Author Archives: Fit Investment Ideas

Quantafuel (QFUEL) had an investor roadshow for Pareto Securities and ABG Sundal Collier clients. The presentation is on their web in the section Presentations

There was a big interest in the presentation – more than 100 institutional investors attended the presentation

The main news from the call: “…we have the corrected feeding issues and restarted the plant today and anticipate achieving PoC shortly…”

The main quotes from the presentation by CEO Lars Rosenlov:

Skive update

• turnaround is completed, CAPEX was as guided
• cold and hot commissioning is completed
• second line in operation earlier than anticipated
• both lines operate stable at high capacity
• chemical process is working
• the failures we were experiencing were in the feeding system which is very simple system in comparison with the chemical part
• we were very close to achieving the PoC before Christmas and again January
• today we have the corrected feeding issues and restarted the plant today and anticipate achieving PoC shortly
• Proof of Concept – definition is the toughest I have seen in gas and oil business
• we reiterate our 12k tonnes production target for the year
• we anticipace starting additional line each quarter this year

Kristianslund update

• 20k mechanical recycling in operation
• testing different chemical reactor than we have in Skive – Skive is heated by own produced gas, here we have electrical
• we are seeing much better prices on outputs than we expected

Esbjetg (Denmark)

• 160k tonnes per year capacity
• Denmark recently announced 60% recycling targets, higher than the EU
• Plant economics are very strong – unlevered IRR higher than 30%
• Political landscape in Denmark is very favorable
• we have potential investors in the data room as we speak
• we are ready to move forward this quarter

Dubai

• Signed MoU with ENOC and Dubal Holding1 for the development of large scale PTL plants
• Strategically located sites evaluated

Sunderland (UK plant)

• UK very interesting market, we have very good plot with excellent logistics location
• 100% owned by QFUEL
• project is now in permitting phase

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.

Our family office had an opportunity to have a call with the Africa Energy (AEC) management on Monday 10/1/2021.

There will be a lot of traction for AEC in 2022 . Further, during 2022 AEC will get into a position to be able to sell its major asset 11B/12B. As I wrote here before, I believe that the market value of 11B/12B stake is multiple time higher than AEC market capitalization today. See previous post on AEC for details. Should be a good year for AEC shareholders.

I enclose the call summary below:

Block 2B Update

• AEC has a 27.5% stake in Block 2B and is carried on the upcoming well. The block is operated by Azinam.
• On Monday, 10 January, Eco Atlantic announced acquiring Azinam in a share exchange transaction.
• Eco Atlantic is a public company from the Lundin group. Africa Oil (another Lundin group company and AEC shareholder) has around 20% stake in Eco Atlantic.  
• Azinam was rumoured to face a potential lack of funding for the 2B drilling. This is now resolved. Eco Atlantic stated it is already in discussions with existing shareholders to secure financing. Africa Oil confirmed it is ready to provide the capital.
• The above increases the certainty of the 2B drilling campaign timetable.
• The rig negotiations are ongoing. The rig contract should be signed in the next month or so.
• The most likely rig is located in the North Sea and will be available from June or July this year. After that, it could start moving to South Africa.
• The trip to South Africa would take about 45 days. Eco Atlantic said it would drill the 2B in the second half of the year. The AEC management believes that 2B drilling may happen already in Q3 before the licence expires in November.
• There should be a lot of newsflow in Q3 on the 2B rig move and drilling campaign.

Block 11B/12B Update

• AEC has an effective 10% stake in Block 11B/12B. The block is operated by Total.
• Total is still negotiating the gas price with the South African Government. Total hopes to have it done in the next month or so.
• Total promised first gas to the SA government by 2025. If the gas price negotiations get further delayed, the 2025 production goal could be at risk.
• The form of the gas price agreement would be a Memorandum of Understanding (MoU).
• The MoU is the basis for the offtake agreement. The gas price is the essential part of it.
• The next major step would be the Application for the Production Right (license). At the moment, the consortium has the Exploration Right (licence). The exploration right expires in September. When you have a discovery, you apply for a production right. It is a one- to two-year process. The Application includes development plans and environmental permit applications that the SA government must approve.
• The Application for the Production Right would be submitted shortly after the gas price agreement. If the gas price agreement is reached in January or February, the Application could be submitted by March this year.
• The SA government indicated they would fast track the approval process as gas production is its priority. The Application should be approved in 2023.
• After the approval, Total will make a Final Investment Decision (FID). After that, Total will start to work on the production wells at Luiperd. The drilling could begin in 2024, and commercial gas production could start in 2025. Based on the current timeline, there would be no material cash requirements for AEC until 2023-2024.
• The priority is gas deliveries to South Africa. Gas exports to Europe could be considered after the production to SA begins.
• The new Energy Bill negotiated by the SA parliament should be approved in Q2/Q3. It does not affect 11B/12B, which is grandfathered – but it would be positive for the industry. The industry has seen and commented on the bill; no surprises there.

