Circa today announced its IPO. Norske Skog owns 32% of Circa. The IPO is expected to be prized at approximately 1.5 billion NOK. Norske Skog stake is therefore valued at 500 million, or 5 NOK per share of Norske Skog. It was valued at immaterial amount. It NAV should therefore increase by close to 5NOK per share.
I believe that the market does not give Norske Skog any credit for this value creation. It should be fully reflected when the Circa IPO is launched on 3 March.
Circa is converting bio-waste into a high grade chemicals. They partnered Merck to distribute the chemical.
Pareto is pricing Circa at “25% below our mid range valuation”. Circa share price should increase significantly on the IPO debut day. As most IPOs do lately. So it should trade up by 25% at least.
If you value Circa based on current multiples of Renewcell, the valuation upside should be 50%-100%. If you value this based on Carbonis multiples, Circa should be valued at 4-6 times its IPO price.
Do not assume, that Circa will reach multiple valuation on its first trading day. But it is realistic to assume that it could easily double on the first day and further double in the next six months. In such scenario Circa would represent 60% of Norske Skog market capitalization – 20 NOK per share. The best way to play Circa IPO now is through Norske Skog shares.