May 24th, 2023 | 07:40 CEST
TUI, Manuka Resources, PayPal - Which turnaround candidate has the most potential?
Table of contents:
"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
TUI - Facing good summer business
TUI, one of the leading tourism companies, has long suffered from the pandemic. After the half-year figures, the group expects a strong summer season in 2023. The figures for the 2nd quarter climb significantly upwards with 2.4 million TUI guests, and sales and earnings have improved considerably: bookings for this summer are currently 13% above last year and thus almost at the pre-Corona level. The Company is thus well on its way to achieving profitable growth and a significantly more positive result in 2023.
In Q2 2023, TUI Group generated a turnover of EUR 3.2 billion, up from EUR 2.1 billion the previous year. Underlying EBIT (earnings before interest and taxes) improved by EUR 88 million to EUR -242 million; excluding the one-off effects of the prior year, it improved by EUR 181 million. The Holiday Experiences segment, which comprises hotels, cruises and activities, is particularly strong. It achieved an adjusted EBIT of EUR 78 million, compared to only EUR 23.7 million in 2022, and is thus above the level of 2019. As the 2nd quarter is traditionally the weakest, further progress can be expected going forward.
With the completed capital increase, TUI has fully repaid the Economic Stabilisation Fund (ESF) subsidies and reduced net debt to EUR 3.1 billion. Following the figures, analysts at Bernstein and UBS recommended the share as Hold with a price target of EUR 6.44. Jeffries advised selling. This has not stopped DWS from increasing its stake to over 3%. The share is currently available for EUR 6.21.
Manuka Resources - Gold production in the starting blocks
Manuka Resources, an Australian mining and exploration company, deserves more attention from investors due to its lucrative projects in precious metals and vanadium. One project is the Mt Boppy mine, a historically rich gold mine in Australia. The Company plans to restart production and produce around 25,000 ounces of gold annually over the next three years. The recent rise in the gold price makes production even more attractive now. In addition, there is the Wonawinta Silver Project in the Cobar Basin, Australia. The estimated silver reserves at this site amount to up to 51 million ounces. The material from the projects can be processed in the Company's mill.
The South Taranaki Bight vanadium project in New Zealand is a major undertaking with the aim of serving up to 15% of the global vanadium market in the coming years. USD 50 million has already been invested in the project, and a feasibility study is in place. With a mining licence that allows for an annual production of 5 million tonnes of vanadium, the Company is strategically well-positioned to benefit from the growing demand for this important raw material. Battery manufacturers are increasingly using vanadium to store more energy and extend their lifespan. The vanadium redox flow batteries can be recharged up to 20,000 times.
This makes them the ideal power storage device for renewable energies. Varta's recent sales figures show that the market is growing strongly. While there were slumps everywhere, the electricity storage segment grew by a factor of 2.7. So far, the share price has not been able to profit from the increased gold price, and the vanadium project has not been sufficiently appreciated. The share is quoted at AUD 0.06 and thus only has a market capitalization of around AUD 34 million. As soon as gold production starts again, things should start to look up.
PayPal - Prospects are improving
PayPal's share price has been in decline since July 2021 and does not reflect the Company's overall performance. Most recently, the outlook for Q2 earnings per share and the downgrade of the stock by Credit Suisse weighed on the share. Taking a closer look at the quarterly numbers, the Company has delivered impressive year-on-year growth with 24.7% revenue growth and raised its full-year earnings forecast to USD 4.95, indicating strong growth.
Despite intense competition in the Fintech market, PayPal has taken strategic steps to diversify its payments platform by acquiring Braintree. This move has allowed PayPal to position itself as a service provider for digital wallets and e-commerce payment platforms. This is now paying off, as Braintree has seen significant growth in overall payment volume and transaction revenue. Most recently, Apple Pay has also been connected to PayPal.
PayPal's long-term prospects are accordingly positive. If the earnings targets of USD 4.95 are achieved, the price-earnings ratio will be 12.7, which is considered favourable for a Fintech stock. The calculations are based on the current share price of USD 63.10. In the past 90 days, 47 analysts have scrutinized the share - 33 recommend buying, and 14 recommend holding. There were no sell recommendations. The price targets were between USD 58 and USD 200. The average target was USD 98.20.
All three companies presented here have lost a lot of ground in the past year. But they all have one thing in common - the outlook is positive. TUI has already improved its result and expects a very good summer business. Manuka Resources is about to resume gold production and has a vanadium project that can cover 15% of global demand. PayPal was certainly too expensive 2 years ago, but now the price-earnings ratio looks good.
Conflict of interest
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