Timing of AEC´s disposal of 11B/12B

• AEC management repeatedly stated that AEC wants to sell the 11B/12B position before the commercialization to realize the gains.
• The minimum requirement for sale is to have a tangible project with clear economics – you need a gas price agreement and the Application for Production Right submitted.
• At that point, the majors would be interested in buying. This stage should be achieved this year.
• Value for 11B/12B will increase as there is further progress. A higher price for the asset might be realized after Total reaches the final decision on the commercialization of the project, which should happen in 2023.
• The AEC investors can therefore expect the disposal could happen any time in 2022-2023.

Block PEL37 Update

• Shell and Total are drilling offshore Namibia. Shell‘s results are rumored to be very positive.
• A positive outcome would renew investor interest in Namibia. In such a case, the value of AEC’s acreage there would increase, and the likelihood of additional drilling around PEL37 increases.

Near Term Catalysts for 2B

• contracting the rig – 1Q22
• Total and Shell drilling results from nearby wells – Jan/Feb
• Eco closing the Azinam deal – 1Q22
• Eco completion of financing for 2B drilling – 1Q22
• rig starts to move to SA (45 days) – 3Q22
• drilling (30 days) – 3Q22

Near Term Catalysts for 11B/12B

• Gas price MOU – January/February
• Application for Production Right – 1Q22

General Catalyst for South Africa

• Energy bill final – 2Q/3Q22

Our summary

There are plenty of catalysts scheduled for this year. The Q1 and Q3 should be especially strong with catalysts.

The gas price agreement and submission of the Application for the Production Right should be the major price drivers in Q1 for 11B/12B. That would be supported by the rig contract and closing of the financing for 2B by Eco Atlantic.

In Q3 there will be plenty of newsflows related to rig movement to SA and subsequent drilling. AEC share price has historically moved strongly on such news.

From Q3, AEC should be in a position to sell the 11B/12B. The transaction is the major catalyst for AEC.

In summary, 2022 should be a rewarding year for AEC investors.

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.

As I expected and wrote here on Friday, QFUEL released before open an update on Skive Proof of Concept progress. I am surprised by the market reaction. Pareto Research stated: We expect a significant positive share price reaction today as achieving PoC at Skive is key for the investment case. I admit I expected material positive reaction too.

I volunteer my view that is also based on research reports published today. I enclose a summaries of the brokers reports below.

Summary:

• Of course it would be better if Proof of Concept milestone was announced. I believe what we got is the second best, with some news exceeding market expectations of Proof of Concept.
• The plant is down due to failures of the mechanical feeding system. The Proof of Concept is about chemical recycling part of the plant. From the press release it seems that chemical recycling part is working well. That is very positive reconfirmation.
• Feeding is technologically less risky part of the plant and therefore it is unlikely that this could cause a major delay. QFUEL statement confirm this: “we are confident that our targeted proof-of-concept will be reached shortly” Again, this is very positive.
• QFUEL announced the second line is in full operation. This is the first time the second line has been in operations, and proves its capability of producing the same, high load as the first line. Again that is positive.
• QFUEL initially communicated that they will first reach PoC on one line and than they will start the other lines. The fact that we now have two lines running may indicate, that the production rump up could be faster than I originally assumed.
• QFUEL reconfirmed The 2022 target for Skive is processing of 12,000 tonnes of plastics, ending the year at a 20,000 tonnes per year run rate as communicated previously. Again, this is very positive, because it indicates, that the delay caused by the feeding systems should be very short term.
• The press release stated that all four lines are the same. One interpretation of this could be that the reconstruction is finalized on all four lines. I do not know if this is right, I hope to get this clarified on the Wednesday call. Again, if this is right, it is another positive.
• Company guidance on 2022 production and capex at Skive remains unchanged.
• Finally, the whole communication is positive – QFUEL significantly improved in its communication skills. For me this is a big leap forward.

