October 25th, 2022 | 11:26 CEST
Varta, Barsele Minerals, Nel ASA - Hard-hitting announcements from analysts
Table of contents:
"[...] Internally we expect the resource to significantly grow the deeper we mine. [...]" Dennis Karp, Executive Chairman, Manuka Resources
Varta - Clear miss
A share price loss of more than 50% since the announcement of the crashing sales and profit warning on September 23 is still too little for analysts after the announcement of the preliminary figures for the third quarter. Thus, Hauck Aufhäuser Investment Banking changed the Varta share from "Hold" to "Sell". The price target was capped from previously EUR 39 to now EUR 24. The experts of Alster Research see the paper even a floor lower, more precisely at EUR 19. Also from Hamburg came a new investment recommendation of "Sell".
The drastic reductions are more than understandable after the disastrous quarterly figures. According to preliminary figures, sales plummeted by just under 14% in the third quarter, amounting to only EUR 194 million after EUR 224.7 million in the same quarter of the previous year. The decline in EBITDA was even more severe. While a profit of EUR 70.2 million was posted in the third quarter of 2021, a loss of minus EUR 2.5 million was now recorded. The original estimates before the share price disaster were based on revenues of between EUR 210 and 230 million, with adjusted EBITDA in the range of EUR 40 to 50 million.
According to management, the reasons for the crash were the high raw material and energy prices. In the micro battery segment, on the other hand, the decline was due to delays in customer projects. Whether these will occur in the final quarter remains to be seen. A renewed forecast for the full year is still missing.
Barsele Minerals - Insider tip from Sweden
The valuation of the Barsele project by the Royal Bank of Canada was already 6 years ago, yet it clearly shows the glaring undervaluation. At a gold price of less than USD 1,350 at that time, the experts calculated a project value of USD 375 million. If the fully diluted number of shares is added, this would mean a fair value of CAD 1.20 per share. Currently, the share price is quoted at CAD 0.37.
Since then, exploration has continued at the Barsele project, where Barsele Minerals holds 45% and major Agnico Eagle holds 55%. As a result, operator Agnico Eagle has advanced exploration and drilled approximately 158,000 meters. In total, more than 400 drill holes have been completed.
Then in 2019, Barsele released a resource estimate of 2.41 million ounces of gold prepared by an independent consultant. Since the resource estimate was prepared, an additional 93 drill holes have been created, and approximately 20,000 meters of drilling have been completed. The next target is a resource estimate in excess of 4 million ounces.
The Barsele project is located in the Västerbottens Län mining region of northern Sweden, 600km north of Stockholm and covers 34,500 hectares in the Fennoscandian Shield. The planned takeover of Agnico Eagle's share by the Canadians failed last year. Still, work continues on a complete takeover on the part of the Belcarra Group, which provides the management of Barsele Minerals.
The management of Barsele Minerals will present itself to interested investors at the International Precious Metals & Commodities Fair on November 4 and 5, 2022, in Munich.
Nel ASA - Loss widened
The Norwegian hydrogen specialist Nel ASA also delivered disappointing figures for the third quarter. EBITDA, for example, almost doubled to NOK -214 million compared with the same period last year. Surprisingly, revenues also declined at the growth stock. After NOK 229.3 million in the third quarter, sales currently amount to NOK 183 million. The Scandinavians were thus well below analysts' consensus estimates of NOK 296 million. On the other hand, order intake increased by 456% to NOK 775 million, which somewhat curbed the gloomy mood.
For US bank JPMorgan, the third-quarter figures were too weak, prompting analyst Patrick Jones to downgrade the stock slightly from NOK 10.10 to NOK 10. The investment rating was reiterated at "Underweight." US investment bank Goldman Sachs, on the other hand, counters with a reiteration of its Buy rating and a price target of NOK 17. According to analyst Zoe Clarke, the hydrogen company's sales fell short of market expectations. However, the good momentum in order intake continues.
The third quarter reporting season is underway. With Varta and Nel, two previous stock market stars already disappointing, analysts have reacted mainly with downgrades. At Barsele Minerals, on the other hand, the gap between project value and share price is widening.
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