29. July 2021 | 13:56 CET
Alibaba, Memiontec, MorphoSys - Now the rally after the sell-off!
The regulator's pressure is getting bigger and bigger. China has tightened the thumbscrews on technology giants and especially their online education companies - triggering a stock market quake on its own stock market. In some cases, well-known tech stocks lost double digits, even though the affected areas only affect fractions of annual sales. Government regulation of the USD 100 billion-plus education market is likely to weaken confidence in China's stock markets for the long term. And the fact that China's trade relations with the US have also reached a low point does not make things any better. Are there still opportunities?
time to read:
ISIN: ALIBABA GR.HLDG SP.ADR 8 | US01609W1027 , Memiontec Holdings Limited | SGXE56008290 , MORPHOSYS AG O.N. | DE0006632003
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Alibaba - Good figures and still punished
The shares of e-commerce giant Alibaba have now lost a full 40% from their high in February. DZ Bank announced this week that it had lowered its price target from USD 295 to USD 192 and downgraded its vote from "buy" to "sell". The reason given is the massive intervention of the Chinese government in the education market and a quasi-nationalization of the sector. In our opinion, this is somewhat rudimentary and one-sided.
Alibaba is only marginally involved in the education sector. Chinese founder Jack Ma's Group operates one of the world's largest online trading platforms. The successful website Alibaba.com offers customers all daily life products for home, garden, office, cosmetics, sports and entertainment, except food. Alibaba's business units also include the online retailers Taobao.com, Tmall.com, Aliexpress and Alimama.com. The Company also offers its online payment system through its financial subsidiary Ant Group. Alibaba is estimated to have a turnover of more than EUR 100 billion in 2021, the EBIT margin is currently 17% - and the Company is growing at a constant rate of 35% per year. So a P/E ratio of 20 is not too expensive.
But: Since February, Chinese shares have lost USD 1 trio. in stock market value. An end to the slide is not yet in sight; on the contrary: According to a media report, Wall Street is already speculating on further coercive measures by Beijing and possible capital controls. Not a good environment for investors, who currently need a lot of courage. Selectively build up first positions!
Memiontec - Water treatment for Asia
Water service provider Memiontec Holdings Ltd is not on the crisis radar. It is a Singapore-based company specializing in all areas of water treatment and purification. For more than 20 years, Memiontec has provided water and wastewater-related services throughout Singapore, Indonesia and the People's Republic of China. Using membrane and ion exchange processes and physical, chemical and biological processes in combination with installation and services, Memiontec covers the entire value chain of water management. Customers are mainly local municipalities and larger industrial companies.
In June, new orders worth SGD 5.5 million were landed from Indonesia. That brings the current order book to around SGD 81.6 million as of June 30, 2021. The orders fit perfectly into the Group's portfolio and utilize the capacity of the local team in Indonesia. Service providers like Memiontec are a blessing for the populous country, as nearly one in every two Indonesians has no access to clean water. Of Indonesia's 270 million inhabitants, 70% even rely on potentially contaminated sources because there are no alternatives. While Indonesia is not a water-scarce country, limited available water infrastructure, uneven distribution, and rapid economic development have led to water scarcity and high contamination levels in parts of the country, especially in urban areas.
The greatest water shortage is on Java, Indonesia's most populous island, which is also home to the capital city of Jakarta. The Indonesian government has taken steps to improve the country's infrastructure continuously. Separately, Memiontec has received a commitment from Japan-based Kuraray, an international specialty chemicals manufacturer, to extend exclusive distribution rights for its MBBR technology, which uses polyvinyl alcohol (PVA) gel beads, for the Indonesian market. This adds promise to both Memiontec's pipeline and its technology.
Far from China and its regulatory frenzy, Singapore-based Memiontec can grow with green projects. It helps the people in the overpopulated region and offers an attractive stock for a sustainable investment via the share listed in Frankfurt.
MorphoSys - The sell-off could continue
MorphoSys AG announced an update to its financial guidance for 2021 earlier this week. Based on unaudited consolidated results for the first six months, consolidated revenues are expected to be in the range of EUR 155 to 180 million, compared to a previous corridor of EUR 150 to 200 million. The updated revenue guidance primarily reflects the reduced guidance for Monjuvi product sales.
MorphoSys also expects a dramatic increase in operating expenses, especially R&D, to a range of EUR 435 to 465 million (previously: EUR 355 to 385 million). The new guidance for the Group's escalating costs is reflected as a result of the acquisition of Constellation Pharmaceuticals, which was completed on July 15, 2021. The total R&D cost ratio is now reported at 57%, which is not surprising for experts, but negative news for the stock market.
The market was abruptly hit by the sales & profit warning and reinforced the downward trend of recent months. The calculated loss amounts to 64% since one year - the share lost over 17% in the last five trading days alone. Commerzbank speaks of a "loss of confidence" after the sales warning from MorphoSys. Investors had hoped for higher market opportunities for the MorphoSys drug Monjuvi, as this drug is the core of the Company's strategic transition.
The operating figures after the acquisition are currently not convincing, and the chart situation is also precarious. With a price-to-sales ratio of over 4, the MorphoSys share is still ambitiously valued at EUR 45. Watch!
The stocks under review here offer a colorful bouquet of investment opportunities, from Chinese uncertainties to justified sell-offs to necessary water technology. Alibaba should be able to pick itself up again, caution is advised with MorphoSys, and Memiontec is, in our opinion, an exciting value from the trend area of environmental technology and infrastructure.