November 5th, 2021 | 13:56 CET
TUI, Troilus Gold, Lufthansa - These are the turnaround stocks for 2022
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"[...] We can make a big increase in value with little capital. [...]" David Mason, Managing Director, CEO, NewPeak Metals Ltd.
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.
TUI - Image cultivation via climate protection
The share price of TUI, the largest tour operator in Europe, recently went sideways because the recent capital increase must first be digested. From the EUR 1.1 billion in fresh equity received, TUI has already returned EUR 375 million to KfW. The Russian investor Alexej Mordaschow, who stayed with his 32% stake even after the measure, is participating in the restructuring of the Group. Overall, these are good signs for TUI.
The Company is now breaking new ground in terms of investor favor and is implementing the issue of "sustainability" in the Group's strategic decisions. Surveys among investors show that investors today want to focus more on responsible investments with a "green footprint." For TUI, after the introduction of so-called "soft tourism" programs, this looks like additional items on the ESG agenda. What do the concrete measures look like?
Air travel generates a significant release of harmful greenhouse gas. Instead of just acquiring pollution certificates, TUI's first priority is to reduce and avoid adverse environmental impacts. The measures relate to all known set screws in the airline, cruise, hotel and associated administrative units and the travel agencies themselves. Complementary points also provide a green energy supply and strict waste avoidance in the travel domiciles.
The TUI share is currently moving in a narrow band between EUR 2.70 and EUR 2.95. If the share breaks out of the corridor, the momentum should pick up again. However, this may only happen when the operating figures brighten up.
Troilus Gold - Good news from Quebec
Canada is a top tourism destination but also a great resource country. Currently, however, the gates of the North Americans are still closed due to covid; in March 2022, it is expected to open again. While tourism came to an almost complete standstill in 2021, the economy moved forward noticeably, especially in the raw materials sector. In 2020, the gross domestic product in Canada was around USD 1.64 trillion; for 2021, a figure of around USD 1.88 trillion is forecast. That is a considerable increase of 14.6% - there aren't many states that can show that much upward growth in 2020 after the Corona Crisis.
In the state of Quebec, we come across a historic property called Troilus Gold, which is now becoming interesting again under new ownership. The precious metals project is located northeast of the Val-d'Or district and produced 2 million ounces of gold and nearly 70,000 tonnes of copper between 1996 and 2010. The new operating company is currently gearing up to build on the historic successes and is reporting recent drill results.
The latest report from October relates to the ongoing drill program at the Southwest Zone. This area is located approximately 2.5 km southwest of the former main mineralized zones and has become one of the key growth targets on the Troilus property since 2019. Mineral continuity noted between 50 and 100m intervals in the new southwest extension supports the new structurally oriented geological model and suggests a much broader system extending well beyond the existing mineral envelope. The main discoveries are near-surface and characterized by higher than average grade mineralization, a robust sign.
Drilling continues at a rate of approximately 7,000m per month. As a result of continued drilling success at Troilus, which highlights technical developments and growth in the Southwest and J zones, the mineral resource estimate is now expected to be completed in the first half of 2022 in conjunction with the pre-feasibility study.
Troilus shares had recently rallied from CAD 0.68 to CAD 0.92 and have now corrected somewhat. Overall, the reaction to the results has been very positive. With a current share count of around 196 million shares, the market capitalization has reached CAD 160 million. Troilus is an eye-catching story in the Canadian gold sector.
Lufthansa - Back to profitability in 2022?
Back to the travel business once again. Lufthansa also had a huge capital increase in connection with the repayment of state aid. The gross proceeds of the capital increase totaled EUR 2.162 billion. After completing the measures, the Company fully redeemed the drawn amount of the silent participation of the Economic Stabilization Fund of the Federal Republic of Germany (WSF) of EUR 1.5 billion. Thus, a large part of the state stabilization funds has been repaid.
Green flags are now appearing on the horizon again. In the third quarter, Lufthansa's regular business showed clear signs of recovery. Operationally, the crane line is back in the black. However, there could be another loss in the fourth quarter, as Corona restrictions are again looming over the winter. The situation is, therefore, still very unclear at present.
For the full year, the Group assumes that the adjusted operating loss will be halved compared to 2020. At that time, EBIT was minus EUR 7.4 billion. The price-to-book value reached a factor of 4 due to the high level of debt, and the equity ratio has fallen to a dramatic 3.5%. Lufthansa now urgently needs positive cash flow from its operating business to service its financial obligations.
A sword of Damocles for the share price still exists in the announced exit of the state through the sales of WSF. The capital increase has also virtually doubled the share volume. The analysts at Independent Research are relatively pessimistic and continue to rate the LH share as "Sell" with a price target of EUR 5.90. A technical rally to EUR 6.60 is currently underway - let's see how far the rise will last. Keep the stock close on your watch list.
The travel industry may stabilize somewhat, but any engagements must be considered highly speculative. At least TUI and Lufthansa have managed to raise a more considerable amount of equity. Even if a trip to Canada is not possible at the moment, portfolio diversification in Troilus Gold may pay off in the medium term.
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