Scale market report: "Right selection makes all the difference"

As a whole, the segment continues to struggle. However, individual stocks are performing well, such as a drilling services provider and an oil producer. Real estate companies, on the other hand, are currently suffering. The three questions this time go to André Speth, CFO of Noratis AG.
 

17 April 2023. FRANKFURT (Börse Frankfurt). Small beats big - that's not true this year either. After the difficult year 2022, the Scale segment with shares of small companies lags behind the DAX also in 2023. The Scale All Share, which tracks all members, is at 1,262 points on Monday morning, roughly the same level as a month ago. Since the beginning of the year, this results in a small gain of just under 3 percent. By contrast, the DAX has risen by almost 13 percent.

Justified or not justified? Humberto Nardiello, equity analyst at asset manager Degroof Petercam DPAM, has a nuanced view of small stocks: "Small caps navigate more easily through different economic cycles, they adapt more quickly to the macroeconomic environment." Because small caps receive much less attention and analysis from institutional investors and also the media, he says, management is often more accessible, with regular interaction with investors a priority. This, he said, fosters a better understanding between small-cap investors and the companies. However, he said, the right selection makes all the difference. To outperform, he said, you need to correctly assess the quality of a company and avoid pitfalls.

Between 50 percent up and 30 percent down

The scale segment also shows how differently small caps develop: the rise of just under 3 percent in the index conceals price gains of 50 percent since the beginning of the year - such as Mynaric (DE000A31C305) and Geratherm (DE0005495626) - but also price losses of 30 percent - such as Pantaflix (DE000A12UPJ7) and Pyrum Innovation (DE000A2G8ZX8).

On a one-year view, geothermal specialist Daldrup & Söhne (DE0007830572) performed best. The company from Ascheberg in North Rhine-Westphalia specializes in drilling, including for the development of geothermal plants, and is therefore seen as a beneficiary of the energy transition. The share price has risen from 6.38 to 12 euros since April 2022 - almost a doubling of the share price. The investment company SGT German Private Equity (DE000A1MMEV4), the oil producer Deutsche Rohstoff AG (DE000A0XYG76), Beta Systems Software (<DE000A2BPP88>) and the Düsseldorf-based streaming provider Cliq Digital (<DE000A0HHJR3>) have also performed well over the past twelve months.

Deutsche Rohstoff: High oil price, high share price

Deutsche Rohstoff AG, which mainly produces oil and gas in the USA, is benefiting from the recent rise in oil prices. At the beginning of the month, the Opec+ countries surprisingly announced a cut in oil production volumes. The price of US WTI crude has risen from 66 to 82 US dollars since mid-March. Deutsche Rohstoff also reported good figures for the first quarter, with production around 7 percent above expectations. For the full year, it is expected to rise to a record high. The share is currently trading at 28.70 euros, compared with less than 25 euros in mid-March.

Cantourage: Share price up, despite legalization "light

The legalization of cannabis in Germany decided last week - even if only "light" - as well as good sales figures have meanwhile caused the price of Cantourage (DE000A3DSV01) to rise: The share now costs 10.56 euros again, up from 8.20 euros at the beginning of the month. According to preliminary figures, the medical cannabis provider's 2022 sales rose from 5.2 to around 14 million euros. The first quarter also went well in terms of sales. "The successful past months show that we are already an established player in the growth market for medical cannabis," said CEO Philip Schetter. Cantourage had gone public in November. The initial price was 6.48 euros. At its peak, the price had risen to 42 euros.

Apontis Pharma: Price tripling on the cards?

Apontis Pharma is one of the top performers this year. The share of the pharmaceutical company from Monheim near Düsseldorf rose from 8 euros at the beginning of the year to currently 10.85 euros. Last week, the supplier of combination preparations ("single pills") announced a new development partnership with Midas Pharma, a pharmaceutical company from Ingelheim. The aim is the contract development of a Single Pill with the combination of two leading active ingredients against high blood pressure. Incidentally, analysts consider the share to be strongly undervalued: Warburg Research, Montega and Hauck & Aufhäuser all recommend buying. They believe the share is worth 29 euros, 26 euros and even 30 euros respectively.

On the other hand, Formycon (DE000A1EWVY8), the top-selling stock in the Scale segment, has suffered further losses - for no apparent reason. The share currently costs 66.40 euros, compared with a peak of almost 92 euros in January. The company, based in Martinsried near Munich, offers biosimilars, i.e. low-cost biopharmaceutical follow-on products, and aims to become one of the leading biosimilar developers and manufacturers.

Real estate stocks suffer

The real estate sector is currently having a tough time: the sharp rise in interest rates, high construction costs and the sluggish economy are making themselves felt. Some companies are also struggling with specific problems, such as Helma Eigenheimbau (DE000A0EQ578). The house builder as Lehrte near Hanover suffers from the insolvency of Natura-Holzbau, a formerly important general contractor. Helma reported a drop in sales from €332 million to €303 million for 2022 and a slump in profits from €27 million to €3.5 million. Also under pressure are Publity (<DE0006972508>), a financial investor in commercial real estate, Noratis (DE000A2E4MK4) (see interview) and RCM Beteiligungs AG (DE000A1RFMY4), which specializes in real estate.

Formycon continues to be the scale stock with the highest turnover

The best-selling scale stock in March was once again Formycon, and by a wide margin. In the past month, shares of the company worth 28.5 million euros were traded on Xetra and the Frankfurt floor. Cliq Digital followed in second to fifth place with 9.3 million euros, 2G with 7.5 million euros, Exasol with 6.1 million euros and Mensch & Maschine with 5.7 million euros. Formycon has also been ahead since the beginning of the year, with sales totaling 68 million euros for the first three months.