Pyrum Innovations – the Global Leader in Chemical Recycling of Tires

New Research on Pyrum Published Today

SMC Research, a specialist for the analysis of German small- and mid-caps, has rated the Pyrum Innovations AG share for the first time. In the conclusion of the research report published today, the analyst sees “a fair value of EUR 88.00 per share and thus significant upside potential” despite a safety discount on the Company’s long-term plans regarding capacity expansion. 

Since 30 September 2021, Pyrum Innovations AG has been listed on the Euronext Growth Market, the growth segment for small and medium-sized enterprises of the Oslo Stock Exchange. Since 30 March 2022, there has also been a secondary listing in the Scale Segment, the SME growth market of Deutsche Börse AG. In addition to SMC’s new research, the research report of Edison Investment Research Limited is also available on the company’s website. 

As a pioneer, Pyrum Innovations AG was the first company in the end-of-life-tyre recycling sector to receive REACH registration from the European Chemicals Agency (ECHA) for the pyrolysis oil it produces. This means that the oil is recognised as an official raw material that can be used in production processes. In addition, Pyrum has received ISCC PLUS certification for the pyrolysis oil and the recovered carbon black. Both products are thus considered sustainable and renewable raw materials. These achievements have also been recognised by international experts in the tyre industry. For example, Pyrum won the Best Tyre Recycling Innovation category at the inaugural Recircle Awards and has been nominated for the “Grand Prix Mittelstand” (“Großer Preis des Mittelstandes”) from the German state of Saarland.

link to the research:

https://www.pyrum.net/en/investors/share/analysts/

Biovica – Notes From the Investor Road Show Presentation, ABG Broker Report Summary

Biovica had their road show presentations for Pareto clients this week. The company reconfirmed that it is in an active talks with FDA which they believe should conclude with the FDA approval by Q3. Our base case (based on discussion with analysts) is June/July. Biovica is meanwhile preparing for the US sales lunch. The impressive US sales team was presented at their Investor Day presentation.

Best Biovica CEO quotes from the presentation yesterday:

“FDA is developing really well… We are confident to get our FDA clearance in Q3….. The last time we communicated with the FDA was last Friday…”

The Biovica presentation from the roadshow:

The impressive US sales team was presented at their Investor Day presentation.

Do watch their investor day presentation from 17 May – link below: https://fitinvestmentideas.com/2022/05/18/abg-summary-from-biovica-yesterdays-capital-markets-day/

ABG Sundal Collier Research Summary from 22/6/22:

Updated timeline for sales start

Updated timeline for sales start
 FDA decision expected in Q3, potential sales start in Q4
 DiviTum shown complimentary to ctDNA
 Q4’21/22 EBIT of SEK -19m, cash position of SEK 90m

Updated sales start
The main news from the report was the timeline and path forward for
approval and sales start of DiviTum. The revised 510(k) filing was
submitted on 28 April and Biovica has received an indication that the
FDA has started to review it. The normal review time is 90 days: Biovica
expects a decision during calendar Q3, which will either be a clearance
or a request for more information. Simultaneously it is establishing the
CLIA lab where the facility is in place (evident in the higher right-of-use
liability) and is now working to get it certified, a process that should be
smoother than the 510(k). The company guided for sales start in
calendar Q4, with key commercial personnel already in place.

DiviTum shown complimentary to ctDNA at ASCO
The BioItaLEE study was presented at ASCO, the world’s largest cancer
conference. The study included 287 breast cancer patients receiving
ribociclib and letrozole as first-line treatment and ctDNA and TK activity
(with DiviTum) was measured for 241 patients. The results showed that
baseline measurement and patterns throughout treatment were
prognostics for treatment for both biomarkers. Measuring TKa and
ctDNA were complimentary. Given the hype surrounding the latter, we
believe it opens new possibilities on how to position DiviTum.

The full research is available for free here: https://cr.abgsc.com/contentassets/c19f4d31dbcf419b964b82c34fceb97d/pdf/updated-timeline-for-sales-start.pdf

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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.

Mintra – Smart Play on Shipping and Energy Boom

2022 is the year of shipping. Product tankers and LNG tankers are flying up on RuSSian war on Ukraine. Container ships are flying on supply chain congestion. We wrote several times here this year about Product tankers and LNG (we are long COOL, HAF, STNG, GLNG, FRO, MNTR). These trades have been very profitable. We like the Mintra idea, that was brought by Pareto Securities. It is a high beta trade on growth in Shipping and Energy. While most Shipping and Energy stock may not double from current levels this year, Mintra is a good doubling candidate for this year.

