Pareto included Norske Skog (ticker NSKOG) into their top pick portfolio for August last week. See my blog post with the Pareto research summary on this below:
Sparebank issued very bullish research on Norkse Skog last week titled:
Increased utilization as capacity closures comes into effect -> material increase in newsprint prices
The research front page summary is below:
The closures of capacity have rebalanced supply demand and according to our knowledge, newsprint prices in Europe has had an material increase in July. Q2 was a disappointment due to higher costs for recovered paper (RCP), but RCP prices have been flat the last month. Cost increases are front-end loaded.
The effect of the closures and hence increased utilisation have according to our knowledge led to a material increase in prices for newsprint in Europe. Our take is that the share prices for peers to NSKOG have increased the last month due to this price increase with NSKOG lagging peers. The enterprise value of NSKOG is small compared to peers and NSKOG has a large investment programme starting in Q3 2021, but still we argue the disconnect to peers is unwarranted. Overall, we expect prices for NSKOG will increase 15% compared to Q2 2021 for Q4 2021 and around 8% in Q3 2021 as some contracts will have price increases later in Q3 2021. From Q4 2021, with 15% price increase, flat RCP prices and higher gas prices, we expect NSKOG to deliver an annualised EBITDA close to NOK1bn. If valued in line with peers, we argue that a fair share price is NOK closer to NOK100. The conversion to containerboard is in our mind a step towards being valued in line as a going-concern. As the majority of the current portfolio for NSKOG is exposed to a declining market, we value NSKOG based on a “5% decline in demand” scenario and view NOK50 as a fair target price.
We recommend buying NSKOG ahead of the Q3 numbers as we expect this quarter will show the effect of increased utilisation/prices and the path to a NOK1bn EBITDA scenario.
I am long and bullish on NSKOG.
OTHER IDEAS TO LOOK AT:
I am very bullish LInkfire. Investment thesis below:
I am very Bullish Biovica. I believe the stock shoudl go up by at least 50% by the launch of US sales in late August/Septermber.