Mid Caps Happy Birthday, MDax

The MDax was created to be the smaller, more nimble version of Germany’s mighty blue-chip DAX index. Twenty years on, the upstart exchange for medium-sized companies has outperformed its bigger, more respected index.
The MDAX was founded to tempt wary investors to the market. Happy birthday!

There was no official ceremony to mark the anniversary, no grand speeches or fireworks.

Germany’s Mid-Cap Dax, or MDax, turned 20 this week. But, true to form, the German stock exchange in Frankfurt did not indulge in pomp and ceremony.

That is not to say that the index, launched on January 19, 1996, doesn't deserve some quiet applause. At the outset, the MDax was listed at 2,648 points, and it has grown since then by more than 600 percent. That's more than double the gains of Germany's blue-chip DAX, its big-brother index that lists the country's 30 largest companies.

The MDax lists 50 medium-sized companies in Europe's largest economy, and its membership changes regularly. Many companies have climbed up the ranks in the past two decades, spending time in the small-cap SDax and cutting their cloth in the MDax before graduating to the big leagues.

Last year, real estate firm Vonovia led the push from MDax to join the ranks of the blue chips. Other one-time blue-chip firms have come back down to join the MDax family – last year it was chemicals firm Lanxess on the losing end as it had to make room for Vonovia.

To explain the MDax's enduring legacy, it's worth taking a closer look at three companies that have been there right from the start: Krones, Hochtief and Südzucker.

Right from the beginning, the world’s biggest food group Südzucker with revenues today of €6.8 billion, has been one of the MDax heavyweights.

One of the founding members was Krones. The packaging manufacturer supplies the food industry and profits from long-term trends. The world population is growing, along with its need for food. And the market is seen as resistant to economic downturns. The stock price of this manufacturer of bottling and packaging machines is currently €10 below its peak of €117 in December.

Anyone who bought the stock ten years ago has been rewarded by growth of 220 percent. With the recent dip in its price, analyst Torben Teichler of private bank Hauck & Aufhäuser sees a buying opportunity.

"Providing the market doesn't deteriorate – and there are no signs of that – it will go back up," he said. The company's perspectives are promising and Mr. Teichler said he expects sound figures for the first quarter and a stock price of around €113.

Yasmin Moschitz of Commerzbank is even more optimistic. She believes a stock price of €125 is possible and recommends buying the stock.

Krones underwent a savings and efficiency program years ago, which is now bearing fruit. For example, the return on revenue is only just under the company’s own target of 7 percent. Krones is represented in all the most important global markets and continues to expand its service business significantly, which has proved resistant to economic trends.


Krones, an MDax veteran, produces packaging machines, like this one for drinks.


The construction company Hochtief has also been there from the word go. Since it was taken over by the Spanish company ACS, Germany’s biggest construction company has recovered from a dip in the early part of the decade.

The new boss of Hochtief, Marcelino Fernandez Verdes, ordered a fundamental restructuring of the company following his arrival in November 2012, selling numerous investments like airports, real-estate companies and the Australian subsidiary John Holland. He wants the company to concentrate on its original construction business.

Hochtief plans to profit from the high level of renovation required for public facilities like highway bridges, but also from a general upturn in construction activity. In 2016, the association of the German construction industry expects revenue growth of 3 percent. There will be considerably more public contracts, and there is a lack of affordable housing in highly populated areas.

“Hochtief is in great shape,” said Marc Gabriel, an analyst at private bank, Bankhaus Lampe. The stock price, which fell below €40 in 2012, continues to climb and is now above €80. Mr. Gabriel recommends buying the stock and sees a target price of around €100.


Hochtief's new CEO Marcelino Fernandez Verdes is turning things around.


Another mainstay is Südzucker, Europe's largest sugar producer, which has been one of the MDax's heavyweights right from the beginning and has revenues of €6.8 billion today.

The company has recently gone through some hard times. Still, the fall of sugar prices since 2012 and a market capitalization which has shrunk by a third could not endanger the stock’s place in the index. The company's free float of 34 percent is low. And there are historical reasons for that, as it is majority-owned by farmers in the south German sugar-beet cooperative.

The company is highly dependent on political decisions and world market prices. And there have also been problems of late with fines from cartel authorities. The stock has had its ups and downs: Last year the stock price recovered at one stage by almost 50 percent to €18, before taking another major hit at the beginning of this year following the announcement of figures for the previous quarter.

Aside from its main sugar business, Südzucker profits in particular from refined products like ingredients for food, animal food and frozen pizzas.

After the fall in its stock price, the analysis firm Warburg Research upgraded the Südzucker stock from ‘sell’ to ‘hold’ in reaction to its earnings figures. Südzucker had done better in the third quarter than expected.

Südzucker investors need good nerves – they’re in the same boat as the sugar beet farmers.


Martin-Werner Buchenau reports from Stuttgart as Handelsblatt's Baden-Württemberg correspondent. Martin Wocher is an editor with Handelsblatt, focusing on the the mechanical engineering and steel industries. Handelsblatt correspondent Martin Tofern also contributed to this story. To contact the authors: [email protected] and [email protected]