In Summary we got a news that the chemical recycling works well, proof of concept should be reached very shortly, reconfirmed production guidance for 2022. On the top of it we got a news QFUEL runs on two lines already, which may indicated faster production rump up. Thumbs up from me.

I enclose below summary from brokers reports published today. Bold emphasis was added.

Pareto Securities Summary:

QFUEL NO – Quantafuel – Progressing towards Proof-of-Concept

Quantafuel is progressing towards Proof-of-Concept (PoC) with two of four lines having “operated stably at design capacity before the runs were cut short by mechanical failures in the feeding systems”. Further, load and performance level would have qualified for PoC but the period of production was too short to meet Quantafuel’s criteria, to our understanding. However, the company expects to resume production and achieve PoC shortly. Please note that the exact definition of PoC is not publicly disclosed. Company guidance on 2022 production and capex at Skive remains unchanged. We expect a significant positive share price reaction today as achieving PoC at Skive is key for the investment case. Our recommendation and Target Price on Quantafuel is under review.

Further details on PoC and 2022 guidance

• Quantafuel has not publicly disclosed the exact definition of PoC, but today comments “all four lines in Skive are identical, and PoC is linked to running one of these lines with post-consumer plastic waste at high load with high availability for a prolonged duration, producing a liquid acceptable for our offtake partner”
• Following PoC, the company plans to ramp-up production with full capacity to be achieved in Q4’2022
• The 2022 target for Skive is processing of 12,000 tonnes of plastics, ending the year at a 20,000 tonnes per year run rate as communicated previously. Capex at Skive remains unchanged at NOK 610m

Fearnley Securities Note:

QUANTAFUEL

• Skive continues progress towards PoC

QFUEL announced this morning that two out of the four lines at the Skive facility have operated stably at a capacity qualifying for Proof-of-Concept. This is the first time the second line has been in operations, and proves its capability of producing the same, high load as the first line did in December. The mechanical issues in the feeding system announced late December have yet to be resolved before PoC can be reached, however, we view it as positive that line one and two are able to operate as planned after the installation of the new equipment. The company reiterates that PoC is linked to running one of the four lines with post-consumer waste at high load with high availability for a prolonged duration, producing a liquid acceptable for the offtake partners, and that full production is targeted to be reached in Q4 2022.

ABG Sundal Collier take:

QFUEL – Reports that 2 of 4 production lines have operated at load & performance level qualifying for proof-of-concept (i.e using consumer plastics, running at design load & producing product within client BASF specs). The plant is down due to failures to the mechanical feeding system, but QFUEL says “we are confident that our targeted proof-of-concept will be reached shortly”. It appears that the new equipment installed in the chemical recycling part of the plant works well. All guidance parameters maintained. It would of course have been perfect if this announcement could have been provided with all systems, including the mechanical feeding system, up and running, but the key issue is that the chemical recycling part of the process works as intended. It sounds like the final PoC announcement is close.

More Clarifications on Wednesday

As I reported, some brokers are hosting Quantafuel roadshow on Wednesday. Our family office will be attending and I will report here any interesting updates.

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 just got an invitation to Quantafuel management roadshow for the next Wednesday 12.1. The roadshow is organised by our Norweigan broker. QFUEL might be doing similar venues with other brokers too.

This could be very positive. It is unlikely that the QFUEL management would be doing a roadshow presentations without any news on Proof of Concept.

It is also not very likely, they would be doing a roadshow on Wed for clients of one broker without telling the whole market first. I would therefore expect some announcement before Wednesday.

If this is right, I would assume that the Proof of Concept update could be comming very soon, possibly already today. There are speculations in the market, QFUEL should want to clarify this soon.

Implications:

If you look at past price performance, when the market expected proof of concept, the share price traded above 70 NOK. Today the share price is around 34 NOK. There is more than 100% upside between today and the previously reached 70NOK.

If the company delivers, the share price should continue moving strongly, as there is a lot of positive news in the pipeline.

Once the proof of concept is achieved, there should be a lot of traction – there will be four large plants under construction at the same time. There should be a lot of positive newsflow.

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.

Andreas Steno Larsen Macro prediction for 2022 is below. He left Nordea recently and publishes his toughs on Twitter. Highly recommended. I publish his Twitter streak publish yesterday, that exactly reflects out thinking and our market positioning.

