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:

https://seekingalpha.com/article/4514844-fusion-fuel-well-positioned-for-eu-adoption-of-green-hydrogen?mailingid=27855053&messageid=2800&serial=27855053.1536&utm_campaign=rta-stock-article&utm_medium=email&utm_source=seeking_alpha&utm_term=27855053.1536

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 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).

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.

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%.

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 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.

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.

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:

Click to access Biovica-Capital-Markets-Day-2022-05-17_FINAL.pdf

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

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.

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).

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 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

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.

There is a major discrepancy between the market sentiment on Quantafuel and the positive signals on progress from the management. We believe Q1 report this Friday could be the turning point for the company fortunes.

Market sentiment on Quantafuel is the most negative since its IPO. No progress Q1 report should surprise no one. Major delays are already priced in. The share price is 80% down from highs one year ago. Analysts and Finansavisen do not like Quantafuel for their over-promising. Badly communicated the February accident did not help either.

At the same time the QFUEL has been achieving the best progress since the IPO. In their last report QFUEL announced that in January 2022 QFUEL processed more plastic than in the whole 2021. At the end of March QFUEL reported reaching of the Proof of Concept that the company was aiming for since the IPO. Despite all of that the share price has decreased materially this year.

As in the Q4 report the most important part of the Q1 report will be what happened after the Q1 end (since the PoC announcement). If QFUEL would announce a materially longer plant run times than one week already announced, and if QFUEL would provide a positive news on additional lines commissioning in the near future, there could be a major re-rating of the sentiment and the share price.

The share price has been hit hard by Finansavisen reporting and analysts reports downgrades

We have been surprised by Finansavisen conduct. We are not sure whether some of their reports fulfill the unbiased reporting standards. A good example could be their reporting of the recent Proof of Concept announcement. On that day there were several analyst updates published. Most of the updates were positive. Finansavisen based their story on just one negative analyst report not including the majority of the positive updates. In our view this is just wrong. A major financial media can not publish just one piece of information when there are other pieces that would make the story balanced. At a later stage Finansavisen probably realized that and added one more paragraph that included an information on one of the positive reports. But that was later after the article was published. By that time most likely most readers already read the story.

We raised a complaint with Finansavisen suggesting that they should review internally whether their own guidelines on unbiased reporting were met. From their replies it did not seem that they were interested in doing so. I hope the company is taking an action on Finansavisen conducts.

Analysts reports contributed to the negative sentiment. After the IPO the analysts were competing who would write the most positive report. Lately they are competing who will write the most negative one. The sentiment completely switched. Once the company will starte delivering the sentiment should switch again.

One illustration on the analysts current negative sentiment. I read most of the analyst reports and spoke to several analysts on QFUEL. In general many value QFUEL in two ways – a DCF of the whole business, and by valuing each plant and than putting a discount rate for a probability the plant would not be build and than discounting such value to the present time.

The valuation of a plant is mostly done based on EV/EBITDA multiple. Most analysts are broadly in line with their EBITDA estimate. They different in the multiples. In our view the large plant (100k tons capacity) that would be 50% owned by a strong industrial partner would achieve 15-20 EV/EBITDA multiple. Scandinavian clean tech champions such as Tomra or NIBE trade at 35-40 EV/EBITDA multiple. We spoke to an analyst that recently published a sell report on QFUEL. He assigned the large plant EV/EBITDA of just 3-4 times…

The analysts burned their fingers when they published bullish reports and the share price plummeted. Once the company starts delivering the sentiment will reverse and so will the analysts reports. I hope the analyst who recently published the sell reports are about to have their fingers burned again.

Summary:

The market is very negative on QFUEL. That creates a favorable risk reward. The bad news is priced in. The market expects the company to deliver slow progress and delayed projects.

It should be easy to beat the low expectations. Material surprise in the current sentiment could result in a significant rally. The Q1 report this Friday could be the turning point for QFUEL fortunes.

Our family office likes QFUEL story and we like the current risk reward. In the last few weeks we increased our position by one third.

QFUEL webcast details:

A webcast including Q&A will be hosted by the Quantafuel management this Friday at 09:00 CET. The presentation will be held in English.
Link to webcast:
https://channel.royalcast.com/landingpage/hegnarmedia/20220513_10/

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 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:

Nordea on Pryme – Their Chemical Recycling First Facility Fully Capitalised

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.

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.

Below is a summary of Pareto´s new research on Linkfire from last week:

• “Linkfire is currently down ~67% since its IPO, and is down around 47% YTD. Valuations for Linkfire’s peers have also traded down significantly, but we believe Linkfire is undervalued at current levels”

• Pareto estimates the revenue growth to accelerate from 36% in 2021 to 51.4% in 2022
• Last year Apple music was the major revenue contributor. Last week Linkfire signed up Amazon music. The revenues from the deal will be already visible in 2Q22.
• Pareto believes that the Amazon Music deal by should help for the commission based revenues to double in 2022 vs 2021.
• Other major streaming platforms are not yet Linkfire partners (Spotify, Tencent Music, or YouTube Music. Linkfire is maintaining dialogue with all major players. Amazon deal should accelerate for the other streaming platform to sign up a similar deals with Linkfire.
• Pareto research quotes:
  • Linkfire is one of the more attractive venues for music streaming providers to turn to when they want more subscribers. Furthermore, now that that two of the key challengers to Spotify (Apple Music and Amazon Music) are Linkfire affiliates, we believe this could further push the other challengers to partner up with Linkfire.
  • This deal greatly increases our confidence that Linkfire can reach its FY2022 revenue guidance… (51% yoy revenue growth)
  • In our view, the stock should be able to trade up if the company manages to deliver on its guidance during FY2022, and as the understanding and awareness of Linkfire, its business model and opportunity grows in the market.

• We believe 1Q22 will be one of the best quarters in Linkfire history, beating the revenue guidance of 51% revenue growth. Could be a major catalyst for the stock.
• Linkfire is reporting on 25/5.

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.