Time and again, the small stocks are proclaimed to be catching up - but so far they have failed to do so. Only a few scale stocks are bucking the trend and making gains. This time, the three questions go to Philip Schetter of Cantourage.
21 June 2023. FRANKFURT (Börse Frankfurt). The small stocks continue to lag behind the large ones. While the DAX marked a new all-time high last week, the MDAX, SDAX and the Scale segment are barely moving. The Scale All Share is at 1,232 points on Wednesday morning, which is roughly the same level as at the beginning of the year. The all-time high from 2021 of 1,969 points is a long way off.
The reasons: The Ukraine war and bank turbulence are causing investors to turn to less risky stocks. In addition, higher interest rates are placing a greater burden on smaller, often more highly indebted companies than on the big ones. And last but not least, large caps have it easier in times of inflation, because their pricing power is greater. Time and again, the stock market is predicted to catch up. "Relative valuations, as measured by price-to-earnings and price-to-book ratios, are the most attractive they've been in at least 15 years," writes Matthew Gilman of UBS Global Wealth Management, for example, looking at European small and mid caps. "And this is in a segment that is expected to generate above-average returns over the long term."
Recently, even geothermal specialist Daldrup & Söhne (DE0007830572), long the star of the segment, has lost some of its value. On a one-year view, however, the company still remains the performance frontrunner. The share price has more than doubled since June 2022 to 11 euros. Also performing well on a twelve-month view are 2G Energy (DE000A0HL8N9), Mensch und Maschine (DE0006580806), Nynomic (DE000A0MSN11) and JDC Group (DE000A0B9N37). However, since June 2022, these have only managed share price gains of 4 to 9 percent.
Daldrup and 2G: Showing off with renewable energies
Daldrup is considered a beneficiary of the energy transition. This is because the company from Ascheberg in North Rhine-Westphalia specializes in drilling, including for geothermal energy plants. After good figures for 2022, Daldrup recently confirmed its forecasts for 2023. According to the analysts of SMC-Research, the share is still a bit too cheap, they now advise to enter again after the price decline ("Buy" instead of "Hold") and name a price target of 11.80 euros. The further prospects for Daldrup are very promising, they say: interest in geothermal energy is increasing significantly, and in this country in particular the heat turnaround will hardly be achievable without a significantly increasing contribution from geothermal energy.
2G Energy is also seen as a winner in the energy transition. The company, based in Heek, North Rhine-Westphalia, specializes in energy generation systems using cogeneration in combined heat and power plants powered by natural gas or biogas. In recent weeks, the share, which had temporarily lost 2022, has made a leap upwards, the background being good figures for the first quarter. The share price, currently 28.85 euros, is now approaching the all-time high of 32.20 euros.
First Berlin believes that the 2G share is worth 33 euros, but because of the price increase now only recommends "adding" to the share, no longer "buying", which would have corresponded to a price potential of more than 25 percent. The positive development in the first quarter will continue in the following quarters, they say. SMC-Research also thinks highly of 2G and recommends buying. The company has made a very dynamic start to fiscal 2023, and in the medium term there will also be additional growth impetus from new products. The analysts consider the share to be fairly valued at EUR 31.70.
EQS: Share price jumps after whistleblower protection law
The share price of the tech company EQS Group (<DE0005494165>) has also risen sharply in recent weeks. The reason: EQS offers, among other things, "the leading cloud solution for compliance with the Whistleblower Protection Act for companies and authorities," as it puts it. After some delays in the implementation of the EU Whistleblower Directive into national law, the Bundesrat (upper house of the German parliament) had given its approval to the law on May 12. The share now costs just under 29 euros, compared with only 20.50 euros before the vote.
For the analysts at GBC, the passing of the law was a major milestone for the company. They still advise an entry and name a target price of 38 euros. GSC Research is also positive: EQS now has massive growth potential, also in the medium term. After the first stage of regulation, which applies to companies with 250 employees or more, the second stage will come into force at the end of 2023, which will then cover companies with 50 to 249 employees. The price target here is 32.50 euros.
Helma in crisis mode
By contrast, the solid house provider Helma Eigenheimbau (DE000A0EQ578) once again suffered a sharp decline in June. The share now costs just 4.80 euros, down from around 70 euros at the beginning of 2022. In March, the company was still expecting a positive result this year - despite the bankruptcy of a subcontractor and a sharp drop in incoming orders in the wake of the real estate slump. Last week, the sales forecast for 2023 was then slashed and a loss was announced.
Trading in scale shares in May once again shows the dominance of Formycon, the provider of biopharmaceutical drugs: In the past month, shares of the company worth 43 million euros were traded on Xetra and the Frankfurt floor. In second to fifth place follow - far behind - 2G with 11.8 million euros, Cliq with 8.5 million euros, and Data Group and Apontis Pharma with around 3.8 million. Since the beginning of the year, Formycon (126 million euros) is not quite as far behind 2G (46 million euros) and Cliq (44.2 million euros).
Further recommendations for scale shares
Analysis house/bank | Scale-Company | Recommendation | Target price in Euro | aktueller Kurs in Euro |
SMC-Research | Noratis | Buy | 19,00 | 9,30 |
SMC-Research | Blue Cap | Buy | 36,00 | 22,00 |
SMC-Research | Beta Sysrems Software | Buy | 51,60 | 42,60 |
GBC | Deutsche Grundstücksauktionen | Buy | 21,20 | 15,10 |
SMC-Research | artec Technologies | Speculative Buy | 3,00 | 1,86 |
GBC | Vectron | Buy | 9,40 | 4,45 |
SMC-Research | Scherzer | Buy | 3,25 | 2,64 |
The design of the legalization of cannabis in this country has disappointed many in the industry. How do you feel about this?
We actually see the public and political debate about cannabis for recreational use as a great opportunity, because it also brings the discourse about medical cannabis into focus. As a medical cannabis manufacturer, we are already noticing this effect. We therefore remain focused on our mission to position medical cannabis as an attractive alternative to established therapy options through innovation, highest quality standards and prices below the black market.
You made a profit for the first time in the first quarter of this year. Where does Cantourage see itself in the medium and long term?
We are aiming for profitable growth, partly by expanding in Europe and welcoming more growers to our Fast Track Access platform. The market is very dynamic and growing strongly. We have positioned our business model to respond to these dynamics. We believe that double-digit Ebitda profitability is realistic in the long term.
On the stock market, things didn't go so well after the brilliant start. What speaks in favor of your share?
We are satisfied with the performance. The initial price jumps are not representative of the overall performance. The current market capitalization reflects a high level of investor confidence in our model. Cantourage has a unique selling proposition in the medical cannabis market through its platform, plus the highly experienced cannabis management team. The stock therefore offers a good opportunity to invest sustainably in the cannabis market - without necessarily relying on further legalization of the market.
Cantourage is a leading European medical cannabis company founded in 2019 by Norman Ruchholtz, Florian Holzapfel and Patrick Hoffmann. The Berlin-based company says it offers products in all relevant market segments, from dried flowers to extracts and dronabinol to cannabidiol, in pharmaceutical grade. Cantourage has been listed on the Frankfurt Stock Exchange under the ticker symbol "HIGH" since November 2022.
by: Anna-Maria Borse © 21 June 2023, Deutsche Börse AG
Schetter
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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