31. March 2021 | 11:45 CET
Varta, Nevada Copper, Porsche - In the wake of the electromobility megatrend!
Demand for copper is increasing, and not only as a result of electromobility. Almost three times as much copper is used in an e-car as in a vehicle with a combustion engine. The world's largest consumer of the industrial metal is China, especially the construction sector. Chile and Peru top the list of the largest copper producers, followed by China and the United States. The metals price has been bullish over the last 12 months, showing a 75% increase. The future is bright not only for the price of copper or the shares of copper producers but also for related demand industries. We present you with three promising investments.
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ISIN: DE000A0TGJ55 , CA64128F1099 , DE000PAH0038
"[...] We knew the world was rapidly electrifying and urbanising and needing significant amounts of copper to do so. [...]" Nick Mather, CEO, SolGold PLC
VARTA AG - Long or short?
The Varta share is increasingly dividing opinions. The German flagship Company made shareholders of the first hour, who entered at the IPO in 2017, especially happy. The share price has increased six-fold since then. At the beginning of the year, the share price reached a new record level of EUR 181.20 during trading. In chart terms, a double top was formed in the area of EUR 170, calculated with a big thumb. The share is currently trading at EUR 126.50, which gives the Company a market value of EUR 5.13 billion. No matter how you look at it, the share is too expensive, and this is also the view of most analysts. Disillusionment has prevailed since mid-February at the latest when Varta issued a forecast for operating growth in the current year, figures disappointed with not even 20% - given a P/E ratio of over 30 and a price-turnover ratio of over 5.
No matter how sporty, any valuation can quickly be put into perspective if the prospects are right. In the past, the technology and innovation leader generated high profits due to its strong market position in microbatteries, which are used in wireless headphones, among other things. Slowly, however, strong Asian players are moving into position in this area. So far, this has not bothered the stock market. Another maneuver by Varta to generate more growth would also be acquisitions, as has been the case in the past.
In the Company's March 16 announcement, some market participants see the big move. Varta announced its plans to enter the market for battery cells for electric cars. A pilot line for a large-format battery cell is to be set up at the Company's headquarters, it said. Intensive talks with several car manufacturers were already underway. Since the share price did not go through the roof after this news, we suspect that skepticism about entering this highly competitive market with strong Asian giants and Tesla prevails at the moment. Ultimately, the question remains whether Varta can transfer its technology expertise in microbatteries to large-format battery cells.
NEVADA COPPER CORP - Take advantage of the share price consolidation
Nevada Copper is an emerging copper producer in the US state of Nevada. A significant asset is the Pumpkin Hollow Copper Project, which has substantial reserves and copper, gold and silver resources. In addition to ongoing high-grade production at the underground mine, an open-pit project is under development.
In recent months, there have been several unplanned shutdowns of underground production that have pushed back the Company's goal of processing 5,000 tons of ore per day. Earlier this month, Nevada Copper confirmed that it would reach that target in Q3. While the focus is clearly on ramping up the underground mine, the Company plans to explore other organic growth opportunities this year. That means further exploration of areas within the large Pumpkin Hollow project.
The significant ramp-up in production from Q3 should provide the Company with decent profits given the high copper prices. But also progress in open-pit mining or exploration of new zones will give the stock positive momentum, in our opinion. In general, the general conditions for the industrial metal and copper producers remain good. High demand from the energy and construction sectors, coupled with an improving economy, should lead to a positive share price performance. The share is currently quoted at CAD 0.165. A few weeks ago, the price was 50% higher. With a market capitalization of CAD 300 million, Nevada Copper is valued low for an emerging copper producer.
PORSCHE - Value without end
Anyone who wants to combine the themes of e-mobility, innovation, and value should take a very close look at the Porsche Automobil Holding share and quickly add the shares to their account, assuming they are not already there.
Porsche Automobil Holding is a listed holding company and holds 53.3% of the ordinary shares of VW AG. As a result, investors can invest in a colorful bouquet of the world's leading automobile manufacturers and brands such as VW, Audi, SEAT, ŠKODA, Bentley, Bugatti, Lamborghini, Porsche, Ducati, Scania and MAN. And the best part - at a whopping discount. The VW stake is worth around EUR 85 billion. Porsche Automobil Holding is valued at just EUR 28 billion. In balance sheet terms, the Company has equity of EUR 36 billion. Relatively low liquidity and the shareholder base certainly justify a discount, but it cannot be that high in the long term.
Another explanation for this discrepancy is that investors do not consider the price increase of the VW share and the Group's future plans to be sustainable. When looking at Porsche shares, there are also a few innovative yield pearls on top, as the Company holds other strategic investments along the automotive value chain in addition to its core investment VW. The share is extremely undervalued - buy.