Scale market report: Small values, big adversities

The energy crisis and rising interest rates are causing problems for smaller capitalised companies. Even those whose business is up and running are struggling. Three questions this time go to Friedrich Pehle of 2G Energy.

14 October 2022. FRANKFURT (Börse Frankfurt). Times remain difficult for small companies on the stock exchange. In times of crisis, the focus is often more on large companies - if at all. "The recent unpleasant performance of the 2G share is certainly not due to business development. Despite all the upheavals, the company's development remains positive," explains Friedrich Pehle, CFO of scale member 2G Energy (see interview below).

Deutsche Rohstoff and Formycon: away from all-time highs

The share prices of other companies whose business is actually booming are also weakening. The Deutsche Rohstoff share (DE000A0XYG76), for example, fell from its all-time high in June at 33.70 euros to 20 euros for a short time; on Friday morning it is 22.80 euros. The company mainly produces oil and gas in the USA and benefits strongly from the current high energy prices. For 2024, Deutsche Rohstoff is now targeting a turnover of 120 million euros and an EBITDA of over 100 million euros.

The Formycon share (DE000A1EWVY8), which has performed very well for a long time this year, has also lost ground recently. The share price is currently 70.50 euros, well below the all-time high of 88 euros in August. The company from Martinsried near Munich develops biosimilars, i.e. low-cost biopharmaceutical follow-on products. In the summer, FYB201 for the treatment of severe retinal diseases was the first product to be approved in Europe.

Only a few winners

The Scale All Share, which tracks all Scale members, was at 1,190 points on Friday morning, down from around 1,350 points a month ago. The Scale 30 selection index has also fallen again in a monthly comparison and is currently at 1,033 points. Similar to the DAX, MDAX and SDAX, only a few companies are still performing positively on a twelve-month horizon. Among the few are Daldrup & Söhne (DE0007830572), which has risen from €4.30 to €7.54 since October 2021, and Publity (<DE0006972508>), Formycon (DE000A1EWVY8), SGT German Private Equity (DE000A1MMEV4) and Beta Systems Software (DE000A2BPP88).

Helma suffers - weakening construction industry

Meanwhile, Helma Eigenheimbau (<DE000A0EQ578>) is struggling. The provider of solid houses had to announce the insolvency of an important subcontractor at the end of September. Helma wants to ensure the speedy and safe completion of the holiday homes originally ordered from this company elsewhere. To this end, there are "advanced talks with predominantly regional craftsmen's companies". The share had already weakened previously due to rising interest rates and a deteriorating construction industry. Since the beginning of the year, the share price has more than halved to currently 25.80 euros.

However, two analysts continue to recommend buying Helma shares. GBC has reduced the price target from 83.35 euros to 54.35 euros after the insolvency of the subcontractor, but there is still a lot of room for improvement. Montega also continues to recommend buying and sees the share as fairly valued at 59 euros. "The macroeconomic distortions are increasingly eating into the German residential construction sector," writes Montega. However, the share is still worth buying, especially for long-term investors.

Analysts: Daldrup and 2G too cheap

The analyst firm SMC Research still sees potential in the drilling technology and geothermal energy specialist Daldrup & Söhne despite a significant rise in the share price this year. The analysts believe the share is worth 8 euros (currently 7.54 euros). Overall, Daldrup is making progress, they say, and the company is experiencing a significant increase in interest in geothermal projects. The framework conditions for the use of geothermal energy improved in the core markets - not least as a reaction to the break with Russia.

2G Energy also continues to have supporters: SMC Research, for example, advises on the share, among other things because of the significant increase in incoming orders. The price target of 33 euros is clearly above the current quotation (20.80 euros). "Overall, there is a lot to be said for a continuation of the growth course, despite the difficult macroeconomic conditions," it says. First Berlin also believes in the share: although risks such as supply chain problems, the war in Ukraine, inflation and pandemic remain. However, after the strong overall performance and the more concrete outlook, the analysts see 2G on track to reach the analyst's sales and margin estimates. They name a target price of 31 euros.

Further recommendations for scale shares

from: Anna-Maria Borse

© 14 October 2022, Deutsche Börse AG