May 31st, 2023 | 08:00 CEST
Up to 200% price potential: TUI, BYD, Shell, Saturn Oil + Gas
Table of contents:
"[...] 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
Shell: Higher dividend?
For a year now, the Shell share has been in a sideways trend between EUR 24 and EUR 28. But operationally, things are going well despite lower oil prices. Adjusted quarterly profit of over USD 9.6 billion was above consensus estimates. From the Canadian RBC's point of view, the share price is, therefore, too low. For them, the shares of the British oil company have "Outperform" potential. After all, their target price is GBP 29. Earnings and dividends are at record levels. Jefferies also sees Shell on a good path and recommends buying the shares. The new CEO has to maintain cost discipline and focus on high-margin businesses. Then the dividend should also continue to rise. Jefferies' target price for Shell shares is GBP 30.
Saturn Oil & Gas: Analysts see a 200% share price opportunity
Analysts see even more upside potential for Saturn Oil & Gas. From Canaccord Genuity's point of view, the fair value of the Canadian oil producer's shares is CAD 6.50. The stock is currently trading at around GBP 2. The security is currently trading at around CAD 2.20. Due to the price potential of around 200%, the recommendation is unsurprisingly "Buy". The results of the first quarter were in line with expectations. The development in the second quarter is now important, as the Ridgeback properties acquired in Q1 will be taken into account here for the first time. Since other oil producers are valued almost twice as high as Saturn Oil & Gas, a revaluation is only a matter of time. In Q1 2023, the Canadians expanded daily production volumes by 140% YOY to 17,783 boe. Adjusted EBITDA even increased by 332% to CAD 70.4 million. According to the industry portal boereport.com https://boereport.com/2023/05/25/boe-intel-q1-earnings-season-report-card-part-1/, Saturn Oil & Gas is thus the fastest-growing oil producer in Canada.
And as already mentioned, the production volume is expected to climb significantly again in the second quarter of 2023. The Ridgeback properties should increase daily production to around 30,000 boe. Profits should also increase further then, illustrating the almost ridiculously cheap valuation. For context: in the first quarter alone, Saturn Oil & Gas generated earnings per share of CAD 1.58, and the second quarter is almost certain to be no worse. But the share price is currently at CAD 2.20. At the latest, when the Company pays a dividend. This is only possible once certain debt used to finance acquisitions has been repaid. Given the current cash flow, this should happen soon. With a solid dividend announcement, the lid should finally fly off the share price.
BYD: "Very, very strong."
BYD shareholders are also waiting for a breakout from the sideways trend. The share has been trading below EUR 30 since September 2022. Like in February 2023, the latest attempt to break out above this level did not work. Yet the Company is operating at full throttle. It is already the market leader in its home market of China. In Europe, market entry is underway - for example, there is a big cooperation with the car rental company Sixt - and the Company also has big plans in Asia. There is a sensation in Indonesia: the largest taxi company there - PT Blue Bird - will order the majority of its electric vehicle fleet from BYD. The E6 and T3 models will make up 80% of the fleet in the future. Blue Bird manager Sigit Priawan Djokosoetono: "We use a lot of imported BYD models because the price is favorable for us in Indonesia."
In any case, the competition has long been on BYD's radar. Tesla boss Elon Musk recently said: "Nowadays, their cars are very competitive." And for Volkswagen boss Oliver Blume, BYD is also "very, very strong". Incidentally, BMW, a German carmaker, will also make its move in Indonesia. However, according to a report by "Bloomberg", Blue Bird only relies on the Bavarian carmaker for rental cars.
The TUI share should be trending-friendly: The summer season, which is vital for the tourism group, is starting, and the turbulent capital increase has been completed. Nevertheless, the share is not moving and is trading around EUR 6. Bernstein Research sees little upside potential. The analysts have a price target of EUR 6.80 and a rating of "Market-Perform". As a reminder, the share was trading at over EUR 15 at the beginning of March. In the analysts' view, TUI is an impressive travel company with a restrictive business model. Operationally, there are no major issues, and the balance sheet has been stabilized. But the valuation of EUR 3 billion is also appropriate. The extension of liabilities should also contribute to the stabilization of the balance sheet. According to the tourism group, it was able to extend existing loans with a total volume of EUR 2.7 billion. The new term now extends until July 2026.
If Saturn Oil & Gas continues the positive development of the first quarter in the further course of the year, it can only be a matter of time before the cork pops on the share. One trigger could be the start of dividend payments. With BYD, too, "only" patience is required until the share reacts to the positive operating development. TUI remains opaque and, thus, a gambler's stock for the time being.
Conflict of interest
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