  • Mintra (www.mintra.com) provides online training courses mainly for shipping and energy.
  • Mintra was listed last year in Norway at 9.70 NOK at the end of 2020. Ticker MNTR
  • Mintra was hammered in the pandemic – the crew teams (on shipping boats and energy platforms) did not rotate due to Covid.
  • Lower crew rotations resulted in lower use of e-learning courses.
  • The situation turned around now – shipping and energy companies are in the best shape for years, generating best profits in decades. They spent more money on hiring and crew rotations – Mintra should be the beneficiary of the shipping and energy turnaround.
  • in 2021 Mintra acquired and successfully integrated SafeBridge.
  • SafeBridge was losing cash, it is now profitable under Mintra wings.
  • Mintra already has a 50% market share in the segment.
  • Safebridge acquisition decreased competition and increased Mintra pricing power
  • Mintra will grow by the increasing use of its courses by its existing customers, new contracts and acquisitions
  • Mintra guided last year 10% revenue growth for 2022. Pareto analyst believes it is too conservative. It does not reflect the current boom in Mintra´s target sectors. The consensus is low.
  • 1Q22 was Mintra´s best quarter ever – Mintra generated a 10% FCF yield in the quarter. That is 40% annualized FCF! They can generate CF equal to their market capitalization in 2.5 years.
  • Next quarter is most likely much better than Q1.
  • Pareto analyst has Mintra as a top pick in his area.
  • SpareBank weekly research shows Mintra as one of the cheapest stocks in the sector.
  • Mintra share price is up 70% from its March lows of 2.5 NOK to current 4.3 NOK. Still well below the 9.70 NOK listing price tag.
  • Mintra is our doubling candidate from these price levels. It is a very good proxy to play shipping and energy boom. While most shipping and energy will not double from these levels, Mintra easily could.

Pareto on Product tankers this morning

HAFNI NO – HAFNI – Product tanker rates are moving higher again, particularly MRs and LR1s (key for Hafnia). Scorpio outperformed vastly yesterday, confirming that near all of Q2 are booked at rates that imply EPS of USD 3.5. BUY HAFNI; Q2 and Q3 estiamtes are still lagging sharply, and rate momentum seems to be returning. NAV towards NOK 50 by Q4.

Ranking of our writings

I publish our family office ideas on SeekingAlpha (largest retail investment ideas platform) and SumZero (largest hedge fund and professional investor investment idea platform). We have noticed two achievements this week.

  • SumZero rated the performance of our ideas among TOP 25 and I was number 3 in the Special Situations sector.
  • I saw that SeekingAlpha is using our ideas (for example on Linkfire) as paid add for getting investors on the platform.

Var Energy opportunity

Last night Var Energy did USD600m secondary placement of shares. Two shareholders were selling. The share price is down today by around 10% at time of writing as some investors sold the share. I believe the share price should recover. We bought in the SPO and bought in the market after open. Var is one of the best energy companies listed in NOrway. Good enetry point for both short term and longer term trading.

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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.

Linkfire – Record Quarter from Danish IPO of the Year

LInkfire delivered 51% revenue growth in Q1. Linkfire is below radar screens of most investors. In our view great opportunity. Linkfire provides smart links that lead consumers from social media to streaming platforms. Amazon Music, Apple Music and other pay Linkfire to bring consumers to their platforms. Linkfire is our top pick in the area.

Competition in the streaming industry is increasing. Linkfire is the prime tool for the streaming companies to increase their market share. Deal with Amazon Music was announced two weeks ago. we expect further deals with the majors this year.

Pareto Securities summary

Strong start to the year for Linkfire
Linkfire delivered a strong Q1’22 report, beating our topline estimates by ~13% and achieving a y/y revenue growth of ~46%, on a constant currency basis, and 51% on a recognized revenue basis, helped by the strong USD. Particularly impressive was the RPM, which grew 38% y/y and came in at DKK 9.52, Linkfire’s highest quarterly number ever, as well as the consumer connections, which grew 36% y/y to 481m (354m). We have a Buy recommendation on Linkfire with a TP of SEK 10, and expect to make some minor upward revisions to our estimates and expect a positive share price reaction today following the report.    

