Scale market report: "Hangover" in the real estate sector

Some scale stocks, which are seen as having a lot of potential, are doing really well, others less so. Increasingly, bad news from the real estate sector is now dragging the segment down.  
 

17 July 2023. FRANKFURT (Börse Frankfurt). Promising, forward-looking companies on the one hand, and seriously troubled companies, such as those in the real estate sector, on the other - the bottom line is that the Scale index is barely moving. The Scale All Share is at 1,256 points on Monday afternoon, a small plus of not even 1 percent since the beginning of the year. The all-time high from 2021 of 1,969 points is far away.

Daldrup: up 55 percent

Geothermal specialist Daldrup & Söhne (DE0007830572) continues to be one of the main drivers, having recovered a large part of its interim share price losses from this year. On a one-year view, the share continues to be the performance leader of the scale segment: the price has risen by 55 percent since July 2022 to currently 12.70 euros. The company, based in Ascheberg, North Rhine-Westphalia, specializes in drilling, among other things for the development of geothermal energy plants, and is therefore seen as a winner in the energy transition. The cash register system provider Vectron Systems (<DE000A0KEXC7>) - known to many from bakeries and restaurants - also performed well over the past twelve months, with a share price increase of 53 percent, and the investment company SGT German Private Equity (DE000A1MMEV4) with almost 30 percent.

"2G as the perfect share for the energy turnaround".

Block-type thermal power station manufacturer 2G Energy (DE000A0HL8N9), recently described by "Der Welt" as the "perfect share for the energy turnaround", continues to be regarded as a value for the future, for every scenario. In June, 2G had again set course for the all-time high of over 30 euros, but recently gave way to currently 24.90 euros. The company is benefiting from the growing demand for decentralized energy supply. The recently agreed expansion of district heating networks should also benefit the company, whose plants can be integrated into municipal heating supply systems, according to analysts.

Formycon and IBU-tec: hopes not yet fulfilled

Formycon (DE000A1EWVY8), which has already been traded as the new Biontech, is also seen as having great potential. The company from Martinsried-Planegg near Munich is a leading developer of biopharmaceutical imitation products, so-called biosimilars. However, after a significant share price increase in 2022 and reaching an all-time high of 91.70 euros this January, the share price is currently only just under 60 euros.

IBU-tec, once described by the investor magazine "Der Aktionär" as the "new star in the battery sky," is also weaker this year after a rally in 2021 and a disappointing 2022. The share currently costs 25.70 euros, a price halving from its 2021 high. The specialty chemicals group produces cathode material for use in lithium iron phosphate (LFP) cells. Currently the only European producer of LFP battery material, IBU-tec believes it is well positioned for further growth.

SMC-Research sees opportunities for a company from a completely different sector: pyramid AG (see interview), the high-tech company that emerged from the investment company mic. Pyramid addresses dynamically growing markets and has decisively strengthened itself with the takeover of faytech. This is not yet reflected in the share price, SMC states a target price of 4.20 euros (currently 2.04 euros) and recommends buying the share.

Real estate sector badly hit

The situation of many real estate companies such as Helma Eigenheimbau (DE000A0EQ578) remains difficult. The share now costs only around 6 euros, compared with around 70 euros at the beginning of 2022. The company is suffering from the bankruptcy of a subcontractor and a sharp drop in incoming orders in the wake of the real estate slump. ERWE Immobilien (DE000A1X3WX6) is also struggling. The company had failed to make an interest payment on a bond due in June and asked creditors to defer interest and convert the bond into equity. Publity AG (<DE0006972508>), a financial investor in commercial real estate, also suffered. The commercial real estate developer Preos Global Office Real Estate & Technology, which is part of an alliance with Publity, has asked creditors to change the terms of its 300 million euro convertible bond. Noratis AG (DE000A2E4MK4), a portfolio developer of residential real estate in Germany, also lost out.

A study published two weeks ago by investment bank Stifel further hurt the sector: According to the analysts, the German real estate sector is threatened by "a long hangover, instead of a civilized after-show party." More and more investors are becoming aware that interest rates will most likely remain high, and not just temporarily. Stifel advises selling Vonovia, LEG and TAG; the smaller addresses are not mentioned.

ParTec wants to make AI possible

By the way, since July 3, the Scale segment has a new member, the manufacturer of super and quantum computers ParTec. The first price was 112.50 euros, currently it is 114.40 euros. The Munich-based company posted 2022 sales of 36 million euros and net income of 11 million euros. "Investors are welcome to join us as we unlock the potential of dynamic modular supercomputing as well as quantum computing," ParTec CEO Bernhard Frohwitter said at the IPO. "It is these machines that make artificial intelligence possible in the first place."