Norske Skog – what the market does not know

I think the consensus does not know or does not appreciate how material CO2 permits are for the NSKOG.

Carnegie is the only broker that did the calculations in their research. I have not seen this in any other broker report.

Carnegie estimated the CO2 permits revenue between 45-60million EURO. That was done when permits were around 60 EURO. The permits are around 90 Euro, If you recalculate this to current CO2 prices, the next year CO2 revenues would be 60-80 Million EURO. That is very material for 350 million EURO market cap. For comparison SpareBank estimates that next year paper EBITDA would be 100 million EURO. CO2 Permits could increase the EBITDA by 60-80%.

SpareBank today published their TOP Picks for December

Norske Skog is on the list for a third month in a row. Their key takeaways were:

• Our take is that NSKOG expect a tight newsprint market in the foreseeable future, in other words, NSKOG expect high utilization and thus prices moving forward
• In our mind surcharges/price increases have not led to demand destruction
• We would not be surprised if 2022 EBITDA from newsprint could be above NSKOG’s over-the-cycle NOK1bn in EBITDA.

• In a going-concern scenario we argue that the share price could
increase to around NOK100. The share is trading at NOK33.
A
NOK100 scenario increases the market cap with ~NOK6bn and
the conversion capex is estimated to be EUR350m or NOK3.5bn
• We would not be surprised if StoraEnso sees the same potential
and view NSKOG as an attractive acquisition target

Summary

We have published already second time about NSKOG this week. We have never invested in paper business. NSKOG is different. We do like the value optionality – there are multiple reasons why NSKOG should revalue materially.

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Disclosure: 

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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