Author Archives: Fit Investment Ideas

Making money is about great ideas. This is what this blog is all about.

CIRCA IPO will DRIVE NORSKE SKOG UPSIDE

Circa today announced its IPO. Norske Skog owns 32% of Circa. The IPO is expected to be prized at approximately 1.5 billion NOK. Norske Skog stake is therefore valued at 500 million, or 5 NOK per share of Norske Skog. It was valued at immaterial amount. It NAV should therefore increase by close to 5NOK per share.

I believe that the market does not give Norske Skog any credit for this value creation. It should be fully reflected when the Circa IPO is launched on 3 March.

Circa is converting bio-waste into a high grade chemicals. They partnered Merck to distribute the chemical.

Pareto is pricing Circa at “25% below our mid range valuation”. Circa share price should increase significantly on the IPO debut day. As most IPOs do lately. So it should trade up by 25% at least.

If you value Circa based on current multiples of Renewcell, the valuation upside should be 50%-100%. If you value this based on Carbonis multiples, Circa should be valued at 4-6 times its IPO price.

Do not assume, that Circa will reach multiple valuation on its first trading day. But it is realistic to assume that it could easily double on the first day and further double in the next six months. In such scenario Circa would represent 60% of Norske Skog market capitalization – 20 NOK per share. The best way to play Circa IPO now is through Norske Skog shares.

Circa Group contemplating milestone capital raise and listing | Norske Sko

MPC Energy should double in next six months

MPC Energy Solutions (mpc-energysolutions.com) is a solar power company. Its IPO was launched two weeks ago. It is new in the market and therefore off radar for many investors. That creates an opportunity.

Scatec Solar trades at 6 times its book value. MPC trades at a bit above 1 times book value. According to the analysts MPC should trade at least 3 times book value. It means that the share price should be 120 NOK per share vs today´s 50 NOK.

What will drive the share price:

  1. Spare bank research publication – IPO was managed by Fearnley and SpareBank. The managers always publish research after the blackout period. Fearnley already published very bullish report titled “A First class Growth Vehicle is Born” their price target is 90. The research pushed the stock from 45 to 50. SpareBank has much higher retail coverage. A similar research would push the price up by 10 NOK. Their publication must be any day.
  2. Company news flow – the analysts expect strong newsflow on project progress over the next 60 month. An analyst told me he expects around ten news items during the period. IF MPC deliver as expected, its share price should double.

Stay tuned…

My top picks in scandinavia

These are my top picks in Scandinavia. I am very long all those stocks. I increased position today in NSKOG and AKH.

Aker Solutions – there is an investor day on Monday. They will announce going green. Three days play. No brainer

Aker Horizons – very bullish on this one. So many catalysts in the next two weeks:

  1. Subsidiary reporting – AKER Carbon Capture and AKER Offshore Wind are reporting tomorrow.
  2. Hydrogen project – the company announced , that on 19/2 they will announce “concrete projects and concrete partnerships” in hydrogen. This event can easily drive the share price up 5 NOK
  3. Post IPO research publication – The blackout period ends next week. The brokers will most likely wait and publish after the 19/2 event (see above). Brokers like Sparebank and Pareto (both in syndicate) can drive the share price up significantly.

MPC Energy – listed two weeks ago, trades at fraction valuatin of Scatec Solar. There is 10 times potential if it would trade close to Scatec. See this blog below on further details on this.

Africa Energy – this has a potential to multiply your money. I like the below article, that summarises the thesis well:

Giant Hydrocarbons Discovery By Total And Africa Energy Better Than Expected (OTCMKTS:HPMCF) | Seeking Alpha

Norske Skog – people do not appreciate the restructuring story. The company is exiting paper and is entering high margin packaging (that replaces for example plastic plates in restaurants) with much higher margins. Further, the company is planning to list one of its subsidiaries, possibly as early as next week. Under my valuation the subisdiary could have 20% value of NSKOG market cap. Further they already announed that they will dispose their Australian paper business that would also help the share price. It is PAreto TOP PICK for this year. In summary the IPO and the Australian business disposal will drive the share price in the short term, the restructuring in the longer term. The stock has a potential to double by the end of this year. Very bullish.

