FRANKFURT (dpa-AFX) - Germany's largest naval shipbuilder, TKMS, made a successful debut on the stock market on Monday. After opening at 60 euros, shares spun off from parent company Thyssenkrupp surged, at times surpassing the 100-euro mark. The rally only slowed at 107 euros, with the closing price settling at 81.10 euros, mid-range for the day.
At its peak on Monday, TKMS's market value temporarily exceeded that of the Thyssenkrupp group: as the value of all Thyssenkrupp shares dropped below the six-billion-euro threshold due to the spin-off, TKMS was valued at up to 6.8 billion euros.
As part of the spin-off, Thyssenkrupp shareholders automatically received one TKMS share for every 20 Thyssenkrupp shares held. Combined, the two stocks now give Thyssenkrupp shareholders a portfolio value of 13.77 euros, 14 percent higher than Friday's closing price of 12.06 euros per Thyssenkrupp share.
The gains at TKMS reflect investors' enthusiasm for the defense sector, which was also evident Monday as other stocks in the industry rebounded sharply after slumping Friday on the prospect of another meeting between U.S. President Donald Trump and Kremlin chief Vladimir Putin. Another one-on-one meeting is planned--again without Ukrainian President Volodymyr Zelenskyy.
According to JPMorgan analyst David Perry, investors have increasingly expected that Trump, following the ceasefire between Israel and Hamas, might achieve something similar in Ukraine. Perry, however, does not share this optimism, emphasizing that peace remains a distant prospect. He views the recent setback in defense stocks as a buying opportunity.
To bring about an end to the fighting, Trump is considering freezing the front lines. Trump met with Zelenskyy on Friday, but according to Jefferies analyst Chloe Lemarie, there were no positive developments. "The outcome of this meeting reinforces our view that the conflict is far from resolved," she wrote. Without a ceasefire agreement, the threat level in Europe will not significantly diminish.
Shares of Rheinmetall, which have been under pressure since early October, jumped 5.9 percent on Monday. Hensoldt and Renk rose as much as 7.9 percent. MWB Research issued a buy recommendation for Renk shares, which had lost over 30 percent since early October--an even steeper drop than Rheinmetall's roughly 18 percent decline.
On Monday, MWB Research also issued a buy recommendation for TKMS shares in its initial commentary. As Germany's largest naval shipbuilder, the Thyssenkrupp subsidiary is a European "pure play" in the naval sector, wrote analyst Jens-Peter Rieck. The company's 18.5 billion euro order backlog offers unmatched transparency in the European defense sector.
DZ Bank analyst Dirk Schlamp described the spin-off in a study published Monday as a success, increasing transparency at Thyssenkrupp and revealing hidden value. According to Citigroup expert Ephrem Ravi, TKMS's implied valuation exceeds his expectations. He sees potential for a revaluation at the parent company as well.
Naval shipbuilder TKMS traces its roots to the Kiel-based HDW (Howaldtswerke-Deutsche Werft AG), founded in 1838. It has been part of Thyssenkrupp since 2005. The former HDW surface shipbuilding operations were spun off and now operate as German Naval Yards. According to the company, TKMS is the world market leader for non-nuclear submarines and also builds frigates and corvettes. The company employs around 8,300 people.
