August 31st, 2022 | 12:59 CEST
TUI, Viva Gold, Steinhoff - Bombed-out shares with doubling potential
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TUI - Strong third quarter
TUI operates in a business segment that lost its business virtually overnight with the lockdown due to the Corona pandemic. For two years, the Group generated hardly any revenue. This summer, everything was supposed to be different and, in fact, the third quarter figures looked much better than a year ago. Sales increased by over 582% to around EUR 4.4 billion. EBIT rose significantly from EUR -630.5 million in 2021 to EUR -42.5 million. Although things are looking up, the Group is not out of the woods yet.
The question is how it will continue. The management did not want to shake the forecasts for the current year, and it is expected that the adjusted EBIT for the fiscal year will be significantly positive. Nevertheless, uncertainties remain. What will happen with the Corona measures in the fall? If inflation rises, people will be forced to save. That could include giving up their vacations. At the same time, energy costs are rising worldwide, which could significantly increase the cost of vacation travel. We will also have to wait and see whether the problems at the airports are resolved in the coming year. The Company has no influence here.
If the lockdown does not materialize in the fall of this year, that would be good news for the Group. The momentum from the summer could then be carried over. If the operating business is not slowed down again, a doubling of the share price is quite possible. The share has already formed a slight upward trend, and as long as there are no closing prices below EUR 1.47, this trend will remain intact. At the same time, a double bottom has been formed. From here, a test of EUR 1.87 could be imminent. Currently, one pays EUR 1.55 for a share certificate.
Viva Gold - Results from the May drill program
Rising interest rates and the strength of the US dollar put the gold price under pressure. While the gold price was still above USD 2,000 in mid-April, it fell back to USD 1,700 at times. Last Friday, the gold price slid again as described but was able to defend the important mark of USD 1,740 and is quoted at USD 1745.90. The consolidation in the gold price has also hit the shares of the Canadian gold explorer Viva Gold. The low at CAD 0.08 of December 2021 was recently tested and defended. If a test of the high at CAD 0.155 now follows, an almost doubling beckons.
Viva Gold is exploring and developing its Tonopah Gold Project, located within the Walker Lane Gold Trend in western Nevada. The property, which is 100% owned by Viva Gold, is located near Kinross' Round Mountain Mine. The current mineral resource estimate is 394,000 ounces of gold measured and indicated. Inferred adds another 206,000 ounces. Since the purchase, the Company has increased its mineral resource every year. This year the drilling program started on May 10, and on August 22, the Company presented the results. A total of 6 drill holes were drilled for a total length of 1,307m. Gold and silver were encountered in 4 of the 6 holes. At its peak, the gold value was 19.9 g/t and silver was 25.4 g/t.
In addition to the discoveries, geotechnical information was collected to assist in mine planning. A 3,000m RC drilling program is scheduled to begin in September. A preliminary economic assessment (PEA) assuming a gold price of USD 1,400 has been positive and is already available. If the mine is built and the gold price is USD 1,700, the investment would have paid for itself within 2 years. The next step is the preparation of a pre-feasibility study. The upcoming drilling is to gather the information to prepare the geotechnical research that must be included in the pre-feasibility study. The current market capitalization is only CAD 8.2 million. Assuming a value of USD 100 per ounce, the value of the Company should be around CAD 51 million. Here one can see the potential.
Steinhoff - Operationally, things are going well - only the debts are depressing
Steinhoff has pulled off an absolute thriller in the restructuring battle. An agreement with creditors was reached literally at the last second. In addition, there were hard times for the retail sector due to Corona. But the Group is on the right track. At least operationally, because the debts of around EUR 10 billion are still pressing. The 10% interest, or EUR 1 billion, is due every year. Management is therefore working on restructuring the debt. Given the large number of creditors, this is also proving difficult due to the rising interest rate environment.
The operating business developed excellently for the quarter ending June 30. Sales climbed 12% to around EUR 7.8 billion. The US subsidiary Mattress Firm also increased its sales by 10% to around EUR 2.9 billion. It was not clear from the report how high the Group's margin currently is. However, it can be stated that all business units were able to increase, above all, Pepco with a plus of 18%.
Where do we go from here? Shareholders were disappointed that there was no positive news on debt restructuring. If no agreement can be reached with the creditors, payment would probably have to be made in shares, which would mean enormous dilution for existing shareholders. However, if management is successful again and achieves a breakthrough, the share price should at least double. The share has been trending sideways since May. Currently, the stock stands at EUR 0.1416. Before investing, one should wait for the right news to push the share price up.
Each of the shares has the potential to double. But each title needs special impulses to get out of the starting blocks. TUI needs regular times without lockdowns. Then the turnaround should succeed. Viva Gold is fundamentally undervalued. A rising gold price could provide a boost. Steinhoff, on the other hand, is groaning under its debts. Only when a solution is found here can the share price rise.
Conflict of interest
Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.
In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.
For this reason, there is a concrete conflict of interest.
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