Buy AKER HORIZONS BEFOR INVESTOR DAY ON MONDAY

Clarkcsons just released their research on AKH:

Lighting The Path Ahead
Aker Horizons is a newly-formed holding company for the renewables and cleantech investments of the Aker Group, which has helped to establish some of the best-performing renewables stocks traded in Oslo, including Aker Carbon Capture and Aker Offshore Wind. The success of these spin-offs from previous Aker entities illustrates the value-creating potential in Horizons, we argue, and owning shares on the holding company level allows investors to participate in potential new ventures at the same terms as the parent company, Aker ASA. We view this exposure, as well as the underlying assets, as an attractive and diversified play on the growing renewables space. We initiate coverage of Aker Horizons with a Buy rating and NOK 62 Target Price, based on a detailed asset-by-asset valuation and including a 20% premium to reflect our view of the near-term potential for significant value creation in upcoming ventures like Aker Clean Hydrogen.


Aker Horizons is rapidly building a renewables “powerhouse”
Despite having been established in mid-2020, Aker Horizons has built a substantial portfolio of ownership stakes across multiple clean energy technologies including onshore wind, offshore and floating wind, solar, carbon capture, battery materials and soon hydrogen. Aker Horizons recently purchased a 75% stake in Mainstream Renewable Power, which is expected to be the main earnings driver in our forecast period, as the other companies are in earlier stages of development. However, these early-stage companies like Aker Carbon Capture already boast substantial market values, and we believe their medium and long-term earnings outlooks are strong. The inclusion of multiple technologies in one holding company provides investors diversification, and we argue it also offers the portfolio companies relevant experience and relationships for further business development. For Aker Horizons, this cross-technology competence could be useful in the establishment of new strategic ventures as the energy transition continues to drive growth in the renewables economy.

New ventures drive a premium valuation
Key to our valuation thesis, Aker Horizons is expected to continue establishing and spinning-off new ventures in areas like hydrogen, a feature which offers investors exposure to potential pre-listing value creation. While it is difficult to estimate the potential value of such initiatives, we do believe that the stock will trade at a premium to the sum-value of its publicly-listed and private assets, to the extent it continues its recent track record of impressive entrepreneurship.

Initiating at Buy with a NOK 62 Target Price
We initiate coverage of AKH with a Buy rating and a NOK 62 Target Price, reflecting 45% upside potential to current pricing. Our valuation is based on a SOTP calculation of AKH’s listed subsidiaries and associated companies, while we account for potential future growth by allocating a 20% premium to our SOTP estimate, which reflects our expectation that Aker and AKH will continue to unlock potential hidden value through new ventures like Aker Clean Hydrogen.

Short term play on MPC ENERGY

MPC Energy IPO was placed two weeks ago. There was 14 days blackout period for the IPO syndicate banks, in which they are not able to publish research. That ended last Thursday. The syndicate had two members : Fearnley and Sparebank. Fearnley published yestarday very bullish report (go to fitinvestmentideas.com for details).

The other member of the syndicate was Sparebank. They have the top rated analyst for Solar. Plus they have a large retail coverage, which Fearnley does not. He can move the market. They published today report on NUMND, which drove the price 20% up. The same could happen to MPC Energy. They could publish any day now. But they will publish. Syndicate members do publish.

We are long MPC ENERGY

From Fearnley Research published today:

MPC Energy Solutions (Buy, TP NOK 90/sh)

We initiate coverage of MPC Energy Solutions (ticker MPCES) with a NOK 90/sh Target Price and a Buy recommendation. MPCES comes across as a highly appealing way of playing the Renewables space, citing 1) an initial portfolio with FSest IRRs >15%, 2) growth opportunities beyond of c. 1 GW with similar economics, 3) scalable business model with applicability beyond targeted regions, and 4) attractive pricing. On the latter, the current market cap implies a price of FSest c. USD 0.8m/MW, representing a +50% discount to peers. Once projects are up and running and the company proves the business model, this sets the stage for meaningful repricing, especially considering the comparably high visibility on growth. Buy

