Deutsche Bank, mm2 Asia, Commerzbank - Uncertainty brings opportunities

After opening - Top opportunity in Singapore

Infection rates in the island and city-state of Singapore are dropping significantly, with just 2,000 new cases per day. The government of the global financial center south of Malaysia recently announced significant relaxations. From now on, fully vaccinated travelers will be allowed to enter Singapore without a negative Corona test. This year, international guests will be offered a lot, including the Singapore Formula 1 Grand Prix, the Singapore Food Festival, and the 10th anniversary of the "Gardens by the Bay," a 101-hectare park area built on artificial land in Singapore's central district.

mm2 Asia Ltd. is particularly benefiting from the opening and is likely to face a strong rebound as a result. The Company is Singapore's leading media entertainment and content company, with regional offices in Kuala Lumpur, Taipei, Hong Kong, Shanghai, Beijing and the US. The business model revolves around "content and media" and is diversified across several sub-segments. The core business is content production, distribution and sponsorship. The acquisition of a majority stake in the award-winning virtual reality, visual effects and computer-generated imagery studio, Vividthree Holding and an event production and concert promotion company, UnUsUaL Limited, gives the Company a clear competitive advantage over its local competitors in this area. With the establishment of mmCineplexes and the acquisition of Cathay Cineplexes Pte. Ltd, mm2 Asia is also one of the most important operators in the region, with 26 cinemas in Singapore and Malaysia.

With the post-Covid pandemic openings, the event production and concert promotion segment promises strong recovery potential. Before Corona, revenue in fiscal 2019 was EUR 174.66 million, while gross profit was EUR 81.49 million. Market capitalization currently stands at EUR 131.69 million. With the expansion of its cinema activities, the staging of major events and the launch of Metaviva, an NFT marketplace, mm2 Asia is well-positioned on several feet. The experts at analyst firm UOB Kay Hian see a target price of EUR 0.075, representing a 100% opportunity for mm2 Asia, which is traded in Frankfurt.

Still in step

For months, two of Germany's largest money houses have been running almost in parallel, driven by news. Both Deutsche Bank and Commerzbank rallied sharply in January after the US Federal Reserve announced a change in monetary policy strategy. That boosted both stocks, which climbed to a new 4-year high. But the party in the shares of banks and financial service providers, which benefit from the rising interest margin, was abruptly stopped by Russia's invasion of Ukraine. The fear of risks in the Russian and Ukrainian loan books was now the slogan that caused both share prices to plummet by more than 30%. After the respective management levels indicated that the risks were relatively low, there was a clear recovery, which was, however, abruptly halted by the sale of Commerzbank and Deutsche Bank by the major shareholder Capital Group.

Significantly better than expected figures

Both banks now presented figures for the first quarter of the current financial year on the same day. Coba more than doubled its operating profit from EUR 284 million in the same period last year. With an operating result of EUR 544 million, the analysts' estimates of EUR 282 million were almost doubled. "Thanks to a strong customer business, we increased our operating profit, although the economic consequences of the Russian war of aggression on Ukraine weighed on our risk result," said Group CEO Manfred Knof (56). "We are sticking to our targets for the full year," he added. US investment bank Goldman Sachs left its rating for Commerzbank at "neutral" with a price target of EUR 9.70 after the preliminary figures.

On the other hand, Goldman Sachs set the Deutsche Bank share at "buy". The price target was repeated at EUR 18.70. A strong performance in trading in government and corporate bonds, currencies and commodities (FICC) had led to a positive revenue and earnings surprise. In the process, Deutsche Bank also beat analysts' forecasts. "The good start to the year gives us further confidence that we will achieve our targets for the current year," commented Group CEO Christian Sewing when presenting the interim report in Frankfurt on Wednesday. Deutsche Bank earned around EUR 1.7 billion before taxes in the first three months, 4% more than in the same period last year. The bottom line left shareholders with a surplus of almost EUR 1.1 billion, an increase of 17%.

Despite the more than solid set of figures, the two shares were deep red. Deutsche Bank was just under 5% red, while Commerzbank was 2.20% behind. However, the two banks seem to be on the right restructuring path in the long term. Due to the uncertain market situation, both shares are currently positioned for the watchlist.

First, the Corona pandemic, then inflation and now the Ukraine crisis - The uncertainties on the markets are more present than they have been for a long time. However, crises offer interesting entry opportunities for the future. mm2 Asia will benefit significantly from the openings for events. The two banks, Deutsche Bank and Commerzbank were able to outperform analysts' forecasts.