Highlights for the quarter:  
– Linkfire increased its revenue by 46% y/y, on a constant currency basis and 51% on a recognized revenue basis, helped by the strong USD. smartURL, which was acquired in the beginning of Q1’22, had no significant impact to the topline in the quarter, and Linkfire is currently working on integrating the company and its traffic flows, and will come out with an update on how that is proceeding next quarter

– Revenue, on a constant currency basis, came in at DKK 11,1m (7.6m), which was ~13% higher than PAS at DKK 9.8m

– Subscription revenue grew from DKK 5.2m to DKK 6.6m (26% y/y), while commission revenue remained the main growth driver, growing from DKK 2.4m to DKK 4.6m (88% y/y), with both beating our estimates

– One of the key highlights from the quarter was the RPM, which grew by 38% y/y and came in at DKK 9.52 (DKK 6.87), which was the highest quarterly RPM in Linkfire’s history 

– It was also promising to see consumer connections kicking off to a strong start in 2022, growing by 36% y/y to 481m (354m)

– EBITDA came in slightly lower than we had expected, driven by greater staff costs and slightly higher other external expenses

– The company remains confident in its mid-term target of 50-70% organic revenue growth and a gross margin of 80% as well as its FY2022 financial guidance DKK 50-60m in revenue with an EBITDA of between DKK -22 and -32m

– Following the report, we expect a positive share price reaction, as Linkfire showed that it is on good track to reach its financial guidance for FY2022          

Biovica presentation at ABS conference

Biovica is starting to move prior to FDA approval. Up 10% today. Could easily double before the FDA approval in late JUne. That would be normal pattern for similar Scandi pharma stocks. See my posts here on Xbrane where we doubled our money.

We are very bullish on Biovica. Based on Broker analyst conversations, we believe the FDA approval for their innovative cancer test should happen by end of June. The reason for this timing estimate is that Biovica submitted last piec of information that th FDA wanted in May.

Do watch the video from ABG Sundal Collier conference on 24/5/2022:


Hydrogen

The Russian agression will accelerate energy transition. We have two exposures in hydrogen – Fusion Fuel and HydrogenPro. interesting article Fusion Fuel was published today on SeekingAlpha:

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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.

Quantafuel – What Brokers Say About the Esbjerg JV Announcement

Quantafuel yesterday announced a partnership with Eurazeo for Esbjerg plastic sorting facility. Eurazeo is a global investment company, with a portfolio of EUR 32bn AUM, focused on ESG. The most important aspect of the announcement is QFUEL demonstration it can sign up partnership with a strong financial backers. Global players are interested to partner with QFUEL. It is another reconfirmation of QFUEL strengths. It is quite likely, the cooperation could continue on other projects. Another positive news from QFUEL.

Pareto Summary on the Announcement

Marking a new standard for financing – backing our estimate assumptions
Quantafuel has signed a 50/50 joint venture with Eurazeo for the Esbjerg sorting facility. The parties will share all capex equally, estimated to NOK 670m, both historic and in the future. With a cash position of NOK 577m per end of Q1’22, QFUEL should be well positioned to complete its part. We believe this marks the first of many joint ventures with financial partners to come, which will be vital to succeed on the company’s rapid roll out plan of PtL projects. This announcement backs up our estimate assumptions, for more colour on our assumptions and estimates, please view our recent update; Transferring coverage with BUY, TP NOK 19.       

About Eurazeo:
•   Eurazeo is a global investment company, with a portfolio of EUR 32bn AUM, including EUR ~23bn from third parties, invested in 530 companies and focused on ESG  

Additional comments:
•   With this announcement, QFUEL delivers on the comments given at the Q1’22 presentation, where it stated that the financial partner for the Esbjerg sorting facility was to be announced in due course
•   We believe this JV marks another important business case verification for QFUEL, as Eurazeo has used third parties to conduct various DDs, ranging from financial-, legal-, supply chain-, technical- and ESG DDs for both its sorting and PtL business
•   Given the size of this large European PE/infrastructure fund, we see it as possible that Eurazeo could participate in JVs for future PtL projects as well
•   Delivering on its PtL business will still be the most important going forward, but signing a financial partner for this sorting facility is an important step to get there, and might open for JVs for future PtL plants as well  

Implications for QFUEL’s financing strategy:
•   We believe that this JV sets a new standard for QFUEL’s financing strategy, since all previous projects has been financed mainly by equity. This supports our estimate assumptions where we have included 50/50 JVs for alle future projects in our estimated time interval
•   We have not included any debt financing in our estimates, as we believe the company must prove its project profitability over time before considering this option
•   Since the next PtL facility on our estimates comes on stream during late 24E, debt financing for those projects is not likely to have much impact on our financing estimates during our estimated time interval (22-26E)  

About the JV:
•   Eurazeo will acquire 50% of the shares in Quantafuel’s wholly owned subsidiary Quantafuel Esbjerg Aps, which will develop and operate the plastic waste sorting plant in Esbjerg
•   Eurazeo will buy into historic capex, which up until now has comprised mainly FEED and occurred in 2021, amounting to some tens of NOKm. For the future, they will share all capex        

