12/09/22 09:35:25

Scale market report: „Young companies have a particularly hard time“

The mixture of fear of recession, inflation and rising interest rates is also weighing on the share prices of small companies. But some are proving to be resilient. The three questions this time go to Pascal Klein, CEO of Pyrum Innovations.
 

12 September 2022. FRANKFURT (Börse Frankfurt). The scale segment continues to suffer from the generally depressed mood. "Young companies are having a particularly hard time at the moment," explains Pascal Klein, CEO of Scale member Pyrum Innovations. The Scale All Share, which tracks all Scale members, is at just under 1,400 points on Monday afternoon. A month ago it was still around 1,500 points. The Scale 30 selection index is currently at 1,180 points after 1,330 points in mid-August.

There are only a few companies that can escape the negative trend. Some are profiting from the high commodity prices, like Deutsche Rohstoff AG. Others are well positioned for the energy transition, like 2G Energy and Daldrup & Söhne. Still others have business models that are completely independent of the economy, such as Formycon. Daldrup & Söhne (DE0007830572) has continued to perform best over the past twelve months, with the share price rising from 4 to 7.30 euros since September 2021. Publity (DE0006972508), Deutsche Rohstoff AG (DE000A0XYG76), Formycon (DE000A1EWVY8) and Beta Systems Software (DE000A2BPP88) follow.

Formycon: "Transition to a new corporate phase".

Formycon's (DE000A1EWVY8) share price has risen from 58 euros to a peak of 88 euros since the beginning of the year, and 75 euros on Monday afternoon. The company from Martinsried near Munich develops biosimilars, i.e. low-cost biopharmaceutical follow-on products. Recently, FYB201 for the treatment of severe retinal diseases was approved as the first product in Europe. Approval is expected soon for the USA. "With the European launch, Formycon is in transition to a new corporate phase," said Formycon CBO Nicola Mikulcik.

The analysts at First Berlin then confirmed their buy recommendation and raised the price target from 97 to 103 euros. They expect Formycon to generate a steady stream of further positive news in the coming months, including good initial sales figures from FYB201 in the US and EU.

Formycon was even the share with the highest turnover in the Scale segment in August. The shares of Cliq Digital, 2G, Deutsche Rohstoff and Mensch und Maschine were also heavily traded - on Xetra and Börse Frankfurt. Since the beginning of the year, however, 2G Energy is still ahead in terms of turnover.

Daldrup & Söhne: Geothermal energy with a lot of potential

Daldrup & Söhne, a specialised provider of drilling and environmental services based in Ascheberg, Westphalia, is being treated as a beneficiary of the energy transition. "The potential of geothermal energy as a renewable, base-load energy for the heating sector is enormous - so far, geothermal energy covers only 1.5 percent of the total heat demand in Germany," writes the company itself.

SMC Research continues to see moderate upside potential for the Daldrup share and recommends a buy. The price target is 8 euros (currently 7.30 euros). The volume of orders in the state of negotiation has increased significantly in recent months, they say. The analysts therefore set their growth forecasts high. They are also convinced that geothermal energy can make a significantly greater contribution to energy production. However, the framework conditions would still have to be improved.

2G Energy: Points with decentralised energy generation

Things are not going quite so well for 2G Energy this year - at least on the stock market. The share is currently trading at 24.60 euros, slightly below the level at the beginning of the year. Yet the cogeneration plant provider published very good figures for the first half of the year. Compared to the previous year, 2G increased total output by 24 per cent, sales revenues by almost 7 per cent and earnings before interest, taxes, depreciation and amortisation (Ebit) by 13 per cent. For the full year, 2G now expects sales of 290 to 310 million euros, up from 280 to 310 million euros previously. 2G Energy specialises in the production of energy generation systems by means of cogeneration in combined heat and power plants that can be operated with natural gas and biogas.

First Berlin recently upgraded 2G to "buy" and believes the share is worth 31 euros. High gas prices make highly efficient and thus primary energy-saving CHP plants attractive compared to the uncoupled production of electricity and heat, it says in justification. In addition, a record order backlog of 221 million euros ensures full utilisation of production until well into next year.

ERWE new in Scale

Since the beginning of September, the Scale segment has a new member with ERWE Immobilien (DE000A1X3WX6). Previously, the share had been traded in the General Standard. With the segment change, the delisting agreement between ERWE and major shareholder Elbstein AG was implemented. According to ERWE, the company intends to maintain its investor relations activities and transparent reporting in the usual quality. The company specialises in mixed-use properties in the office, service, retail, hotel and residential sectors.