ONE WEEK trade in AKH and AKSO

AKSO – Buy ahead of CMD
Trading update today with strong underlying figures, but COVID-related one offs of NOK 350m appears to steal the headline as the stock is trading 4% lower. There is no continuation of these one-offs into 1Q20 according to the company. We believe AKSO has taken out the trash ahead of the CMD and Q4 results on 15 Feb, so focus will forward-looking on Renewables and potential dividends. Underlying EBITDA today was NOK 470 vs 354m consensus. Order intake was NOK 6.8bn vs 6.6bn our estimate. Today’s update was all backward-looking, at the CMD on 15 Feb we expect focus will be on the strong project pipeline within subsea (NCS and Brazil) and renewables through Aker Carbon Capture and Aker Offshore Wind. The pipeline has grown to NOK 76bn from 42bn largely due to renewables and low carbon projects. Through an improved revenue profile; NOK 1.5bn in cost synergies; and 60% reduction in capex, we expect NOK 600m/1.1bn FCF 2021/22 which together with NOK 450m net cash paves the way for a 2021 dividend. Buy ahead of 15 Feb.

AKH – Buy ahead of AKER’s Q420
On 17 Feb, AKER will announce their new clean hydrogen venture ‘Aker Clean Hydrogen’ which will sit in Aker Horizon’s portfolio. Current NAV in AKH is NOK 24/share vs 43 share price. However, that assumes MRP is booked at cost. If we use peer group pricing on MRP, AKH’s NAV increases to NOK 47/share which includes zero value on Aker Clean Hydrogen, only NOK 100m on Rainpower and zero value on SuperNode. We believe Aker Clean Hydrogen will increase NAV further following the announcement on 17 Feb. Additionally, we see potential for a lot of newsflow from portfolio companies near-term, especially the ones which have yet to be listed. Worth a look.

trade idea: TWO WEEKS PLAY ON Aker Horisons

I just listened to AKER HORIZONS CALL:

The company is reporting Q4 results on 17/2. As a part of the results they will introduce their Hydrogen Project. They stated on the call, that they will “introduce concrete projects and concrete partnerships”. First, this will be very bullish for the company share price. Secondly, it will create a wave of Broker research updates in following days. Both should be very bullish for the stock price.

Link to the investor presentation:

Click to access 270121%20Aker%20Horizons%20AS%20-%20Investor%20Presentation%20-%20FINAL.pdf

SHORT TERM PLAY: QIIWI Games did their IPO that temporarily depressed its share price. It is already coming back. You can make quick money.

Hurry up.

• QIIWI did successful private placement raising gross proceeds of approximately SEK 66.5 million (1,000,000 new shares) at a subscription price of SEK 66.5 per share

• The book was multiple times over-subscribed and allocation was heavily tilted towards institutional investors that met the Company during the recent roadshow

• Top 10 orders received approx. 68% of allocated shares and top 20 orders received approx. 82%

• The private placement received strong interest from Swedish and international institutional investors, including Konsortiet Dan Sten Olsson and Erik Nielsen

This is a one – two days transaction on the rerating of the stock. Or you can play it for a few weeks. They will use the money to do a transaction. If they announce it, the share price would fly much higher.

Africa Energy´s bloc 2B is block to watch in 2021 according to welligence energy analytics

We are long Africa Energy. It is one of our large position. The investment thesis is very well summarized here:

Giant Hydrocarbons Discovery By Total And Africa Energy Better Than Expected (OTCMKTS:HPMCF) | Seeking Alpha

Our investment thesis is based on AEC investment in Block 11B/12B in South Africa, that is operated by Total. Their other large block 2B is often neglected from the analysis. Wellingence Energy Analytics just publisher their report: The 2021 outlook for offshore exploration in Sub-Saharan Africa

https://mailchi.mp/71c70bec441f/welligence-argentina-rumblings-on-the-ground-12976651?e=bf954ea555

In the report they list AEC´s block 2B among the top exploration wells to watch in 2021 list below.

The AEC share is down due to wait on the negotiations with the South Africa Government. This should be resolved soon, as the SA pushes for breaking the dependence on coal for energy production. We are increasing our position.