Arctic Securities summary:

Quantafuel: Disclosed financial partner on Esbjerg sorting

QFUEL yesterday during trading hours announced that it has signed a JV agreement with Eurazeo (financial player) for development and operation of the Esbjerg sorting project, an announcement that has been highly expected for some time. Note that this is a sorting plant, which is necessary to enable chemical recycling (QFUEL’s core business). The plant will have a capacity to handle 160,000 tonnes of plastic waste per year. Based on current gate fee’s seen in the market, we estimate the plant to generate NOK ~250m in annual EBITDA on 100% basis and expect the plant to be operational in H2/23). We have valued the project at NOK 2.0 per share, where we have risked the project by 15% (applying zero risking would lift our SoTP valuation by NOK 0.3 per share).

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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.

Hafnia – Broker Reports Summary, Price Targets up to 45-50NOK

We have been long product tankers for some time. Russia is the major supplier of diesel to the EU. The rates are moving higher. Brokers see significant upside. Clarksons:

The outlook for product tankers has not been better than since the spring of 2020. However, contrary to the temporary floating storage boom seen two years ago, this time around a change in the trade pattern is the driving force, with longer voyages resulting from Europe’s desire to replace Russian oil products

Do also look at our past posts on LNG tankers. The same theme. EU will be reducing dependence on Russian gas. That is very bullish for LNG tankers. The rates are up significantly. The equities are not, yet. Our top pick COOL.

Linkfire, one of the most interesting companies from Denmark (listed in Sweden) is reporting tomorrow. Stay tuned. We expect the best quarter in the company history. After the deal with Amazon Music announced last month, 2022 should be excellent year for Linkfire.

Clarkson Platau Summary on Hafnia:

Raising target to NOK 50/share

Hafnia (Oslo: HAFNI) reported black figures in 1Q22 that were in line with expectations, as well as their recent trading update. Based on Hafnia’s 2Q22 bookings to date, and conservative freight rates for the remainder of the quarter, we believe the dividend for 1Q22 of NOK 0.20/share could increase to NOK 1.75/share for 2Q22. EPS for the second quarter could exceed NOK 3.50 per share (annualized P/E of 2x), while operating cash flow could top NOK 4.50 per share. Despite the stock’s year-to-date gains of 64%, we see significant further upside potential as the product tanker market could potentially surge further as refinery production improves during the summer months. We raise our target to NOK 50, representing NAV at newbuild parity and including operating cash flows in 2Q22. BUY rating reiterated.

1Q22 earnings:
In the first quarter, EBITDA was $88 million, based on average achieved TCE rates of around $15,800/day. Net income after adjustments was $24 million, or $0.05 per share.

2Q22 bookings:
With 70% of 2Q22 booked at approximately $27,200/day, and assuming current rates of around $35,000/day, we look for EBITDA to surge beyond $250 million for 2Q22 and EPS of $0.37 (NOK 3.50). With a 50% payout ratio, the dividend for 2Q22 could be $0.18 (NOK 1.75).

Market outlook:
The outlook for product tankers has not been better than since the spring of 2020. However, contrary to the temporary floating storage boom seen two years ago, this time around a change in the trade pattern is the driving force, with longer voyages resulting from Europe’s desire to replace Russian oil products. Global refining margins have reached very strong levels which is good news for the supply of product cargoes in coming months. According to the International Energy Agency, global oil demand is expected to rise by 3.6 million barrels per day from an April low through August as Chinese restrictions ease, summer driving picks up, and jet fuel continues to recover. This is expected to increase global refining activity significantly. Between now and August, runs are expected to increase by 4.7 mb/d. According to our estimates, historically, 28-29% of global refining volumes have been seaborne, so we could see a 1.3 mb/d increase in shipments, representing a 6% increase for product tankers. In short, we argue that product tankers have been backed by miles in the ton-miles equation, but tons will now expand as well. This suggests that 3Q22 may be stronger than 2Q22.

Valuation:
Freight rates are undeniably high right now, which will have a huge positive impact on earnings, with Hafnia expected to generate more than $200 million in operating cash flow in the second quarter alone. The main question that investors have is whether freight rates are sustainable. We believe that the Russia/Ukraine war has permanently altered the global trade map, resulting in longer hauls. Assuming that refinery output increases during the summer months, as noted above, the market could potentially surge even further. It’s no surprise that major oil traders are looking for multiyear contracts to charter product tankers. This trend will almost certainly result in higher ship values and, as a result, higher NAVs in the future. We calculate the current NAV to be NOK 31.80 per share. All else being equal, if ship values reach newbuild parity by 2023, the NAV would rise to NOK 45/share. If we include the estimated operating cash flow in 2Q22, we believe the NAV could reach NOK 50 per share, our new target price.

