Varta, Royal Helium, and Lufthansa with significant catch-up potential

Varta - Is this the liberating blow?

Does last week's news herald a turnaround for the crisis-ridden battery manufacturer? At least the reaction of investors - the Varta share price rose by more than 20% to EUR 11.76 after Varta announced its interest in the battery business for electric vehicles - offers the chance for a longer-term countermovement. The oversold situation in the MACD trend-following indicator and the RSI alone offers the Varta share room to close the downward gap at EUR 14.14 that opened on April 11.

According to the press release, the management is in intensive negotiations with Dr. Ing. h.c. F. Porsche AG about a participation of Porsche in the business area for large-format lithium-ion cells by means of a majority shareholding in V4Drive Battery GmbH, a 100% subsidiary of Varta AG. As part of Porsche's planned investment, VARTA's V4Drive business will initially be transferred to the newly founded V4Drive Battery GmbH. In a second step, a capital increase is planned to gain Porsche as a shareholder. However, this is still subject to a positive due diligence review and the approval of major Varta shareholders.

It remains to be seen whether this announcement will help Varta AG to get back on its feet in the long term. After all, the capital possibly raised by Porsche will not flow to the parent company but to the subsidiary V4Drive Battery GmbH. Although this is positive for the restructuring process on the one hand, it is unlikely to change much in terms of income or future cash flows. An investment in Varta is, therefore, still associated with high risks.

Royal Helium - Bottoming out and Buy signals

Strategically, the Canadian company, which has undergone the transformation from a helium explorer to an industrial gas company with the start of production at the end of 2023, is going according to plan. Royal Helium controls over 1,000,000 acres of prospective helium concessions and leases in southern Saskatchewan and southeastern Alberta. Given the current and foreseeable global undersupply of this critical and non-renewable product, Royal Helium is well-positioned to become a leading North American producer of this increasingly valuable commodity.

Nevertheless, Royal Helium shares have suffered from the general correction in the commodity markets and a corporate action that raised CAD 6 million at CAD 0.09 per share. However, the share has been bottoming out at this level since the end of April. Both the MACD and RSI formed positive divergences for a sustained trend reversal and have not confirmed the recent lows for weeks. Both indicators have provided a "Buy" signal. In addition, the price established itself above the EMA 50. The next target should be the EMA 200, which currently stands at CAD 0.165.

In recent weeks, the Canadians have celebrated fundamental successes regarding the Steveville production plant, which should further boost the Royal Helium share. In May, the plant reached a significant milestone with the delivery of the tenth and eleventh helium trailers and an increase in the production rate to 50% of its total capacity, with peaks of up to 75% being achieved at times.

The expansion of production capacity led to a doubling of monthly sales figures to four trailers. The Company is well on the way to reaching its full production capacity, with seven to eight trailers being produced each month.

Lufthansa - The crane is flying again

With a significant weekly gain of over 6% to EUR 6.03, the airline was one of the top performers in the leading German DAX index last week. According to analysts at the major Swiss bank UBS, the Lufthansa share still has plenty of room for improvement.

In a published sector outlook, analyst Jarrod Castle set a target price of EUR 12.30, representing a price potential of over 100%. The quarterly figures are likely to be as mixed as in the first quarter, but the focus will be on the outlook for summer business. Due to the low outlook, there is a limited risk here.

In contrast, the US analyst firm Bernstein Research was much more pessimistic and reiterated its "Market Perform" rating with a target price of EUR 7.

Meanwhile, the Company's CEOs commented on the complete takeover of the Italian state-owned airline ITA Airways in a conference call. CEO Carsten Spohr considers this step to be realistic after 2027. By 2025, a synergy achievement of 20 to 30% is expected, which should increase to 70 to 80% by 2026 to 2027. Spohr also emphasized that the cost structure of ITA will continue to improve and that the takeover will anchor Lufthansa even more firmly in Europe. This will also have positive effects for Lufthansa's investors.

Michael Niggemann, another member of the Lufthansa Executive Board, emphasized that ITA, as a new airline and thus virtually a start-up, operates more efficiently than the other hub airlines of the Lufthansa Group. The personnel costs are around 20% lower than in Germany, while productivity is around 20% higher.

The Varta share celebrated a price firework after the announcement that Porsche is considering acquiring a stake in the subsidiary V4Drive Battery. Analysts at UBS believe that Lufthansa has a share price potential of over 100%. The Royal Helium share could be on the verge of bottoming out.