AndreasStenoLarsen@AndreasSteno

First, the Covid crisis is most likely OVER. Omicron is much milder and in Denmark we have <5 Omicron linked ICU cases despite the biggest case count so far (>20.000 daily cases). Since a virus usually mutates in a milder direction, this ought to be very very good

Second, it strikes me how everyone finds that this automatically leads to a strong year for growth. I am not so sure, since it will allow the fiscal cliff to grow, while monetary policy expectations tightened markedly meanwhile. Growth will surprise to the downside this

This also means that the inflation pressures fueled by Corona-lockdowns have peaked and I see more risks to the downside for inflation compared to the current narrative Everybody can suddenly explain why inflation is skyrocketing. Don’t rule out negative CPI prints in Nov/Dec

6-9 months ago, I was also the only one calling for rate hikes from the Fed in 22. Now every analyst finds it oh so natural that the Fed will hike 3-4 times this year. I am tempted to fade these expectations now, since inflation looks peakish, while growth is coming down.

This means that I like to be long USD, long duration (the longer the better) and long growth/tech stocks in to 2022. It might also be a good idea to remove a few chips from the commodity/crypto space consequently.

The credit impulse is waning swiftly now, and the above is basically your playbook when that happens. Happy hunting in 2022! It is good to be back 🙂

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 announced today, that the newly installed equipment is performing as expected, and that the aim to reach proof-of concept (PoC) around YE’21 is maintained.

This is very bullish. The management is coming out to reconfirm their target that may be only days ahead. It has two implications in our view:

• reaching of Proof of Concept is a major catalyst for the stock. Management confirms we are just days from reaching this.
• the management indicates they want to communicate actively. It is an indication that they care about the share price and its shareholders.

Both of the above are very good news for QFUEL shareholders.

I include below what brokers wrote today about the announcement:

Pareto Securities summary:

QFUEL – Quantafuel announces that the newly installed equipment is performing as expected, that it has had several days with production at applicable load volumes, and that the aim to reach proof-of concept (PoC) around YE’21 is maintained. The Proof of Concept is only linked to running one of the four lines with commercial plastics at high load with high availability for a prolonged duration (apparently 2 weeks). Further, the company restates the 2022 targets for Skive of processing of 12k tonnes of plastics, ending the year at a full capacity of 20k tonnes. In sum, it is positive that the company seems confident in reaching proof-of-concept in short time. As we have highlighted earlier, with several delays and changes to plant assumptions, our target price is currently under review

ABG Sundal Collier take:

Quantafuel has transitioned to production mode in Skive Quantafuel (B) is out with a status update on Skive this morning. It states it has successfully completed installation and commissioning of the new equipment. It has been feeding plastics to the first of four production lines at high load for several days in a manner consistent with meeting proof-of-concept around YE as previously guided. It reports that the new equipment is performing as intended. It is now conducting repairs to the shredder and will restart production shortly. Quantafuel reiterates all guidance parameters. We consider it positive that QFUEL is progressing towards proof-of-concept as previously guided, and find it comforting that the company states that the new equipment is performing as planned.

OUR TAKE – valuation

There is a positive news from QFUEL on weekly basis. Last week we had an announcement on Kristianslund, one week before that it was an announcement on new partnership.

If you look at past price performance, when the market expected proof of concept, the share price jumped above 70 NOK. The share price had a nice move this morning, but there is still more than 130% upside to the previously reached 70NOK. If the company delivers, the share price should continue moving strongly. Todays share price move is a small one relative what the company could experience if the PoC is reached.

The company is very active in preparing new plant projects. Once the proof of concept is achieved, there should be a lot of traction – there will be four large plants under construction at the same time. There should be a lot of positive newsflow.

OUR TAKE – valuation

If you look at past price performance, when the market expected proof of concept, the share price traded above 70 NOK. Today the share price is around 30 NOK. There is more than 130% upside to the previously reached 70NOK. If the company delivers, the share price should continue moving strongly, as there is a lot of positive news in the pipeline.

Once the proof of concept is achieved, there should be a lot of traction – there will be four large plants under construction at the same time. There should be a lot of positive newsflow.

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 is the global market leader in smart links for music streaming companies with a 70% market share.

For example, you click on Justin Bieber’s song you got from a friend on Snapchat, you get into a link that shows you where you can download the music from, the next concert, or where to buy tickers. Linkfire links music on social networks to music streaming companies.

The stock is 50% from its IPO price, despite delivering on all its guidance. The revenues has been raising around 50% over the last two quarters as the company indicated in the IPO. The reason for this according to the Pareto analyst is that the company did not actively communicate between August and October. The retail got scared and start selling. The stock is sliding on very low volumes. The company is starting to communicate actively. If you look at social media there is one good news per week.

