, sales stand at EUR 2.1 billion. The operating loss was halved to around minus EUR 330 million. For the current year, management is planning a significantly positive operating result. In addition, a cash capital increase of EUR 425 million was carried out in May, reducing public sector financing. The shares were placed at EUR 2.62.
With the cash capital increase announcement, the share price began to decline significantly. The low was marked at EUR 1.67 on June 16. In the meantime, the share price has risen again to EUR 1.90. Nevertheless, the uncertainties remain high. In addition, the major Russian shareholder, who holds more than 30% of the shares, is still on board. Analysts are also not convinced by the share, which is reflected in 5 sell recommendations and 2 hold recommendations this year. Deutsche Bank has issued the highest price target at EUR 3.30. Currently, one should wait and see how the operating business develops.
Barsele Minerals - New drilling program started
This year has been relatively quiet for Barsele Minerals, which owns the Barsele project in northern Sweden together with Agnico Eagle. Agnico Eagle has a 55% interest in the project but may acquire an additional 15% from the Barsele project upon completion of a preliminary feasibility study. However, Agnico Eagle has recently shown little ambition to move the project forward. The Company's focus is more on North America. Last year, Barsele Minerals had the opportunity to buy Agnico Egale's shares for USD 45 million and become the sole owner. However, the deal did not materialize. In the background, negotiations for a takeover of the Agnico Eagle shares continue.
Apart from a gold discovery from last year's exploration program, there has been no news this year about the Barsele project, which hosts gold deposits of 2.4 million ounces. That changed on June 7, when the Company announced the resumption of diamond drilling. Agnico Eagle completed geophysical surveys and soil sampling by the end of May and used a data interpretation program to develop the drill plan. Approximately 15 holes are to be drilled with a total length of 3,000m. Drill targets will be tested for orogenic gold deposits and volcanogenic massive sulphides. Barsele Minerals believes that a 35,000m drill program could raise its mineral resource estimate to between 4 and 5 million ounces of gold.
Since the end of April, the stock could be seen making a major drop, which pushed the share price down significantly. At the low, the share was at CAD 0.23. On the news of the new drilling program, the donor obviously sold his remaining pieces. Since June 10, the share price has quickly risen with small turnover. Currently, the share is quoted at CAD 0.30, giving the Company a market capitalization of around CAD 39 million. This is favourable, considering that the Company still has 1.08 million ounces of gold. The upcoming drill results can be expected with excitement.
Steinhoff - Group figures on June 24
Steinhoff has been fighting for its continued existence for years. The enormous debt level threatened to crush the Group last year. Only at the last second was it possible to settle with creditors. But even today, the Company is still groaning under the weight of its liabilities. A successful turnaround after the Corona dip could open up an opportunity for shareholders. Without it, the Group will have to heavily dilute existing shareholders to service its liabilities. Due to this swelling uncertainty, the stock has not been able to gain recently.
Since Steinhoff's products are more in the discount segment, inflation could provide new customers. The Group plans to present its half-year report on June 24. The half-year figures from the Pepco subsidiary offer a foretaste. On June 9, the half-year figures were published. Revenue increased by 18.9% YOY to EUR 2.37 billion. EBITDA increased by 7.3% to EUR 347 million, and a total of 450 new stores were opened in the process. The first store in Germany opened at the end of April. However, the new stores increased net debt by EUR 171 million.
At the subsidiary Pepkor, which operates in South Africa, the first half of the year was also successful despite several problems. So we look forward to the Group's figures next Friday. The share has lost 57% at its peak since the beginning of the year. Since May 9, it has been running sideways between EUR 0.14 and EUR 0.17. Good group figures could therefore trigger an upward impulse. The most important question is: Can profit more than exceed interest expenses? If that succeeds, the outlook is much better for Steinhoff shareholders.
Of the three candidates, Barsele Minerals currently seems to have the least downside. The seller appears ready, and no one can take the shares in the gold deposit away from the Company. Second place goes to Steinhoff. Due to the good figures of the subsidiaries, we expect a good result for the Group. However, one should wait for next Friday. TUI is in last place. The Group suffered badly from Corona and is now facing the subsequent problems, which it can hardly influence itself. If the problems are solved, TUI will also look good.
Conflict of interest
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