Pareto Securities Summary:

Huge estimate-lag – TP to NOK 45 (35)
Hafnia delivered Q1 as guided– and Q2 bookings confirmed the momentum we have seen recently. We raise our estimates also for Q3 and expect USD 0.9 of full year 2022 EPS – resulting in ROE of 30% and a dividend yield of 15%. The current product tanker strength across all regions and segments is still not reflected in equities – with asset values moving upwards. Huge estimate revisions are coming, we raise our TP to NOK 45 (35) and reiterate BUY  

Q1 confirmed – Q2 coming up, soon turning to Q3…
Hafnia delivered Q1 in line with guidance provided in the surprising equity raise earlier this month. A dividend of ~NOK 0.2 declared, roughly equal to 10% of the equity raised. Q2 guidance confirming the bullish market conditions, with ~70% covered at ~27,200, vs. our earlier est. of ~24,950/day – and rates on average far above this now. We update our estimates now see Q2 EBITDA and EPS of USD 234m and USD 0.34 respectively – putting that equity raise further into perspective. The company has sold two more LR1s, and along with the removal of the 8x stainless steel vessels sold earlier our 2023/24 estimates are lowered. However – we also adjust Q3 to reflect how bookings are starting at a much higher level than assumed – effectively keeping Q3 and Q4 at the same level. Our updated 2022 estimates are up 34% vs. before – and we are 53% above cons.

…as the market starts to grasp that this is about more than war
Global inventories of refined products are at decade-low’s, crack spreads are surging, and refinery dislocations are happening. While Chinese diesel exports surely have had a positive impact, we are yet to see the effect of Russian products forced to go longer haul, which we argue can boost ton-mile demand by up to 14%. With all regions and vessel classes experiencing tightness there is not a single reason to pin-point – but with newbuild prices soon back to 2008-levels as the orderbooks are at record low’s at a point in time where we need fleet replacement the outlook for 2023 and 2024 is solid.

Cashflow will push NAVs a lot higher – TP up to NOK 45 (35)
2022 was supposed to be ‘just the prequel’, but once again things did not end up exactly as planned. We estimate cash earnings of near USD 650m for HAFNI this year, resulting in dividends of ~NOK 4 (15% yield). Current NAV of NOK 34 will hit 45 by year-end, and at ~P/E 3x ahead of what was supposed to be the upcycle we reiterate BUY. With higher estimates and NAV we raise our TP to NOK 45 (35), equal to our YE’22 NAV with an assumed fleet value increase of 10%.

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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.

Pareto Securities on Quantafuel: BUY, TP NOK 19

Pareto Securities just published a research on Quantafuel. New analyst, new price target, the bullish story remains. Another bullish report after ABG, that I wrote here about on Monday.

We are bullish on Quantafuel and have been buyers in the last month.

Do look at the yesterday note on Biovica Capital Markets Day. Biovica has a strong catalyst coming by the end of June, which could easily double its share price. We are very bullish on Biovica.

Pareto Securities summary of the 15 page research on QFUEL:

Transferring coverage with BUY, TP NOK 19
After Quantafuel’s Proof of Concept milestone, we believe it is interesting to take a closer look at the company and its updated project pipeline. Our estimates include the five pipeline projects in addition to Skive and Kristiansund.  Including assumptions in the low end of company targets, we retrieve a fair value of NOK 19 per share, while more aggressive assumptions return values above NOK 40. For now, we maintain our Buy rec. for this transfer of coverage and introduce a TP NOK 19. old    

Over NOK 0.5 bn in 24E revenue, and cash flow positive beginning of 2025
On our estimates, which reflects the company’s guiding, we foresee 2022E revenues of NOK 134m, reflecting QFUEL reaching run rate production near its maximum capacity for both Skive and Kristiansund during Q4’22. From 2023-2025E our estimates reflect a CAGR of 100%. Due to overall high project risks still being present, we are hesitant to reflect more than the pipeline projects for now. However, should the company build additional factories, each new project will add NOK ~4/sh, given similar economics as the designed modular plants. 