The CEO is buying

The CEO reported on Friday that he started buying. The volumes were not high, but it is an indication that the management cares about the share price. See:

Click to access reporting-of-transactions-made-by-persons-discharging-managerial-responsibilities-and-persons-closely-associated-with-them-in-linkfire-a-s-shares.pdf

LInkfire CEO interview on Market Makers!

Market Makers! Hear Linkfire’s CEO Lars Ettrup on the company vision and next steps around 26 minutes in. Listen on your preferred podcast app here 👉 https://lnkd.in/dScp8t5W

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.

I think the consensus does not know or does not appreciate how material CO2 permits are for the NSKOG.

Carnegie is the only broker that did the calculations in their research. I have not seen this in any other broker report.

Carnegie estimated the CO2 permits revenue between 45-60million EURO. That was done when permits were around 60 EURO. The permits are around 90 Euro, If you recalculate this to current CO2 prices, the next year CO2 revenues would be 60-80 Million EURO. That is very material for 350 million EURO market cap. For comparison SpareBank estimates that next year paper EBITDA would be 100 million EURO. CO2 Permits could increase the EBITDA by 60-80%.

SpareBank today published their TOP Picks for December

Norske Skog is on the list for a third month in a row. Their key takeaways were:

• Our take is that NSKOG expect a tight newsprint market in the foreseeable future, in other words, NSKOG expect high utilization and thus prices moving forward
• In our mind surcharges/price increases have not led to demand destruction
• We would not be surprised if 2022 EBITDA from newsprint could be above NSKOG’s over-the-cycle NOK1bn in EBITDA.

• In a going-concern scenario we argue that the share price could
increase to around NOK100. The share is trading at NOK33. A
NOK100 scenario increases the market cap with ~NOK6bn and
the conversion capex is estimated to be EUR350m or NOK3.5bn
• We would not be surprised if StoraEnso sees the same potential
and view NSKOG as an attractive acquisition target

Summary

We have published already second time about NSKOG this week. We have never invested in paper business. NSKOG is different. We do like the value optionality – there are multiple reasons why NSKOG should revalue materially.

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 (QFUEL) announced today it has completed the plant reconstruction and it has also completed cold commissioning. QFUEL is now proceeding into hot commissioning.

Cold commissioning represents cold tests that all plant modifications are tight – there is not leakages. Hot commissioning means the plant is actually starting its operation.

QFUEL also reconfirmed its target to reach proof of concept around year end. The most positive announcement is reconfirmation of the plant assumed capacity of 12k tons of plastic., which means that at least from the mid year QFUEL should operate at full capacity.

Pareto take on the announcement:

Quantafuel just announced that the Skive plant is progressing as communicated in the Q3’21 report. The plant is now transitioning into hot commissioning, followed by feeding of plastics around mid-December and the aim to reach proof-of-concept (PoC) around YE’21, roughly two weeks later. Quantafuel also reveals that the PoC is only linked to running one of the four lines with commercial plastics at high load with high availability for a prolonged duration (apparently 2 weeks). Further, the company includes 2022 targets for Skive of processing of 12k tonnes of plastics, ending the year at a full capacity of 20k tonnes. In sum, positive that the company seems confident in reaching proof-of-concept in only weeks. With several delays and changes to plant assumptions, our target price is currently under review

Fearnley take on the announcement

QFUEL (Under review)

• Skive is on track for PoC around year-end

QFUEL announce today that Skive is progressing as stated in 3q21 and is on track for PoC around year end. The company communicates that they are about to start hot commissioning, which will be followed by feeding of plastic around mid-December. Further QFUEL states that the installation and cold testing of two of the four lines at Skive have been completed on schedule, and the remaining lines are under preparations in parallel with ongoing commissioning, start-up, and operation. All four line are identical, and the company’s initial focus after hot commissioning will be on running one of the lines with commercial plastics at high load for a prolonged duration, producing acceptable liquid for offtake partners. This is what PoC is linked to. We see this announcement as another positive step for QFUEL towards successful operations at Skive, and notice that after several delays at Skive, the company is advancing at a higher pace towards PoC than previously.

OUR TAKE – valuation

There is a positive news from QFUEL on weekly basis. Last week we had an announcement on Kristianslund, one week before that it was an announcement on new partnership.

