Quantafuel share issue timing reasons, Norske Skog top idea for the next two weeks

QFUEL CEO and Lego foundation participated in Quantafuel (QFUEL) share issue yesterday. Carnegie published their bullish update on Norske Skog (NSKOG) increasing their price target. Pareto and SpareBank have NSKOG as their best idea for January. It is out top idea for the next two weeks.

Quantafuel competed share issue yesterday

The company made two intersting disclosures – information on who subscribed and Skive update:

Skive update:

The ramp-up of production at the Skive plant continues to progress, and two of four lines have operated at design capacity proving that the last remaining identified process challenges have been resolved. The production lines also delivered the oil yield and quality expected indicating the chemical process is functioning according to plan. The plant has limited redundancy, so the Company still need to stabilize operation and produce for a longer time-period to deliver on its plan for Proof-of-Concept. Last week (the w/c 17 January 2022), the Company converted more than 100 MT of waste plastic to valuable product, and the Company’s opinion is that they are well on track to reach the 12,000 MT target for the full year 2022. The forecasted CAPEX of NOK 610 million remains unchanged.

It is encouraging that QFUEL again reconfirmed their bullish full year guidance. It implies the plant should be running at full capacity from mid year. It is also very encouraging the plant seems to be able to process a lot of plastic – 100mt per week seems encouraging. As I wrote before here, I do not believe, that it makes any difference to the QFUEL value proposition of whether the PoC is reached this week or next month. I understand that the reason for the timing might be a regulatory one. Insiders can not trade within 30 days before the quarterly results announcement. Yesterday was the last day before the deadline. Kirby, as a main shareholder would not be able to participate between yesterday and the results announcement. The company might have been also concerned about the worsening market conditions caused by changing macro environment as well as geopolitical issues (Ukraine tensions). They are right – if Russia would attack Ukraine, the markets would close for many months…

Strong shareholders subscribed:

KIRKBI Invest A/S, a company closely related to the board member Kasper Trebbien, was yesterday allocated 4,000,000 shares in Quantafuel ASA at a price of NOK 25.00 per share. After the transaction, KIRKBI Invest A/S holds 17,888,880 shares in Quantafuel ASA.

Thorleif Enger, member of Quantafuel ASA’s board of directors, was yesterday allocated 20,000 shares in Quantafuel ASA through Thoeng AS at a price of NOK 25.00 per share. After the transaction, Thorleif Enger and affiliates holds 159,300 shares and 80,000 options in Quantafuel ASA.

Lars Rosenløv Jensen, CEO in Quantafuel ASA, was yesterday allocated 20,000 shares in Quantafuel ASA at a price of NOK 25.00 per share. After the transaction, Lars Rosenløv Jensen holds 20,800 shares and 400,000 options in Quantafuel ASA.

There is another interesting aspect I saw yesteray in the FB Quantafuel Investoren Forum. It showed that 20 largest shareholders are buying. That seems to be right even after you deduct custody banks for online trading platforms. Smart money buying is always a good signal.

Norske Skog – top idea for the next week

Norske Skog (NSKOG) is reporting next Friday. Pareto and Sparebank have NSKOG as their best idea for January. Carnegie increased their price target today that drove the share price up 5%. ABG is due to report their guadance next week. NSKOG is our top trade idea for the next week:

  • NSKOG Q4 numbers should be very strong. Brokers estimate Q4vsQ3 EBITDA growth by 200-300%.
  • Strong paper prices should cause the EBITDA to tripple in 22 vs 21. Sparebank estimates EBITDA would increase from 450 mill NOK to 1600 mil NOK. Carnegie expects 2022 EBITDA even higher at 1950 million NOK.
  • NSKOG is cheap vs peers. Under Sparebank estimates NSKOG trades at 4.2x 2022EBITDA vs 9.5x 2022EBITDA for the peers.
  • Pareto estimates that the renewable portfolio has the same value as NSKOG current market cap. I do not believe the mkt gives NSKOG any credit. Its waste to energy plants comes into operation in five months. That should cause recognition of this value by investors.
  • The mkt gives NSKOG no credit for significant CO2 permits revenue – 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%.

Carnegie increased its price target today. Research front page summary below:

We expect EBITDA more to double Q/Q to NOK230m
Q4(21) has been characterised by strongly increasing energy prices (electricity and gas) and to some extent other input costs, but also higher publication paper prices for those producers, such as Norske Skog, that have imposed surcharges. While we expect material costs per tonne in Europe to have increased by 21% (from EUR300/t to EUR363/t), this is more than offset by higher paper prices. For Q4, we have factored in EUR569/t (+EUR100/t).
There might be upside here as the time-weighted surcharges add up to EUR126/t.

Strong increase in 2022 estimates, modest for 2023
Currently the publication paper market is very tight. Recent closures, high energy prices and the Finnish strike all contribute. We expect the industry’s operating rate to exceed 90% over the next two years. For 2022e we have increased Norske Skog’s ASP in Europe by 10% (to EUR629/t) and for 2023e by 4% (to EUR584/t). The 2022 price estimate is 17% below the January prices, recently released by RISI. This alone increases our 2022 and 2023 EBITDA estimates by NOK870m and NOK310m, respectively. Higher energy and material cost forecasts (+ 5%) shave off around NOK200m. In total this increases EBITDA in 2022e by 56% to NOK1,949m and for 2023e by 3% to NOK1,524m.

Despite a decent run lately, the share still stands out very favourably
On our estimates, the share trades on EV/EBITDA multiples of 3.2x and 4.4x on our 2022 and 2023 estimates. Excluding the IBD build-up for the conversions and the value of the nonpaper initiatives (not incl. in P&L EBITDA), the corresponding multiples fall to ~1.8–1.9x.

We increase our target price to NOK80(70)
The new target price is based on our new estimates with peer pricing and a 35% discount and a SOTP valuation, where we have used 2025 estimates at an EV/EBITDA of 5x for the ‘old’ Norske Skog, 6x for the conversion and we have also risked the values by 33%.


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 any 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 investing money in these creasy markets.

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