August 31st, 2023 | 08:10 CEST
Warning against the Green Illusion! SMA Solar, Saturn Oil + Gas, JinkoSolar
About one-fifth of Germany's gross final energy consumption comes from renewable energies - and the trend is rising. Renewables are also on the rise in the US and China. From an investor's point of view, this naturally suggests itself as an investment. Renewable energy is climate-neutral, cost-effective, and politically supported. Despite these apparent advantages, some pitfalls still surround this presumed self-propelling sector. We shed light on why sustainably-minded investors do not need to shy away from fossil energy sources and why certain challenges exist within the Green Illusion.
time to read: 3 minutes
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Author:
Nico Popp
ISIN:
SMA SOLAR TECHNOL.AG | DE000A0DJ6J9 , Saturn Oil + Gas Inc. | CA80412L8832 , JINKOSOLAR ADR/4 DL-00002 | US47759T1007
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
Author
Nico Popp
At home in Southern Germany, the passionate stock exchange expert has been accompanying the capital markets for about twenty years. With a soft spot for smaller companies, he is constantly on the lookout for exciting investment stories.
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SMA Solar: Is the premium manufacturer digging its own grave?
The share of SMA Solar has risen by nearly 50% in the past year. The German inverter manufacturer is clearly benefiting from the energy crisis and the associated turnaround. German investors, in particular, are likely to have snapped up shares against the backdrop of rising gas prices and the public discourse around it. SMA Solar is one of the darlings of German solar installers. Good quality, solid documentation, and service are still winning factors for German homeowners today. But inflation has also left its mark in Germany. When it comes to implementing a PV project, more and more customers are turning to red pens in the face of high labor costs. The victims of this trend are often brand manufacturers from Germany - Chinese technology is more affordable.
Now, Handelsblatt recently reported that SMA Solar is considering a plant in the US in order to tap into subsidies there in the course of the Inflation Reduction Act. This argumentation sounds a bit like an investment in a shady film fund to save taxes. Although subsidies make an investment decision easier for SMA Solar, added to the fact that products produced within the US have advantages on the US market, the risk of overcapacity remains. Already today, SMA Solar belongs to the premium segment with its inverters. Competition from Asia and companies like Enphase, which follows a decentralized approach in inverter technology, is already fierce.
Prospects at JinkoSolar rather bleak - Hope beyond the beaten track?
The upward trend established by SMA Solar just over a year ago is in serious jeopardy. Clouds are also gathering on the horizon for competitors like JinkoSolar. The share went on a roller coaster ride last week but is still deep in the downtrend - the value lost about 50% on a one-year horizon. There are no signs of a comeback. In contrast, the share of Saturn Oil & Gas shows more signs of an imminent recovery. The Canadian oil producer might not be at the top of sustainably-minded investors' lists. However, Saturn Oil & Gas can score points in this area in particular and has already renaturalized former production sites and campaigned for more diversity in Canada's oil industry. Above all, Saturn Oil & Gas convinces with its figures.
Saturn Oil & Gas: A value miracle - but when will the market wake up?
While SMA Solar is traded on the stock market as a growth story, Saturn Oil & Gas has taken matters into its own hands and, thanks to several acquisitions in recent years, has transformed from a micro-cap to a mid-sized oil producer: Currently, the Company produces around 25,000 BOE (Barrels of Oil Equivalent including gas components) per day. This flushes cash flow of CAD 67 million into the Company's coffers in the second quarter - and yet, the market capitalization of the entire company is only CAD 368 million**.
After the acquisitions, Saturn Oil & Gas is also focusing on organic growth and plans to drill for oil on no less than two properties using new methods in the second quarter. Past wells showed hit rates of 100% in the first half of the year. That is also attracting more and more professional investors, as research portal researchanalyst.com reports, "*Fundamentally, Saturn is currently trading at an estimated 2023 EV/adj EBITDA ratio of about 1.2. With a median industry valuation of 4.5, a fair value per share of about CAD 9.00 to 11.00 would be expected from today's perspective. Most recently, the major investor GMT Capital had increased its stake in Saturn Oil & Gas to 24.91%. *Interest from institutional investors seems evident now due to the Company's new size."**
As fossil fuels continue to be needed and the Best-in-Class approach of ESG investors favors producing countries like Canada, sustainably-minded investors might also want to take a closer look at the share of Saturn Oil & Gas, which is led by a young, innovative team. While the solar industry could suffer from overcapacity in the future, and a price war is already on the horizon, oil prices have stabilized recently. The value creation per barrel of oil equivalent at Saturn Oil & Gas recently stood at CAD 41.87.
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