July 18th, 2024 | 07:00 CEST
BASF, VCI Global, Palantir - AI and digitalization as a market opportunity with high returns
Future industries such as robotics, AI, and digitalization are accelerating the growth of companies through the automation of production processes. This also increases the opportunity for high-growth stocks. BASF has been using computer-aided technology in its various business areas for over ten years. Starting with machine learning in the chemical industry, they are now supporting countless smallholders and farmers in the agricultural business with artificial intelligence. No less a partner than Google is involved in this partnership. Does this bold move offer the traditional company a chance of above-average growth? One candidate in the high-growth sector is the Southeast Asian company VCI Global. The experienced management has an impressive track record of successful IPOs and has established itself as an expert in guiding companies through public listings. The Company also invests in future markets through an investment arm. Its focus here: Robotics, blockchain, AI. Palantir, on the other hand, is known for its big data technology, which uses AI for government institutions. Recently, some analysts have expressed concerns about the Company's high valuation. However, in Europe, one authority continues to rely on the US company's data networking. Where do the best returns lie for investors?
time to read: 5 minutes
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Author:
Juliane Zielonka
ISIN:
BASF SE NA O.N. | DE000BASF111 , VCI GLOBAL LIMITED | VGG982181031 , PALANTIR TECHNOLOGIES INC | US69608A1088
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"[...] In Canada, there is $1.75 of debt for every dollar of disposable income - and that was true even before the pandemic. [...]" Karim Nanji, CEO, Marble Financial
Author
Juliane Zielonka
Born in Bielefeld, she studied German, English and psychology. The emergence of the Internet in the early '90s led her from university to training in graphic design and marketing communications. After years of agency work in corporate branding, she switched to publishing and learned her editorial craft at Hubert Burda Media.
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BASF raises millions and focuses on AI in agriculture
With its German headquarters, the long-established company BASF is knee-deep in the stagnating German economy. BASF has a global presence and is represented in almost every country with its 112,000 employees. Its business areas include chemicals, materials, industrial solutions, surface technologies, nutrition & care, and agricultural solutions. Despite the challenging economic situation, the Company is also progressing in Germany. The state of Brandenburg has granted the Company a subsidy of EUR 4.95 million for the construction of a battery recycling plant at the Schwarzheide site in Brandenburg.
It is all the more exciting for investors to see which countries of the world BASF is aiming for further growth. Digitalization and AI are now finding their way into the core areas of the agricultural division. This includes production, engineering, research and development, and the management of agricultural products.
An example from practice is the xarvio field manager for farmers. The digital assistant combines a variety of functions on a single platform. It supports farmers throughout the entire cultivation cycle - from sowing to harvest. By optimizing the use of inputs, it improves plant health, increases yields, and boosts profitability. BASF Japan has developed an innovative AI chatbot for xarvio field manager users in collaboration with Google Cloud. Users receive answers around the clock in the form of text, images, and videos. The aim is to increase the profitability of farms.
BASF is able to adapt to new market dynamics. However, analysts disagree in their ratings While BNP Paribas rates the share as "Underperform", Berenberg Bank upgrades it to "Strong-Buy". Redburn Atlantic changes its rating from "Neutral" to "Buy". The share is currently trading at EUR 44.06.
VCI Global focuses on expansion and future markets in Southeast Asia
The Southeast Asian consulting and technology company VCI Global has a similarly broad base to BASF. With its offices in Singapore and Malaysia, the Company is located in the epicenter of the ASEAN countries. The ASEAN Alliance comprises ten Southeast Asian countries that jointly promote political, economic, and cultural growth as well as solidarity. Since 1995, ASEAN members have enjoyed a free trade area thanks to successful tariff reductions, which have significantly increased regional exchange and cooperation.
In 2022, the gross domestic product (GDP) of the ASEAN countries reached a total of USD 3.6 trillion. This positions the Southeast Asian economic region as the fifth largest economy in the world, with an estimated annual growth rate of 6%.
In the midst of this thriving economy, VCI Global is driving its growth strategy in Southeast Asia. As an emerging market leader in IPO advisory and investor relations in Malaysia, the Company, founded in 2013, already has over ten IPOs in the pipeline in the US capital markets and serves more than 40 IR/PR clients in Malaysia. IPO advisory services are a key driver of this business, generating revenues of between USD 5 million and USD 8 million per assignment with a margin of around 50%.
The Company uses the profits from the advisory business to invest in disruptive technologies of young companies. A particular focus is on the areas of AI, robotics, and secure messaging apps, which contribute to asset growth as investments. VCI Global promotes their development in incubators, accelerates their growth and drives the commercialization of innovative technologies. VCI Global is thus positioning itself as a driving force at the interface of technology and business.
VCI Global is also expanding into the real estate sector. In cooperation with leading Asian construction companies, the Company is acquiring consultancy projects in the Middle East and Asia, including a major project in the Middle East. This region has a GDP growth of 4.63% (CAGR) from 2019 to 2024.
With these three solid business areas - Consulting, Investment, and Real Estate - and operating in thriving regions, VCI Global is well-positioned for continued growth. Investors have the opportunity to invest in various future markets with this share while the consulting business continues to generate profits.
Palantir share under pressure: Analyst warns of excessive valuation
Investors are taking a critical look at Palantir shares after Mizuho analysts downgraded their assessment of the AI and data company. They now rate Palantir as "Underperform" instead of "Neutral". The analysts justify their skeptical stance by citing the increasingly hard-to-justify high valuation of the Company. Although Palantir has shown a generally strong performance in recent quarters, analysts have expressed concerns about the "lack of transparency" in the business model and the quality of some recent positive results. They find it difficult to understand how the high valuation is justified.
Analysts are particularly critical of this year's 67% share price increase, which in their opinion already prices in a high acceleration of revenue growth that exceeds current expectations of 20 to 21%.
The Company will present its quarterly figures for the second quarter ending June 30, 2024, on August 5 after the close of trading. Analysts expect earnings per share of USD 0.08, compared with USD 0.05 in the previous year, on forecast revenue of USD 652.1 million.
Palantir has another new business customer in Europe: According to Bild-Zeitung, the Bavarian state parliament has approved the use of controversial police software from the US company Palantir. The system links various police databases, which has alarmed data protectionists and opposition parties. Of the 38.7 million people recorded in 2022, only 40% were suspects. The main point of criticism is the possible accessibility of sensitive data for Palantir, which raises concerns about data protection and privacy. Palantir's further development, therefore, remains an exciting topic for market observers and investors alike.
The traditional company BASF is proving its adaptability through the use of AI and its ongoing digitalization, especially in the agricultural sector. However, BASF faces challenges with the weakening German economy and divergent analyst assessments. However, a financial boost from state funds provided by the state of Brandenburg has brightened the balance sheet domestically. As a diversified company in the fast-growing ASEAN region, VCI Global shows great potential. The combination of a profitable consulting business, strategic investments in future technologies, and real estate expansion positions the Company well for growth. It also operates in regions such as the Middle East, which is generally forecast to see good growth in the coming years. Palantir has a strong market position in the big data and AI sector, but the Company's current valuation raises questions. A lack of transparency regarding individual customer contracts and dependence on government contracts increase the risk profile. Currently, VCI Global appears to offer the greatest potential for above-average returns. The combination of an established business model, investments in future technologies, and positioning in a fast-growing market makes the Company particularly interesting. BASF could offer a solid but possibly less spectacular return. Despite its innovative approach, Palantir appears riskier than the other companies presented due to its high valuation and transparency issues.
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