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February 22nd, 2022 | 10:49 CET

Bayer, Memiontec, Dr. Hönle - Serious threat!

  • Investments
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Water is the basis of all life. We use water for our nutrition, daily hygiene and leisure activities. Water is also a crucial economic factor as an energy source, transport medium and raw material. But access to clean drinking water is not a matter of course; even today, 1 billion people are denied it. According to various experts, this situation will soon deteriorate dramatically. By 2025, 3 billion people could be living in countries with severe water shortages. Therefore, water scarcity is an urgent issue for the future of humanity.

time to read: 4 minutes | Author: Carsten Mainitz
ISIN: BAYER AG NA O.N. | DE000BAY0017 , Memiontec Holdings Limited | SGXE56008290 , DR. HOENLE AG O.N. | DE0005157101

Table of contents:

    Bayer - Pharma top, Agri flop?

    Roughly speaking, the German life science group is active in the fields of health care and food, and this is reflected organizationally in three segments. In its top-selling Pharmaceuticals Division, Bayer focuses on researching, developing, and marketing innovative specialty drugs. These have significant clinical benefits, particularly in the therapeutic areas of cardiovascular, oncology, gynecology, hematology and ophthalmology. Consumer Health markets 170 branded products in the areas of skin, nutritional supplements and pain management, among others.

    The third business unit is Crop Science. Here the Group provides its customers, who are farmers, with tailored solutions for seeds, traits, crop protection and digital tools. As one of the world's leading agricultural companies, the Germans are also working on sustainable, water-saving solutions. The Crop Science business unit can certainly be viewed positively in the long term.

    However, the cleanup resulting from the acquisition of the US company Monsanto years ago is still weighing on the Company. Several lawsuits are pending in the US in connection with alleged carcinogenic products. It had a significant impact on the figures for the past fiscal year, with analysts forecasting a profit of just under EUR 700 million. Things are expected to pick up again significantly in the current fiscal year. The experts predict a profit of EUR 4.6 billion, which brings the 2022 P/E ratio down to a moderate 11. The dividend yield is 4%. Analysts believe the share has an average upside potential of 20%.

    Memiontec - Pre-programmed growth

    With over 20 years of market presence, Memiontec is an established expert in Asia in freshwater and wastewater management. The Company also has a high level of expertise in patented membrane ion exchange technology treatment processes. Recently, the Singapore-based Company announced that freshwater sales have now begun following the completion of the first phase of the Build-Own-Operate-Transfer (BOOT) project in the Indonesian megacity of Pekanbaru.

    The plant currently has a capacity of 200 LPS (liters per second). It is to be increased initially to 500 LPS in the further course involving the rehabilitation and modernization of the existing water treatment plant. The contract with the national water authority PDAM is designed to run for 25 years, thus ensuring continuous cash flows.

    The second BOOT project in the Indonesian capital Jakarta ("Hutan Kota") has already reached the second expansion stage with 450 LPS. The Company is pursuing further projects - mainly in the form of private-public partnership (PPP) projects with municipalities and industrial companies - in China, which is the subsidiary's third location after Singapore and Indonesia. After a share price multiplication, the Company is currently valued at SGD 180 million, equivalent to EUR 118 million. In view of the high order backlog and good prospects, the shares should have further potential.

    Dr. Hönle - Corona profiteer and still losses?!

    The shares of the specialist for UV technology have been on a downward trend since last summer. The downward movement has accelerated again significantly in recent weeks. In the past 12 months, the share lost 43%, whereas SDAX and TECDAX lost only 13% and 6%, respectively. The Bavarians are among the world's leading suppliers of industrial UV technologies. In the wake of the Corona pandemic, the Company attracted attention with its disinfection systems and devices. The devices inactivate germs, viruses, bacteria and mold spores through UVC irradiation. The solutions' fields of application are diverse, including surface disinfection or water disinfection.

    At the end of November last year, the Company shocked with an impairment loss at a subsidiary. In Q4, goodwill had to be reduced by EUR 3.4 million and other items on the assets side of the balance sheet by EUR 4.1 million, as the outlook for the business area had deteriorated. Adjusted operating profit (EBIT) of around EUR 8 million was forecast for the 2020/2021 financial year. Taking into account the extraordinary impairment charges, the operating result will only amount to around EUR 0.5 million. The Company will therefore be in the red below the line.

    Last week, Dr. Hönle specified the outlook for the current financial year with sales revenues of EUR 130 to 140 million and EBIT of EUR 14 to 17 million. The statements on sales of air sterilization equipment were disappointing. In the first three months of the current financial year, Dr. Hönle only achieved sales revenues in the amount of EUR 5.2 million. That means the Company sold fewer systems than originally assumed, despite existing subsidy programs for air purifiers in schools and daycare centers. Sales for the year as a whole are also forecast to be below the previous year's figure. The stock has not yet found its bottom.

    Water is too important an issue to ignore. The worsening (drinking) water shortage can be countered, among other things, with innovative or suitable countermeasures. Memiontec has successfully positioned itself in markets with high potential and additionally benefits from long-term contracts with the public sector. In addition, the share is a "pure-play" in terms of water management. As a global agricultural company, Bayer also reflects the investment theme, but other business areas predominate in the overall performance of the Group. At Dr. Hönle, disappointment dominates in relation to air disinfection systems, which is likely to further weigh on the share of the actual Corona winner.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    Carsten Mainitz

    The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.

    About the author

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