If you look at past price performance, when the market expected proof of concept, the share price jumped above 70 NOK. The share price had a nice move this morning, but there is still more than 130% upside to the previously reached 70NOK. If the company delivers, the share price should continue moving strongly. Todays share price move is a small one relative what the company could experience if the PoC is reached.

The company is very active in preparing new plant projects. Once the proof of concept is achieved, there should be a lot of traction – there will be four large plants under construction at the same time. There should be a lot of positive newsflow.

Other interesting news today:

From Fearnley research:

BW LPG (Buy, TP NOK 78)

• Sells 2 vessels and initiates 10m share buyback program
• Sells four vessels to BW LPG India

BWLPG continues its fleet high grading with the sale of 2x 2010 built VLGCs. The vessels are BW Niigata (previously Yuricosmos) and BW Sakura. BW exercised the purchase option on Niigata in 3q21 and is now selling the vessel together with Sakura for a net gain of USD 13.7. No price was revealed, but the sales will generate liquidity of c. USD 72m. Simultaneously, BW LPG is initiating a buyback program of up to USD 50m (10m shares with max amount of USD 50m). With the share trading at c. 50% of NAV this is an exercise (selling assets and buying equity at a steep discount) that in our view makes a lot of sense.

———————-

Biovica – out doubling candidate

Biovica – QFUEL is starting to move, as the catalysts are coming nearer. Biovica should experience the same very soon. See below for Pareto take on Biovica, who recently published research highlighting the doubling optionality within weeks.

Biovica – our doubling candidate is reporting tomorrow

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.

For the last three months both Pareto and SpareBank have Norske Skog (NSKOG) as a top idea for the month. There has been several positive developments in the last two weeks:

Share overhang removed – over the last few weeks NSKOG went from 34 to 42 NOK. Larger appreciation was limited by the share overhang – the market new that UK based Oceanwood Capital Management that invested years ago is about to reduce its exposure, which has multiplied due to strong share price appreciation over the last few years. They placed the shares on 2/12 through Pareto and entered in to three months lock up. The market suspected the sale would happen which was a break on the stronger share price appreciation. This hurdle has been now removed.

Investor day – the company hosted Investor day on 25/11. It was the first investor day in 15 years they said. The reason was the company believes it has a lot of to say to its investors. I recommend to watch at least the initial presentation by the CEO.

https://www.norskeskog.com/investors/press-releases/english-press-releases/capital-markets-day-2021?PID=4684&M=NewsV2&Action=1

Pareto Securities – Summary of the Investor Day

Repricing warranted – Buy

Norske Skog delivered a CMD in line with expectations, adding colour and clarity on the transition toward growth markets. Expansion projects are on-track and budget. While publication markets are cited tight, enabling NSKOG to include price surcharges and offset costs. Accordingly, we lift 2021-22E, and getting increasingly confidence on a cyclical rebound, which we think will yield 6-7x quarters consecutive EBITDA growth. This coupled with improved revenue mix, growth markets and a greener footprint, margins should rise, and a repricing seems warranted. Buy and NOK 60 TP reiterated, corresponding to ~6x EV/EBITDA’22E vs peers trading at ~8-9x. Publication paper market to remain tight into 2022 While the CMD provided limited new information, it added colour and clarity. Expansion projects are on time and budget, set to transform the company and improve the energy mix as well as the environmental footprint. NSKOG is fully financed, and long-term leverage targeted set below 2.0x. Near-term, a tight market balance (and costs) has driven highly necessary increases in publication paper prices. A price uplift larger than previous anticipated. Estimates upped for 2021-22 We include price surcharges in Europe of EUR 115/t for Q4 (volume weighted) and expect prices to increase further in 2022 (time-lag). For 2021-22E, EBITDA is lifted by 28-12%, respectively. For Q4, we look for an EBITDA of NOK 225m, ahead of consensus of 171m (Bloomberg), and up from NOK 111m in Q3. Buy and TP NOK 60 reiterated Q4 is said to be markedly better than Q3 – albeit easy comp. This driven by higher publication prices and should be followed by expansion projects in 2022-23 (Bruck boiler and containerboard). This should provide at least 6-7x quarters consecutive EBITDA growth. An outlook that is not remotely reflected by the share price trading at 4.7x EV/EBITDA’22E (Bloomberg). We say Buy, TP NOK 60, corresponding to 6x EV/EBITDA’22E vs. peers at ~8-9x.

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