Small caps continue to struggle, and valuations are extremely low. However, some shares have recovered significantly, such as Pantaflix, Fashionette and Veganz. Deutsche Rohstoff even climbed to a record high. The three questions this time go to Georg Issels of Scherzer & Co.
18 October 2023. FRANKFURT (Börse Frankfurt). War in Israel, high interest rates, weak economy - the many bad news also weigh on the Scale segment. The Scale All Share is at 1,130 points on Wednesday morning, down from 1,182 points a month ago. Since the beginning of the year, this results in a minus of 8 percent. However, Deutsche Rohstoff (DE000A0XYG76) has climbed to a new all-time high of 33.80 euros. The Mannheim-based raw materials and mining company is benefiting from the high oil price. Already at the end of September, the company raised its forecast for 2023 and 2024 - because of the oil price and a strong operating performance. The newly issued corporate bond (DE000A3510K1) is also doing well and is currently trading above 105 percent.
With a rise from 24 to over 33 euros, Deutsche Rohstoff is one of the scale shares with the best performance over twelve months. The price of the media company Pantaflix (DE000A12UPJ7) has risen even more sharply, from 0.71 euros a year ago to 1.69 euros now - more than doubling. The Veganz Group (DE000A3E5ED2) and the POS system provider Vectron Systems (DE000A0KEXC7), known to many from bakeries, have gained around 57 percent. The Düsseldorf-based online retailer of luxury accessories Fashionette (DE000A2QEFA1) still rose by 45 percent. In all cases, however, the rise was preceded by significant setbacks.
Veganz and Fashionette reinvent themselves
The Veganz Group, which describes itself as a "food brand for innovative product diversity and vegan, sustainable enjoyment from Berlin," remained in the red in the first half of the year. However, the loss narrowed. The company trimmed its product lineup and, among other things, dropped frozen pizza from its lineup. "Our consistent focus on profitability, innovation and sustainability are having an impact in the difficult macroeconomic market environment," explained CEO and founder Jan Bredack. Fashionette has also taken new paths and discontinued unprofitable market segments. This is now starting to bear fruit.
AI hope at Pantaflix
For Pantaflix, it's "back to the roots." Founded in 2009 by actor Matthias Schweighöfer, among others, the company wants to focus on film productions again, instead of streaming. What's new is that artificial intelligence (AI) is now being used. For this, Pantaflix is working with the US company Runway AI, which is considered a pioneer in the field of corresponding AI software. However, analyst firm Montega considers the recent share price increase to be exaggerated: "Although the half-year report indicates a strong operating performance, we do not currently see any fundamental changes," it says. While the prospects in the AI sector could be quite attractive, they are too uncertain. Montega therefore advises selling the share and gives a price target of 0.85 euros.
In 2022, Formycon (DE000A1EWVY8) was also among the winners, but this year things look different. Currently, the share is trading at 53.60 euros after almost 92 euros at the beginning of the year. The company, based in Martinsried near Munich, offers biosimilars, i.e. low-cost biopharmaceutical follow-on products. Actually, things are not going badly: Formycon delivered good figures for the first half of the year.
The analyst firm AlsterResearch therefore also considers the current valuation to be far too low, advises a buy and names a price target of 100 euros. One reason: the European Medicines Agency EMA has accepted the application for approval of the biosimilar FYB202. "Formycon - punished like Evotec or other biotechs - should be worth a second look," also said Nebenwerte Magazin recently. The development pipeline is "starting to deliver," it said. The sales figures of already approved biosimilars rose strongly, as did the sales-related revenues.
Daldrup: Hopes for municipal heat planning
Things have been going sideways for 2G Energy (DE000A0HL8N9) for some time. As a manufacturer of combined heat and power plants, 2G is benefiting from the growing demand for decentralized energy supply. However, the back and forth regarding the Building Energy Act GEG has caused uncertainty and delayed incoming orders. Daldrup & Söhne, on the other hand, has recently seen a downward trend. Drilling technology and geothermal specialists are also considered beneficiaries of the energy transition.
Daldrup has reported positive operating developments in all business areas for the first half of 2023. Demand for drilling services for geothermal projects is increasing significantly, explained company CEO Andreas Tönies when presenting the figures. With the law on municipal heat planning, municipalities and municipal utilities now have an obligation to decarbonize the heat supply quickly, he said. "Geothermal can provide and store renewable, base-load heat in most regions of Germany." Daldrup is currently rated by SMC Research and Pareto Securities and recommended in both cases. SMC sees the price target at 11.40 euros, Pareto at 14 euros. The share is currently trading at just under 8 euros.
Scherzer too cheap?
According to GSC Research, the investment company Scherzer & Co. also has potential (see 3 questions to). The clear profit in the first half-year is not adequately reflected in the share price. This is far below the last reported net asset value (NAV). In addition, Scherzer still has considerable potential from several severance speculations. GSC advises to buy and states a target price of 3.15 euros, significantly above the current 2.42 euros.
Bank | Company | Vote | Targer in Euro | Price in Euro today | |
SMC-Research | Noratis | Buy | 13.60 | 6.10 | |
SMC-Research | artec technologies | Speculative Buy | 3.10 | 2.40 | |
SMC-Research | Laiqon | Buy | 12.60 | 7.60 | |
SMC-Research | RCM Beteiligungs AG | Speculative Buy | 2.50 | 1.57 | |
Montega | Nynomic | Buy | 56.00 | 30.00 | |
GBC | EQS Group | Buy | 42.26 | 26.10 | |
SMC-Research | Cyan | Speculative Buy | 2.90 | 1.37 | |
AlsterResearch | Deutsche Rohstoff | Buy | 52.50 | 33.80 |
Börse Online recently called Scherzer & Co a "small but fine Cologne-based investment company" with parallels to Warren Buffet's Berkshire Hathaway. Too much praise, or justified?
In fact, we also consider ourselves to be a small but fine Cologne-based investment company and are pleased when we are viewed positively in the community. In terms of performance, we can't keep up with good old Warren Buffett. Nevertheless, we also have a long-term approach and possess great flexibility. This allows us to quickly take advantage of market opportunities. For example, we can also invest in stocks that have been subject to delisting, such as Rocket Internet or Centrotec.
The share has not performed so well recently. What is the reason for that?
We have been observing a bear market in small caps for some time. Trading volumes have fallen sharply and many stocks have dried up, so to speak. Small stocks are currently more favorably valued than they have been for years. Our share is also affected by this.
Analysts point to the fact that your share price is far below NAV, which gives rise to potential. Do you agree?
We publish our NAV every month and are convinced of the potential of our shares. We have therefore just decided to launch a share buyback program of up to 1 million euros using the authorization granted by the Annual General Meeting.
Scherzer & Co. AG is an investment company based in Cologne. Its aim is to build up long-term assets through both security- and opportunity-oriented investments. The company sees itself as one of the leading listed investment companies in the field of special situations and corporate action.
by Anna-Maria Borse © 18 October 2023, Deutsche Börse AG
Anna-Maria Borse is a finance and economics editor specializing in financial markets/stock markets and economic topics.
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