I had a privilege to speak to Quantafuel management for one hour after the webcast yesterday. The information was quite reassuring. Below is my summary of the interactive meeting.
How certain are we that the modifications in Q4 would be sufficient
The company has been testing and resolving issues during the last months. Many issues have been already resolved. The company concentrated on testing the technology to assess what modifications are needed. They run certain parameters and assess the results. For example in the last five runs, they did not experience a single unexpected issue. They know the issues, and they know what causes them. My take – I must say that they were very confident and their confidence was very reassuring for me.
Proof of concept milestone – will Quantafuel reach the milestone before the modifications scheduled for Q4
It is quite possible that Quantafuel could reach proof of concept on current equipment settings. But they view it as less important. The priority will be to reach proof of concept after the modifications.
Could the modifications be delayed?
The modifications are scheduled to be completed and the plant should be restarted by mid Q4. That is just two and half months from now. They seemed quite confident that the timing should be achieved.
Finansavisen article titled QFUEL does not rule out postponements
The management was very unhappy about the title. The journalist asked the managment whether there could be further delays in commercialization. The reply basically was that one can never exclude any unforeseen situations but the management believes the stated deadlines should be met. The journalist run a title that QFUEL does not rule out further postponement. From what the managment told me the title might in my view not fully express what they told the journalist.
The board has approached prominent figures outside of the factory. Certain insiders also submitted their CV to the board. The process is to be finalized by October. In my view it is surprising that the CEO would appointed only after the modifications are resolved.
My take on this was quite reassuring. The mgmt was quite confident and made strong statements on their understanding where the issues are and how to fix them. We should be just over two months from the modifications completion. Hopefully that will be the final step in the commercialization process. I expect that as mid Q4 would be coming closer, the QFUEL share price would start moving upwards.
My top picks portfolio
LInkfire – in my view top IPO from Scandinavia. Since I first wrote about it about six weeks ago the share price is up 20%. The company on Q2 call mentioned they are finalizing a takeover of a major competitor, which should be completed very soon. This would be the next major catalyst in coming weeks. I believe Linkfire could reach 20 SEK this year (now 12 SEK). Full thesis is below:
Energy Recovery – my largest position. Since I wrote here first about year and half ago, the share price is up 140%. The company has a unique Pressure Exchanger technology that transfer desalination industry, where it has 100% mkt share. Now they are implementing the technology into other industries. The next big industry is refrigeration and climatisation, which is due to regulation transferring all technology from greenhouse gasses into CO2. The technology can save 30-40% of costs. ERII expects first sales of its CO2 products this year. The company has ten time potential over next few years. Full thesis:
Biovica – is up 50% since I published first here. I believe it will breach 100 SEK from current 56 SEK by October. See my prior posts on this. Very bullish.Full thesis below:
Africa Energy – is about 20% below since I first wrote about this, despite the fact that all is progressing well for the company. This company could be up three times by the end of the year. Major points:
- Africa Energy (Lundin Group) owns 10% stake in one of the largest gas discoveries in the world.
- The block is majority owned and operated by French oil giant Total.
- Total is expected to reach an off-take agreement with South African government by October.
- The off-take agreement will be the trigger for Africa Energy to sell their stake and distribute the cash as dividends to shareholders, as they repeatedly declared.
- The value of the stake is 3-5 times of Africa Energy capitalization. Good risk reward for 12 months investment horizon.