Scandinavian Opportunities Today

Hafnia and Pryme sold off due to secondary placements. Both are down and both present a buying opportunity.

Hafnia down by 8% today on Secondary Placement

Hafnia one of the most bullish stocks in Norway did secondary placement, that drove its share price down by 8%. Hafnia is the one of the companies that will benefit from EU embargo on Russian Hydrocarbons. Russia is the major supplier of diesel to EU. We are cutting off from Russian hydrocarbon supplies. It is already happening. Yesterday it was reported the workers in Dutch ports are refusing to unload Russian tankers. It means EU is switching to alternative suppliers of diesel. Hafnia and Scorpio are the beneficiaries. Pareto has Hafnia price target of 35 NOK. According to Pareto: Hafnia that currently generates NOK 1+ of monthly EPS – implying run-rate P/E of around 2x at the current share price. HAFNI will generate near USD 250m of operational cashflow in H1’22, vs. USD 66m during the whole of 2021.

The share is today at 25.5NOK, down from 28.8 NOK yesterday close. Clear buying opportunity. Our family office bought yesterday at the SPO and doubled on that purchase this morning.

More on Pareto take on Hafnia below:

How to Trade the War – Pareto Bullish on Product Tankers Scorpio and Hafnia

PRYME CLEANTECH down 15% over last two days on Secondary placement

Nordea issued a bullish report on Pryme two weeks ago with a price target of 85 NOK. The share price is down from 28 NOK to 11 NOK over the last two weeks on share issued in the Secondary Placement, that was completed yesterday. The share price is raising today and should do in the coming weeks. The company is reporting on 25 May. Pryme is fully financed until for this year. The commissioning is scheduled for Q3. Quantafuel had a strong performance as they started the comissioning. Pryme may have the same.

I wrote about Pryme here:

EU sanctions on Russia Hydrocarbons – other trade ideas

I wrote about sanctions impact on Product tankers above. The other beneficiaries of the EU ban will be oil tankers and LNG tankers. I wrote on this opportunity here several times before. We are long COOL and GLNG. Look at past posts for details and valuations.

Mintra reported reported annualized 28% CF yield in Q1

Pareto take on the Q1 report: Mintra reported FCF above 40m in Q1, equal to ~7% of its EV, and modest growth of ~3% y/y. Looking ahead, the ~80% customer exposure towards ‘oil, gas and maritime’ and its record high order intake (up 17% y/y), should result in upped growth and continued cash generation. Coupled with Mintra trading at ~7x ‘22e EV/EBITDA, on what we believe are conservative estimates, we reiterate our Buy/TP NOK 7 recommendation, equal to ~15x ‘22e EV/EBITDA.

Q1 FCF of more than 40m, equal to 7% of current EV

Mintra’s Q1 report included slight organic growth and strong cash generation – a encouraging report in our view. Revenues came in at NOK 62m, up ~3% y/y and fairly in-line with exp., while EBITDA ended at NOK 17m, equal to a 28% margin and spot on exp. With positive effects from WC and limited capex, FCF for the quarter ended at NOK 41m, which equals roughly 7% of the current EV of NOK ~600m. Another positive was the order intake that ended at NOK 41m, up 17% y/y and a good indication of continued growth over the coming quarters. Please see link for more info.

Some positive adjustments – upside potential to estimates

With Q1 figures largely in-line, we only make small positive adjustments to our estimates, which leaves ‘22e/23e EBITDA 1-2% higher. However, lower D&A pushes net profit 30-35% higher than our previous forecast. For FY’22e, we now project 256m in revenues, up ~6% y/y, a 30% EBITDA margin and a 20% FCF margin. However, with I) the highest ever reported order intake (up 17% y/y) and II) the fact that ~80% of its customers operate within oil, gas and maritime (a favorable exposure in today’s market climate), we believe our estimates are conservative.

Buy/TP NOK 7 reiterated At the current share price and our new estimates, Mintra trades at ~7x ’22e EV/EBITDA, ~11x ‘22e EV/EBIT and ~11x ‘22e EV/FCF. With growth, solid cash generation and a healthy balance sheet, we find this to be attractive – Buy/TP NOK 7 reiterated, equal to 15x ’22 EV/EBITDA.

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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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