August 17th, 2021 | 11:32 CEST
Varta, Nordex, Saturn Oil & Gas - Buy or Sell?
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"[...] 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
Saturn Oil & Gas - GBC sees 200% price potential after takeover
GBC Research sees significant price potential with the share of Saturn Oil & Gas Inc. (ISIN: CA80412L1076). After positive company news from the oil producer, the analysts have confirmed their price target of CAD 0.46. Currently, the share is quoted at around CAD 0.15. Saturn Oil & Gas Inc. has successfully completed the acquisition of Oxbow assets in the province of Saskatchewan. The Company has thus succeeded in jumping into a whole new league. Daily oil and gas production is up by more than 2,000%. As a result, Saturn Oil & Gas' annual sales should climb to around CAD 160 million and profits to CAD 60 million. From GBC's point of view, the acquisition strengthens Saturn's financial and operational power. It said the area's economics are secure, with about 70% of projected production secured for next year, 60% for year two, and about 50% for years three and four. The new size offers more flexibility to adapt to changing market conditions while improving financial capacity. Analysts expect net income to catapult from CAD -3.3 million in 2020 to CAD 66.30 million in 2023 - all based on current resources. That would allow the Company to ultimately pay off the debt incurred for the acquisition in just two years.
"The completion of this transformative acquisition has truly taken Saturn to new heights and put our brand on the map at a very attractive purchase price," said John Jeffrey, CEO of Saturn. "We have added high-quality light oil assets to our portfolio, which now has a robust long-term inventory of future development drilling targets that are very economical at current commodity prices. The Saturn team is excited about the opportunity to generate compelling returns for our shareholders while helping to meet the world's growing energy needs in an environmentally responsible manner under stringent Canadian regulations."
Nordex - Commodity and logistics markets causing problems
Investment bank Jefferies left its rating on Nordex (ISIN: DE000A0D6554) at "buy" with a price target of EUR 25 after the quarterly figures. The improvements in profitability, balance sheet and order intake were positive. However, the analysts have reduced their earnings estimates for the wind turbine manufacturer despite the good figures. They noted there is currently short-term price pressure. The wind energy group is clearly feeling the effects of the pandemic through distortions in the raw materials and logistics markets. In the first half of 2021, Nordex increased its sales from EUR 2.0 billion to EUR 2.7 billion. On an EBITDA basis, the Hamburg-based Company generated a profit of EUR 68.4 million, compared with a loss of EUR 70.8 million in the same period last year. The net loss of EUR 180 million in H1 2020 was improved but remained significantly red at EUR 64 million. Order intake increased from EUR 1.81 billion to EUR 1.96 billion. At the end of June, the order backlog was EUR 7.7 billion, EUR 400 million less than the same date last year. No changes were made to the forecast for 2021: Sales are expected to be between EUR 4.7 billion and EUR 5.2 billion. A positive EBITDA margin of between 4.0 and 5.5% is to be achieved.
Varta - Big disappointment
The biggest disappointment of the past stock market week was delivered by Varta (ISIN: DE000A0TGJ55). The battery group presented the eagerly awaited half-year figures and failed to meet expectations. In the first six months of 2021, Varta increased sales by only 1.8% to EUR 397.6 million. EBITDA was nevertheless increased by around 10% to EUR 112.3 million. Net profit increased from EUR 39.9 million to EUR 45.6 million in the first six months of 2021. "We have announced that in 2021 we will once again increase last year's very good operating result and achieve an EBITDA margin of around 30%. After the first six months, we can say: our plans are fully on track," Varta CEO Herbert Schein commented on the figures. Thus, the speculations on a forecast increase were disappointed. After the Varta share had already lost double digits on Friday, it continued its downward slide on Monday. Analysts also lowered their thumbs. Investment bank Kepler Cheuvreux has renewed its "Reduce" rating for the Varta share. Whether the targets for 2021 will be achieved depends almost exclusively on the market launch of the Apple Airpods 3. Their presentation is expected for September, and Varta should again be the battery supplier for Apple's bestseller. Kepler Cheuvreux's price target for Varta shares remains at EUR 105, below the current level.
Saturn Oil & Gas Inc. has set the course for new sales and profit dimensions with the acquisition. Nordex is feeling the distortions in the commodity and logistics markets. At Varta, it is likely to take some time for investors to digest the disappointing quarterly figures.
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