March 21st, 2022 | 10:08 CET
TUI, Desert Gold, Steinhoff - Cheap Shares, bargain hunters watch out
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"[...] We are convinced that we could already leverage significant potential with a drilling program of around 35,000 meters. However, to finance this, we need a decision. Fortunately, there are already interested parties who can imagine advancing Barsele together with us. [...]" Gary Cope, President and CEO, Barsele Minerals
TUI - Many uncertainties
The Corona measures are to end slowly but surely as of now. That will allow the tourism industry to breathe a sigh of relief, as the pandemic has hit the industry hard over the last 2 years. The thirst for travel is great, so TUI assumes good summer business. But there is a new problem due to the Ukraine crisis. On the one hand, travel to these countries is largely canceled, and on the other, the conflict is causing the price of oil to rise, making air travel more expensive, which could ultimately backfire on TUI.
Then there is the main shareholder, Russian billionaire Mordashov, who holds 34% of all TUI shares. These have now gone to Russia to Severgroup and Ondero Limited. The latter got 29.9% and is run by Mordashov's wife. The question is whether customers will reject TUI for a Russian majority shareholder and prefer to book elsewhere. However, the shareholder received feedback from the tour operator that "so far no fundamental changes in booking behavior" have been seen. Therefore, there is no need to worry for the time being.
Since TUI recently issued a job guarantee to its employees until the end of 2023, things seem to be going better again operationally and management is positive about the future. Nevertheless, Corona is not over, and one should remain vigilant about how Corona events unfold, as TUI's stock will react negatively accordingly. The share was pulled down to EUR 2.02 by March 7, but a countermovement has set in that has brought the value back up to EUR 2.80. If a jump above the EUR 3.00 mark succeeds, a test of EUR 3.50 is likely.
Desert Gold - Confirmed gold deposits and new discoveries
The breakout of the gold price to over USD 2000 at the beginning of March is very positive for gold companies. Chart-wise, gold has consolidated to the breakout edge but has bounced there for now. So the market segment looks very positive for Desert Gold, a Canadian explorer active in Africa, specifically in Mali. The Company owns the 440 sq km SMSZ project that includes 43 km of the Senegal-Mali shear zone and an 11 km extension of the main Transcendental shear zone. Several producing gold mines, including Barrick Gold, border the property to the north and south.
On January 17, the Company announced an initial mineral resource estimate, limited to 5 deposits, in accordance with NI 43-101 standards. The measured and indicated mineral resource is 310,300 ounces of gold, and the inferred resource includes an additional 769,200 ounces of gold. That marks the achievement of the first milestone of 1 million ounces of gold, with only 5 zones. The project has 19 additional zones. On March 3, the Company announced exploration potential for the Mogoyafara South zone, suggesting another 413,000 ounces of gold there. At least 5 magnetic highs were determined with a magnetic soil survey, which offers a high chance of finding gold deposits there.
The 2022 drilling program is already underway and foresees approximately 20,000m. There were first successes in the Gourbassi North West Zone in January, where up to 2.75 g/t gold was found. For more information, please see the analysis on researchanalyst.com. Since December, the stock has been trending sideways between CAD 0.105 and CAD 0.155. Currently, it is trading at CAD 0.125. That is far below the high of CAD 0.23 in 2021, even though there are secured resources, new gold deposits and a rising gold price. The market capitalization of CAD 18.8 million is well below the value of measured mineral resources.
Steinhoff - Must reduce debt
Retail has also suffered from the Corona pandemic, although not as much as the tourism industry. The masking requirement is to be dropped so the situation in the retail sector could ease and more people are likely to flock to the stores again. The Steinhoff retail group, which was on the verge of bankruptcy for a long time, would also benefit. A settlement with creditors was reached at the last minute; otherwise, the lights would have gone out. At present, the debt level amounts to EUR 9.7 billion.
The Group is now in the third phase of the restructuring plan. Further debts have to be repaid. It should be possible to tell from the quarterly figures whether this will work, but the preliminary report for the fourth quarter is missing the profit. Sales increased by 10% to EUR 2.83 billion. Steinhoff's US investment Mattress Firm contributed EUR 987 million to this, and there are rumors that the Company would like to be listed on the stock exchange. It is, therefore, fitting that things are looking up for the Company.
Nevertheless, the overall situation remains delicate. By the end of 2023, at the latest, the Company will have to sit down with its creditors again. If it does not find other solutions, it will amount to a dilution of existing shareholders, and the creditors will receive shares. So the Company is not out of the woods yet. The share, which was still at EUR 0.325 in mid-January, is feeling the effects of this uncertainty and fell to EUR 0.16. The share is currently trading at EUR 0.214 and remains a hot potato.
These three examples alone show how different the conditions are. Desert Gold appears to be the most valuable because the currently existing gold deposits clearly exceed the Company's value on the stock market. TUI comes in second place. On the one hand, Corona plays a major role there, but on the other hand, the Company cannot get rid of its main Russian shareholder, which could have a negative impact on customer behavior in the future. Nevertheless, the Company has an ace up its sleeve, and that is the German government. It has helped before and will probably do so again. The Steinhoff share still has too many imponderables. It could be diluted or go bankrupt in the end - it is only for hard-core gamblers.
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