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June 25th, 2024 | 08:45 CEST

Evotec, Royal Helium, Nel ASA - Turnaround candidates under review

  • Mining
  • Helium
  • renewableenergies
  • Biotechnology
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With the recent rise in shares in Power Nickel, following a bonanza find in its exploration work, the topic of "turnaround candidates on the stock market" is once again coming to the fore. Such companies, which get back on track after significant price falls, offer investors enormous profit potential. The recovery after a deep crisis can represent a second chance for investors but requires a keen sense of market analysis and timing. The success of the investment depends largely on the right selection and timing of entry. We take a look at three candidates.

time to read: 4 minutes | Author: Armin Schulz
ISIN: EVOTEC SE INH O.N. | DE0005664809 , ROYAL HELIUM LTD. | CA78029U2056 , NEL ASA NK-_20 | NO0010081235

Table of contents:

    Evotec - Takeover rumours boost the share

    Since the surprising resignation of former CEO Werner Lanthaler and the resulting inconsistencies, the share price has fallen to EUR 7.215. Recent takeover rumours have led to a sharp jump in the Evotec share price due to reports from the financial service "Bloomberg". Market participants may remember the similar case of MorphoSys in the spring when Novartis paid five times the lowest price. Accordingly, the share price shot up to EUR 8.88 after the rumours became known. Nevertheless, the share is still a long way from the price of over EUR 21, at which it was trading before the CEO's departure.

    According to "Bloomberg", several private equity companies have expressed interest in taking over Evotec. These investors specialise in majority shareholdings and complete takeovers, particularly in medium-sized companies and groups. Following the jump in the share price, Evotec's market capitalization is currently around EUR 1.48 billion, which makes the drug discovery company attractive for buyout firms. In order to arm itself against possible takeover attempts, Evotec has allegedly engaged consultants who specialize in defending against such takeovers.

    Operationally, things are going well. A significant scientific advance in the neurology partnership with Bristol Myers Squibb triggered a USD 20 million payment. The partnership focuses on the development of novel treatments for neurodegenerative diseases. Tubulis, in which Evotec holds a strategic stake, has dosed the first patient in the Phase I/IIa study for the ADC candidate TUB-040 in ovarian cancer and lung adenocarcinoma. The new CEO, Christian Wojczweski, will likely need time to get the Company back on track. The share is currently trading at EUR 8.31.

    Royal Helium - Progress in exploration and production

    Royal Helium has mastered the step from helium explorer to industrial gas company. Production has been running since the end of last year. The share has come under pressure due to a capital measure through which the Company raised CAD 6 million. New shares were issued at CAD 0.09 each. In addition, each investor received a warrant with a strike price of CAD 0.12. The money is to be used to finance new drilling. The Company has begun licensing the Forty Mile #1 exploration well in the Forty Mile project in southeastern Alberta. This area covers approximately 2,830 hectares and hosts a historic well whose results reflect some of the best helium discoveries in Alberta, Saskatchewan and Montana.

    In parallel, Royal Helium is making significant progress at its Steveville production facility. The plant delivered its tenth and eleventh helium trailers in May and has increased production to 50% of total capacity, with occasional increases up to 75%. This increase in production is equivalent to selling four trailers per month, which is double the previous performance. Once full capacity is reached, the Company expects a monthly output of seven to eight trailers. The technical expertise of the team on site and the continuous improvements are significantly contributing to this success.

    In order to optimize production as quickly as possible, the Company has engaged Progress Through Technology LLC to manage the ramp-up and stabilization of helium production in Alberta. On June 21, the next 2 helium trailers were delivered. The plant also produces food-grade CO2 and condensate. The Company is settling the bond interest payments by issuing new voting shares. Investors should follow Royal Helium's continued progress and strategic actions closely as there is a lot of potential here, especially when the Company receives its CO2 credits. The stock gained over 14% last Friday on heavy volume and is currently trading at CAD 0.08.

    Nel ASA - Outsourcing of the refueling division

    Although the National Hydrogen Council predicts a significant increase in hydrogen demand in Germany for 2030 to between 94 and 124 terawatt hours, mainly due to demand from the steel industry, heavy goods vehicles, and the chemical industry, many hydrogen stocks are performing poorly. Nel ASA is one of the best-known European providers of hydrogen technology, yet even the electrolyser expert has not yet made it into the profit zone. Despite political support, the hydrogen refueling division has been highly unprofitable.

    On June 12, this division was spun off into the new Cavendish Hydrogen. The shares were placed at NOK 29. Shareholders of Nel ASA received one share in the new subsidiary for every 50 shares held. The share price subsequently halved and then rose to over NOK 38. It was a real rollercoaster ride for the shareholders. At NOK 27.84, the price is currently below the issue price again. The self-proclaimed pioneer in electrolyser technology is now focusing exclusively on the development and supply of state-of-the-art electrolysers for hydrogen production.

    With investments in new technologies and strategic partnerships, including an agreement with Reliance Industries, the Company is positioning itself for further growth. The latest financial results underline the success of this strategy, with increasing revenues and a positive EBITDA. Nel is also seeing capacity expansion in Norway and the US, laying the foundation for future success. The share, therefore, has the potential for a turnaround. The share has fallen from NOK 8.70 to the current NOK 5.67.

    All three companies presented have the potential for a turnaround. Evotec is benefiting from takeover rumors and operational successes, which form the basis for future growth. Royal Helium is making significant progress in production, sales of helium and exploration of new areas. Nel ASA is showing a clear direction with growing sales and hopefully positive results by spinning off the loss-making refueling division and focusing on electrolysers.

    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

    Armin Schulz

    Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.

    About the author

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