Sparebank Upgrades Mintra on Takeover Speculations

SpareBank published a new note on Mintra today, summarising their target price uplift. They argue that the two largest shareholders may buyout Mintra and take it private. The summary of the note is below.

I never wrote here about Ocean GeoLoop, a novel carbon capture company. Our family office has a smaller position there. The company today announced that Chevron invested 100 million NOK at 28% premium to yesterday close. That is one of the largest premiums we saw for such transaction in Scandinavian market. Both companies signed MoU on future cooperation. OCEAN is up 24% now, but still below the share price Cheveron paid. Interesting opportunity for further analysis. I enclose below a Clarkson note on the announcement.

Todays note on Mintra by Sparebank

Mintra (upgrade): Yesterday, we upgraded our recommendation from Neutral to Buy in MNTR and increased our target from NOK3.6 to NOK5 per share.
Following the 2Q22 report, we make positive changes to OpFCF. Indeed, even though we lower our revenue estimates slightly (model 3.5%/8.2% and 9.1% YoY growth in 2022/2023/2024), we increase our EBITDA 4-5%. This is primarily related to the trailing 12m improvements, which is solely related to lower opex base. Coupled with more or less unchanged capex expectations, our OpFCF for 2022 and 2023 is upped 7% and 6%, respectively. Our 2023 EPS however is upped 15%.

The main reason we upgrade from Neutral to Buy is 1) new owners in place with Ferd and Tjaldur owning 40% of the company giving us more comfort with the underlying development, 2) attractive exposure with more than 50% of revenues coming from energy related business, 3) another quarter with OpFCF beat leading to 5-7% higher OpFCF estimates, 4) valuation support with 2022e and 2023e OpFCF yield of 9.3% and 11%, respectively and 5) the optionality that the company is a perfect LBO candidate.

With regards to the latter, on slide 5-7 we have conducted a simple LBO model to illustrate the potential in Mintra as a public to private candidate. First, the two largest owners owns 40% of the company and the reminding free float is negligible. The actions we believe needs to be taken in order to grow double digit organically (currently low single digit and we model 6.7% next three years) requires increased investments in R&D, which could be better to take off the stock exchange (short-term hit on margins). The company has trailing 12m OpFCF margins of +20% and is net cash with NOK116m, which is a very good starting point for leverage. Assuming 10x EV/EBITDA (20% premium) in both entry and exit multiple, 6.9% revenue CAGR, 31.8% average EBITDA margin, 22% tax-rate, 5% interest rate, 10% D&A (due to amortization of acquired companies), 7.5% capex/sales and 24% working capital to sales, we arrive at 2.9x MoM multiple looking towards 2027 and 23.4% IRR.

Therefore, we upgrade Mintra from Neutral to Buy and increase our target from NOK3.6 to NOK5. On our NOK5 target, the company trades at 2023 EV/EBITDA of 9x and 8.6% OpFCF yield, which still looks cheap. The main reason we do not set our target higher – i.e., give the company credit with higher multiples, is the current low single-digit organic growth. If the company, given their exposure to the energy sector, is able to also increase its organic growth – we see further upside on multiples.
Clarksons note on OCean GeoLoop partnership with Chevron

Ocean GeoLoop (OCEAN NO, NOK 28.98, Buy, PT: NOK 40.00)

Chevron invests in OGL at 28% premium
Ocean Geoloop announced this morning that oil giant Chevron has acquired shares in the company for the first time through a primary offering at a price of NOK 37/share, representing a 28% premium to yesterday’s close. The rare listed investment by Chevron appears to be a major vote of confidence in the commercial viability of OGL’s technologies, which is the key to the stock’s ultimate value potential, in our view. The investment follows a successful start-up of the OGL’s pilot plant and its first capture of carbon, with a more formal “proof of concept” expected to be achieved later this year after 3000 hours of testing. We have a Buy rating and NOK 40 Target Price on Ocean Geoloop based on a probability-weighted value analysis, though as we outlined in our coverage initation  several scenarios exist in which upside potential could exceed our Target Price, depending on commercial success of the company’s technologies.

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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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