Ambitious roll out plan requires substantial capex funded by equity
From 2023-2026, QFUEL is expected to start operations at 5 new plants, comprising the Esbjerg Phase 1, Sunderland, Dubai, Esbjerg Phase 2 and Amsterdam projects.  The five new projects will require NOK ~2.1bn in capex, given that QFUEL finds financial partners to all projects, willing to engage in a 50/50 JV. We also predict NOK ~200m of yearly overhead costs as Quantafuel has become an organization of size, counting over 100 employees. Furthermore, we apply a plant lifetime of 30 yrs to all the projects. Ultimately, to fund the pipeline projects we estimate that the company needs to raise equity of NOK 1.7bn, to be fully funded. To our understanding, project capex typically starts occurring 3 years before initial operations. To keep up with the pace of QFUEL’s project pipeline, we expect an equity raise in Q4’22.  

Transferring coverage with a Buy recommendation and TP NOK 19
Our valuation is based on a DCF reaching steady state after all announced projects have come on stream during 2026. We apply a WACC of 9.5%, which one could argue is somewhat aggressive, but when taking the guided plant economics into account, in addition to favorable market conditions for petroleum alternatives, we believe it is fair. Even though we expect the company to have a large capital need, we still see upside to current market pricing and transfer coverage of Quantafuel with a Buy recommendation TP NOK 19. 

HydrogenPro

Pareto today published research on HydrogenPro. We have a small stake in the company as a way to play a potential Hydrogen revolution. In this area we also have warrants on Fusion Fuel Green, an innovative company listed by Fearnley last year. We prefer Fusion Fuel to HydrogenPro. Both are very interesting and both are cheap vs where they were trading last year. Both have progressed nicely.

Fusion Fuel announced today their partnership with Toshiba. Link to the announcement is below : https://ir.fusion-fuel.eu/news-releases/news-release-details/fusion-fuel-green-and-toshiba-energy-systems-and-solutions

Pareto Summary on HydrogenPro: Too Cheap vs Peers

Too cheap vs peers
We look for comments and further colour on recent contract awards and the manufacturing roll-out plans at HydrogenPro’s upcoming Q1’22 report. The company was in April awarded another Mitsubishi contract and suggests large long-term potential in Asia as well as the US. With its offering and validation from Mitsubishi, we foresee large growth and thus find the current discount to other hydrogen companies unjustified, despite its short history. Buy, TP NOK 30 reiterated.    

Financials will not be the focus at the Q1’22 report
HydrogenPro will release its Q1’22 report 25 May. We expect revenues to grow slightly q/q as the company should book some revenues from the Norwegian Mitsubishi order. In the greater scheme of things however, the Q1 financial result is negligible. We include USD 2.5m in revenues and -2.3m in EBITDA. We look for comments and further colour on the manufacturing roll-out plan, recent contract awards from Mitsubishi, development with DG Fuels and other potential projects. 

Big in Japan?
In April, HydrogenPro received its third contract from Mitsubishi. While the first two was from Mitsubishi Power Americas (one pilot in Norway and one larger order of USD >50m in the US), the last one was received from the parent, Mitsubishi Heavy Industries, for a large electrolyser in Japan. Japan has extensive hydrogen targets and aims at becoming a leader in the hydrogen industry, with the nation having allocated USD 3.4bn for hydrogen projects from its USD 20bn Green Innovation Fund. Although this latest contract was for USD 3m “only”, the potential in Japan is great. Should Mitsubishi follow in its own footsteps with first ordering a pilot sized delivery followed by a large order, we would expect larger contracts in Japan to follow. We just make small revisions to our estimates ahead of the report and foresee large growth for HydrogenPro. The electrode efficiency, the capital-light fabrication roll-out plan (partner-model in capacity expansions) and validation from Mitsubishi support our thesis in our view.    

Buy, TP NOK 30 reiterated 
We reiterate Buy and our NOK 30 TP. While we believe there is substantial upside also beyond this, we would like to see the company firm up some larger contracts before increasing our fair value further. The company trades at a large discount to other hydrogen names, which despite its short history, is something we find unjustified given recent order intake. The company trades at 0.7x 23E EV/sales on our estimates (and a mere 1.4x the two recent Mitsubishi orders alone), vs hydrogen peers at 9x in the same period.        

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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.

ABG Summary from Biovica yesterday´s Capital Markets Day

Biovica submitted its application to the FDA. The probability of the approval is very very high – FDA requested just one additional information that Biovica now submitted. I expect FDA approval by end of June. The share price could easily double on the approval. Yesterday Biovica presented its team that is working on the product lunch. The team is very impressive. Do watch the presentation.

The FDA approval is the major catalyst. The stock is hammered by the FDA approval delay caused by Covid FDA congestion. The stock should easily double from the current levels upon the FDA approval.