The analyst firm GSC Research recently took another close look at ERWE and recommends a buy with a slightly reduced price target of 3.10 euros (currently 2.12 euros). "So far, the Board of Management, which is experienced in the sector and networked far beyond the real estate sector, has manoeuvred ERWE well through the general conditions characterised by Corona, inflation as well as rising construction costs and interest rates," explain the analysts. Despite all the challenges, they remain confident about the future development of the company.

Pyrum: Fit for the circular economy

SMC Research is also confident about the scrap tyre recycler Pyrum Innovations (see Three questions to). "Pyrum has signed the first contract for a joint venture in which partners will assume the majority of the investment for a new recycling plant," the analysts explain. This is an important milestone in the expansion strategy, they say. Seven other potential projects are currently in advanced negotiations. "The dynamic expansion scenario we assumed in our initial study in June is underpinned by these advances." The analysts expect strong revenue and earnings growth in the coming years and name a target price of 86 euros (currently 68 euros). However, the verdict remains "Speculative Buy" due to the high forecast risk. Pyrum Innovations has been listed on the Oslo Stock Exchange for some time, and since the end of March this year it has also been listed in the Scale segment of the Frankfurt Stock Exchange.

Further recommendations for scale share

Analysis house/Bank

Scale companies

RecommendationPrice target in euroCurrent price in euro

GMC

Deutsche Grundstücksauktionen

Buy

 28.00

 18.45

SMC Research

Blue Cap

Buy

 40.00

 24.20

Warburg Research

Blue Cap

Buy

 42.00

51.30

SMC Research

Delignit

Buy

9.80

7.20

GBC

EQS Group

Buy

43.95

 28.10

GSC Research

EQS Group

Buy

38.50

 28.10

SMC Research

RCM Beteiligungs

Buy

2.30

 1.98

GBC

Helma

Buy

83.35

36.80

BankM

Datron

Buy

15.44

9.85

GBC

Media and Games Invest

Buy

5.85

1.96

 

Three questions ... this time to Pascal Klein, CEO Pyrum Innovations AG

Pyrum is active in the increasingly important recycling industry, yet the share price has not performed well this year. Is this only due to the general market development?

If you look at the development of the indices, part of the price trend is certainly due to the general market development. In the current market environment, young companies have a particularly hard time. The trading volume of our share is also still quite low, so that even small sales have a direct impact. Nevertheless, compared to the IPO, we are currently still up by around 10 percent.

At the time, you described BASF's commitment to the Pyrum technology 2020 as a "breakthrough". Has that come true?

Yes, BASF intensively tested our technology and the quality of our products during the negotiations. The shareholding - BASF holds 7.9 percent of the shares - and the purchase agreement for 100,000 tonnes of pyrolysis oil per year are proof that we can supply raw materials of consistently high quality. This has been registered in the market, and we have also convinced Mercedes, which manufactures vehicle components from BASF plastic on the basis of our oil. We have also entered into further cooperations, for example with Continental, who participated in our IPO, and Siemens.

From an investor's point of view: What speaks in favour of your share

The market potential for our innovative technology is enormous: in the EU alone there are 3.4 million tonnes of used tyres per year. In addition, there is increasingly strict regulation that restricts the conventional disposal of used tyres. In addition, raw material prices have risen sharply. We offer a solution for the former and benefit from the latter. The off-take agreement with BASF alone offers the potential for up to 22 plants. And we are also experiencing increasing demand for our carbon, not only from tyre manufacturers. We do all this in a completely sustainable way, as we close the recycling loop and save a large part of the CO2 emissions.

Pyrum Innovations AG, based in Dillingen/Saar, is active in the recycling market for used tyres with its patented pyrolysis technology. Pyrum's pyrolysis process is energy-autonomous, saves a large part of the CO2 emissions that are usually produced during the disposal of used tyres in a cement plant and produces new raw materials such as pyrolysis oil, gas and recycled industrial carbon black from the waste used as input materials.

Klein

from: Anna-Maria Borse

© 12 September 2022, Deutsche Börse AG

About the author

Anna-Maria Borse is a finance and economics editor specialising in the financial market/stock exchange and economic topics. 

Feedback and questions to redaktion@deutsche-boerse.com

 

Borse

Please wait...