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September 12th, 2023 | 07:10 CEST

Trend-setting developments at Covestro, Cardiol Therapeutics and 2G Energy AG

  • Biotechnology
  • Energy
  • Innovations
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The holiday season is drawing to a close. By Tuesday at the latest, when the last German state concludes its school holidays, every investment banker will be back at their screens, closely monitoring the most exciting events on the markets. Despite the summer lull, there have been many impactful events, especially in second-tier companies, which could significantly impact share prices in the near future.

time to read: 4 minutes | Author: Stefan Feulner

Table of contents:

    Covestro AG - The story continues

    It is becoming increasingly likely that German plastics manufacturer Covestro will slide under the umbrella of state-owned oil company Abu Dhabi National Oil Company, or Adnoc, in the future. In a company release, the CEO of the Leverkusen-based company, Dr. Markus Steilemann, announced that open-ended talks are to be initiated with Adnoc. How far and on what terms a deal could be reached will depend on the upcoming negotiations.

    The Company director stated: "Adnoc's interest in our company underscores our strong position as one of the world's leading producers of high-quality plastics and as a pioneer on the path to a circular economy. Despite the current economic challenges in our industry, we are ideally positioned to create sustainable substantial value in highly attractive industries with stable long-term growth trends. Regardless of the discussions with Adnoc, we will remain focused on implementing our successful Sustainable Future strategy to realize our full potential and continue to drive the transformation to a circular economy."

    Most recently, the business channel Bloomberg, citing insider information, reported a verbal offer by Adnoc to be between EUR 57 and EUR 60, representing a total volume of EUR 11.6 billion. A key player in the UAE's oil supply, Adnoc is pursuing ambitious investment plans amounting to USD 150 billion to strengthen its global presence in the natural gas, chemicals and renewable energy sectors. Persian Gulf oil producers are generally looking to diversify their reliance on crude oil sales. Covestro shares are getting closer and closer to this level. Following the announcement, it gained more than 6% to around EUR 53.

    Cardiol Therapeutics - The 500% Opportunity

    If it were up to various analyst houses, the shares of the Canadian clinical-stage life sciences company, which is dedicated to the research and clinical development of anti-inflammatory and antifibrotic therapeutics for the treatment of heart disease, should be trading significantly higher. Thus, in its current study, analyst firm Canaccord Genuity assigned a "Buy" rating with a price target of USD 6, which equates to a price potential of just under 500% compared to the current price of USD 0.94.

    The experts at First Berlin Equity Research are not quite as euphoric. However, with a price target of USD 3.60 and a "Buy" verdict, according to their estimates, there is also a significant undervaluation and thus an upside potential of around 260% after the announcement of the figures for the first half of 2023. In this context, the published figures would have met analysts' expectations. The Company's cash balance at the end of the first half was USD 32.87 million, sufficient to fund operations through 2026.

    The Company said that CardiolRx's two core programs for recurrent pericarditis (RP) and acute myocarditis (AM) were on track.

    At a recent US investor conference, management confirmed that all 8 clinical sites in the US for RP were actively recruiting patients. First Berlin expects 50% of the total planned patient enrollment to be completed in the next few weeks. Thus, analysts believe there is a good chance that Cardiol could positively surprise investors before full trial results are expected early next year. Like peer Kiniksa Pharmaceuticals' approval process for its approved drug rilonacept, should Cardiol's efficacy results be positive for the first 50% or 12 patients, experts expect management to meet with the FDA in the fourth quarter of 2023. The goal of this meeting is likely to obtain permission to initiate a Phase III trial immediately. The subsequent announcement of the start of a Phase III trial would then naturally be a great catalyst for the stock.

    2G Energy AG - Full employment despite falling orders

    Fears of recession and a reluctance to place further orders characterize the current earnings season for many companies, including the Heek-based supplier of decentralized energy supply via combined heat and power (CHP) block heating power plants. Compared to the same period last year, incoming orders sank by around 31% to EUR 77.6 million. In the previous year, record figures of EUR 112 million were still achieved, but this was due to the panic in the wake of the Ukraine war, as many companies were looking for alternative energy sources to make them independent of Russian oil and gas. Therefore, 2G Energy will likely remain fully engaged in fulfilling existing orders despite the slowdown.

    In the first half of the year, there was a growth in revenues of 18.9% to EUR 135.5 million. In parallel, the plant's production output increased by 20.7% to currently EUR 166.3 million. This growth was achieved through the consistent application of "Lean Production" methods by 2G. The increased efficiency is manifested in the significant increase in work in progress, which now amounts to EUR 97.3 million, up from EUR 66.7 million in the same period of the previous year, and consists mainly of cogeneration units ready for delivery or connection. The EBIT margin also showed a positive development, rising from 2.2% in the previous year to currently 3.0%. EBIT grew by 61.8% to EUR 4.1 million, setting a new record for a first half-year.

    On a weekly comparison, the 2G share has performed by around 5% to EUR 25.55. The high for the year is EUR 30.05.

    Cardiol Therapeutics could deliver positive surprises later this year, according to the views of several analyst firms. 2G Energy is still running at full capacity despite a dip in its order books. The takeover of Covestro by the state-owned Abu Dhabi National Oil Company is expected to make further progress in the coming weeks.

    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

    Stefan Feulner

    The native Franconian has more than 20 years of stock exchange experience and a broadly diversified network.
    He is passionate about analyzing a wide variety of business models and investigating new trends.

    About the author

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