Quantafuel – Broker Comments on QFUEL Hot Commissioning Announcement

Quantafuel (QFUEL) announced today it has completed the plant reconstruction and it has also completed cold commissioning. QFUEL is now proceeding into hot commissioning.

Cold commissioning represents cold tests that all plant modifications are tight – there is not leakages. Hot commissioning means the plant is actually starting its operation.

QFUEL also reconfirmed its target to reach proof of concept around year end. The most positive announcement is reconfirmation of the plant assumed capacity of 12k tons of plastic., which means that at least from the mid year QFUEL should operate at full capacity.

Pareto take on the announcement:

Quantafuel just announced that the Skive plant is progressing as communicated in the Q3’21 report. The plant is now transitioning into hot commissioning, followed by feeding of plastics around mid-December and the aim to reach proof-of-concept (PoC) around YE’21, roughly two weeks later. Quantafuel also reveals that the PoC is only linked to running one of the four lines with commercial plastics at high load with high availability for a prolonged duration (apparently 2 weeks). Further, the company includes 2022 targets for Skive of processing of 12k tonnes of plastics, ending the year at a full capacity of 20k tonnes. In sum, positive that the company seems confident in reaching proof-of-concept in only weeks. With several delays and changes to plant assumptions, our target price is currently under review

Fearnley take on the announcement

QFUEL (Under review)

  • Skive is on track for PoC around year-end

QFUEL announce today that Skive is progressing as stated in 3q21 and is on track for PoC around year end. The company communicates that they are about to start hot commissioning, which will be followed by feeding of plastic around mid-December. Further QFUEL states that the installation and cold testing of two of the four lines at Skive have been completed on schedule, and the remaining lines are under preparations in parallel with ongoing commissioning, start-up, and operation. All four line are identical, and the company’s initial focus after hot commissioning will be on running one of the lines with commercial plastics at high load for a prolonged duration, producing acceptable liquid for offtake partners. This is what PoC is linked to. We see this announcement as another positive step for QFUEL towards successful operations at Skive, and notice that after several delays at Skive, the company is advancing at a higher pace towards PoC than previously.

OUR TAKE – valuation

There is a positive news from QFUEL on weekly basis. Last week we had an announcement on Kristianslund, one week before that it was an announcement on new partnership.

If you look at past price performance, when the market expected proof of concept, the share price jumped above 70 NOK. The share price had a nice move this morning, but there is still more than 130% upside to the previously reached 70NOK. If the company delivers, the share price should continue moving strongly. Todays share price move is a small one relative what the company could experience if the PoC is reached.

The company is very active in preparing new plant projects. Once the proof of concept is achieved, there should be a lot of traction – there will be four large plants under construction at the same time. There should be a lot of positive newsflow.

Other interesting news today:

From Fearnley research:

BW LPG (Buy, TP NOK 78)

  • Sells 2 vessels and initiates 10m share buyback program
  • Sells four vessels to BW LPG India

BWLPG continues its fleet high grading with the sale of 2x 2010 built VLGCs. The vessels are BW Niigata (previously Yuricosmos) and BW Sakura. BW exercised the purchase option on Niigata in 3q21 and is now selling the vessel together with Sakura for a net gain of USD 13.7. No price was revealed, but the sales will generate liquidity of c. USD 72m. Simultaneously, BW LPG is initiating a buyback program of up to USD 50m (10m shares with max amount of USD 50m). With the share trading at c. 50% of NAV this is an exercise (selling assets and buying equity at a steep discount) that in our view makes a lot of sense.


Biovica – out doubling candidate

Biovica – QFUEL is starting to move, as the catalysts are coming nearer. Biovica should experience the same very soon. See below for Pareto take on Biovica, who recently published research highlighting the doubling optionality within weeks.

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The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

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