The most impressive part of the presentation was the composition of the Biovica team working on the lunch. I included a few. They were quite impressive. Looks like Biovica management is well positioned for a lunch of the DiviTum

Warren Cresswell, President of the Americas

  • 25-years of Diagnostic Experience in Medical Device (IVD 510(k) & PMA), CLIA Lab (LDT), and Pharma
  • Built Dx Orgs, Developed & Launched High Value Multi -Analyte Algorithm Based Dx Assays, and Implemented Effective Reimbursement Strategies
  • Executive Leadership, Commercial, BD& Operations

Kendon Richards, Executive Director of Sales

  • 25+ years of Pharmaceutical and Specialty Diagnostic Experience
  • Built Pharma and Dx Sales Orgs, Successfully launched 15 products (8 in
    the Specialty Dx space), Led Salesforce Integration and Implementation of Effective Reimbursement Strategies
  • National Sales Leadership, National Accounts Leadership and Marketing Brand Team Member

Amy Williams, PhD, Head of Clinical Development and Medical Affairs

  • PhD in Pathology from Boston University School of Medicine
  • 20+ years of experience in oncology drug development – from discovery through launch and beyond
  • Most recent experience with Novartis Oncology, Breast Cancer Team
  • Supported Femara, Zometa, Afinitor, Piqray, Kisqali, etc

Mattias Bergqvist, Clinical Development Director

  • 10 years at Biovica as Clinical Development Director
  • 5 years at AstraZeneca, Therapy Area Director Oncology Nordics, Global Brand Manager Breast Cancer
  • Responsible for directing ex-US clinical trial program

Henrik Winther, DVM, PhD

  • SVP Business Development & Pharma Collaborations
  • 20+ years in the in vitro diagnostic (IVD) society bringing biomarker assays into the clinical routine market and with managing roles within R&D and BD.
  • Special passion and general manager roles within the Companion Diagnostic (CDx) field and collaborations with Pharma
  • Design responsible for the first global market CDx assay (HercepTestTM)
  • Responsible for the development, registration and commercialization of the Keytruda and Opdivo CDx’s (one true CDx and one Complementary Diagnostics)

Link to all presentations from the capital mks day:

Link to the webcast:

https://tv.streamfabriken.com/biovica-international-cmd-2022

ABG Sundal Collier summary

Takeaways from Capital Markets Day Commissioned research:

 Demand generation important for CLIA lab strategy
 Multiple angles to market the product
 US launch will follow after 510(k) decision

Updated CLIA lab go-to-market strategy
During its CMD yesterday, Biovica updated the market on its planned goto-market strategy, which is now focused on establishing a CLIA lab. In
our view, the important factor is to establish awareness and convince
KOLs, and Biovica is currently building its sales organization to do this.
This model will provide a direct relationship with all the relevant
stakeholders, (patients, physicians & payers), which we believe could
prove beneficial to optimize its offering to facilitate uptake. We believe
standardized reimbursement coverage will be important for broader use,
but the company will enter the market with a combination of hospital
contracting, insurance and co-pay initially.


Multiple pathways to position DiviTum
Biovica has developed a broad base of clinical evidence, and this creates
multiple potential pathways to position DiviTum in the market. One such
pathway is to stratify patients to design treatments, on the back of the
prognostics value it has shown at baseline measurement. Another area is
to confirm treatment response or alter non-responding treatments
through continuous monitoring, on the basis of the different TKa patterns
identified from continuous monitoring. Supported by the budget impact
model, Biovica will initially position DivTum towards cost savings, but as
usage increases it would also like to establish a benefit in improving
clincal outcomes.


510(k) resubmitted, clearance decision within months
Looking forward, the key milestone is achieving the long-awaited 510(k)
clearance, after which Biovica will launch the product in the US. The
updated application was submitted on 28 April and under the regular
review times a potential clearance decision should be given within 1-2
months from that date. We believe the uncertainty surrounding the
response time from the FDA continues to be elevated, although it is our
impression that the situation has improved as the COVID burden is now
easing.

Link to the ABG Research:

https://cr.abgsc.com/contentassets/affaa8f4dc6e4019b37f4d026aebda0c/pdf/takeaways-from-capital-markets-day.pdf

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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.


Quantafuel – ABG Sundal Research Summary

Post the Q1 report ABG Sundal Collier published a research update. We summarized the Q1 report in the previous post on this blog.

See the summary of the ABG research below:

Some progress, some setbacks, in Q1
Q1 demonstrated the complexity in the case Strong fundamentals remain in place If it delivers, the value is there
Skive shutdown and lower ’22 production guidance
Q1 for Quantafuel was characterized by progress, but also operational disappointments. It secured NOK 400m for its share of capex for the Esbjerg sorting plant, reached 30 days of continuous production at Skive, and declared Proof-of-Concept. However, it also experienced equipment malfunction leading to downtime and repairs, and the ‘22 guidance was lowered to 6,000-8,000 tonnes from 12,000 also as the company deems it of more value to prioritize process design learnings for future plants over short-term volume. The EBITDA of NOK -52m suggested a higher cost level than we modelled based on the ~NOK 30m per quarter in corporate SG&A, while the cash position ended at NOK 577.5m.

