Endor AG (E2N.DE) - A Brief Introduction
As I was getting ready to hit “send” on another post related to this stock, I remembered that very few people have probably even heard on Endor. So let me provide some color.
Endor is a German small cap company that designs and sells sim racing hardware. Sim racing is a form of gaming that tries to replicate the experience of driving a racecar around a track. These games use very sophisticated physics engines to do this, but rely on hardware to transfer these physics from the game to the players hands. Fanatec, the consumer facing brand under Endor’s umbrella, sells wheelbases, steering wheels, pedals and accessories to make this virtual driving experience come to life. The wheelbase contains an electric motor which applies mechanical force to the wheel, which simulates bumps, the roll of the car and other forces which help to tell the player “what the car is doing”.
The industry has historically been pretty niche and as a result, competition is relatively low. Logitech and Thrustmaster (consumer brand for Guillemot) make up the low-end competitors and Fanatec occupying the mid to high-end market. There are some other competitors in the high-end, but many of these products are closer to professional grade than hobbyist grade and as a result reach a much smaller user base. Fanatec is by far the largest competitor in the space and is positioned very uniquely for the console market (Sony’s PlayStation and Microsoft’s Xbox), they are the only high-end firm that provides products for console players. With the console market being much bigger than the PC market, this represents a great opportunity for the firm.
Note: Thrustmaster does offer a few products that would fall into the mid-range category, however they have no presence in the high-end space.
This story isn’t just about the fundamentals though. Endor IPOd on the Munich stock exchange in 2006 with a market cap of 17 million Euro. Fast forward to today and it is now a 350 million Euro company doing close to 100M euros of revenue. Despite this growth, the company still does not function like a larger corporation. They historically1 have not reported quarterly financials and all of their filings were released in German only. The company reports under the German accounting standards and not IFRS. It’s not very IR focused, but that is changing.
The company also doesn’t enjoy the efficiencies and scale gained by being a larger company. They don’t have a large dataset to better meet customer demand. They outsource manufacturing to TWO suppliers. These flaws do however present opportunity; The company has a lot of levers it can pull to extend the earnings power of the business.
I don’t want to spill too many details here as I plan on writing more about this company in the future, but hopefully this is enough to get you interested. I have enjoy the treasure hunt that is researching this business and am looking forward to sharing more about it.
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Endor AG’s first quarterly filing was released in Q1 of 2021 in both English and German.
I should note, I do have a position in this security. It is small and pretty illiquid. Do your own work before deciding if you want to buy the stock.