Operational progress is what the stock needs
The push to increase the recycle rates of plastics appears to remain strong, and market price proxies like biofuels are at ~USD 2,000 per tonne vs the base assumption for QFUEL’s liquids at ~USD 1,000 per tonne. With respect to the share price performance, we think it’s all about improving operational performance. There are important triggers ahead if the company delivers, including concluding the Esbjerg project financing, ramping up Skive lines 3 & 4, and progressing with preparations for final investment decisions within its defined roll-out programme.

Cost of capital rising, but plant economics remain solid
In this update we have included the changes to the roll-out schedule guided for in the Q4 report, included the Q1 results/’22 guidance and incorporated the Esbjerg sorting plant with start-up in H2’23. The profile includes all modelled plant capex paid by ’24 but the majority of earnings come in late ’24 and in ’25. At 10% WACC, we estimate a SOTP of the guided roll-out programme of ~NOK34/sh, and estimate the share today prices in 1 PtL plant in addition to Skive, Kristiansund and Esbjerg Sorting, which are all projects under development. We maintain BUY with TP NOK 30 (42).

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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.

Quantafuel Q1: “We have never been even close to the progress we are experiencing today” – Selected quotes from the Q1 Webcast

Quantafuel delivered its Q1. The most important news are high run times of the Skive plant and reiterated the guidance to be CF positive in H2 for both Skive and Kristianslund. The management was very optimistic about the progress. The analysts focused on lowered production guidance for the year which overshadowed the other positive news. Pity the QFUEL did not pre-announce the run time successes to set the tone for the Q1 report.

Selected quotes from the Q1 call (emphasis added):

  • This quarter was a significant step forward for Quantafuel.
  • We have never been even close to the progress we are experiencing today. Not at any time in our history.
  • This fact is not share by the general opinion… It is our high priority to close this gap.
  • We will try to underpromise and overdeliver.
  • We will invite you to a capital markets day in early September.
  • We maintain out guidance that both our plants Skive, and Kristianslund would have positive cash flow during second half of this year
  • The expected timing of our major project has not changed
  • In Skive we achieved Proof of Concept running both lines for longer than 7 days with 90% of uptime.
  • In January we had 20 plus days of continues operation and in March/April we set the Skive record at 30 days of continues operations on both lines.
  • We are keeping our schedule to have lines 3 and 4 running within the end of Q2 and Q3.
  • We are aiming to finish the year with running the plant at the designed capacity of 20 000 tons per year.
  • We lowered our guiding of our production from 12 000 to a range of 6000-8000 tons. The lower guiding will allow us to make the tests needed to have the best possible platform for the next generation of plants.
  • Skive production date are important but even more important is to execute the tests needed to ensure that the next generation of plastic to liquid plants is the best possible. The learnings from running Skive are instrumental to our success. The next generation of our plastic to liquid plants will be simpler, have more redundancy, achieving higher stability and uptime.
  • We are also testing the plant for different plastic quantities… Different plastic quality can result in unwanted substances. It is important we understand for the next design both limitations and possibilities.
  • We have tested highly contaminated plastic by biowaste and concluded the end product has the right quality.
  • BASF nominated Skive plant for the Danish Plastic Price Award for 2022.
  • Esbjerg sorting plant has progressed well while we were working on due diligence with potential financial partners. The process we expect we can conclude soon.
  • 160 000 tons Esbjerg facility will be the largest sorting facility with in Denmark when it is complete in second half of 2023.
  • In Dubai we have selected the site, verified that suitable feedstock is available and feasibility study was concluded. Next steep will be to proceed with the FEED phase leading to investment decision later.
  • Kristianslund is performing well. We are rumping up volumes. The off-take market is strong with high demand and attractive prices for our products.

We expect material newsflow in the next weeks, namely:

  • Commissioning of line three in Skive
  • Contract with a financial partner for the largest sorting facility in Denmark in Esbjerg
  • Progress on increasing run time in Skive
  • FEED phase in Dubai announcement
  • Commissioning of line four in Skive

In Summary, we were encouraged by the progress. Several positive announcements were made. The presentation was very good. I highly recommend to all investors to watch it. Link below:

https://channel.royalcast.com/hegnarmedia/#!/hegnarmedia/20220513_10

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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.