Category Archives: Uncategorized

Two weeks ago Quantafuel sold off due to a delay of Skive continues production. Investors viewed this as increasing uncertainty over Quantafuel ability to chemically recycle plastic.

Today, Quantafuel announced that BASF converted their convertible loan into shares of Quantafuel. I view this as very positive. BASF knows more about Quantafuel more, than anybody else. They have been helping Quantafuel since the start and have they staff permanently at Quantafuel plant. The fact BASF decided to convert loan into equity is a strong vote of confidence. The press release provided the below quotes:

“After further equity injections by third parties and in the course of continuously optimizing BASF’s financial investments, BASF decided to convert the loan into new shares,” says Dr. Lars Kissau, Senior Vice President Global Strategic Business Development at BASF’s Petrochemicals division. “Quantafuel’s technology remains an important building block for BASF’s ChemCyclingTM project with the aim to use pyrolysis oil as feedstock in chemical production.”

“We are happy that BASF have decided to convert the loan into shares, making them our largest shareholder. We are very much looking forward to the continued cooperation,” says Ann-Christin Andersen, Chair of Quantafuel’s Board.

I believe the Quantafuel shares reached bottom today. The shares should start re-rating, as investors digest the importance of today’s announcement.

The main message BASF is send in us is: BASF is confident in Quantafuel ability to deliver. I believe investors should listen.

Wait for a string of good news from Quantafuel and proof of concept, that should be comming soon.

OTHER OPPORTUNITIES TO LOOK AT:

Biovica – is one of the top picks for this quarter. The company is due to get FDA approval and start sales in the US. The company has 25 studies from leading US and EU hospitals that their breast cancer works, saves lives and costs of treatments. Biovica is to become a global leader in this novel way of testing for cancer. Xbrane, in a similar situation, doubled in two months prior to such an announcement. Biovica will most likely do as well. See the below article for the full investment case:

Biovica International Should Double On Novel Breast Cancer Test Launch In Q3 | Seeking Alpha

Linkfire. It is a recent IPO listed in Stockholm. It was placed at 11.20 SEK, it is now around 10 SEK. It is a play on the growth of music streaming and, in the next phase, movie streaming. Pareto will be publishing research in two weeks time. I am long and very bullish, Linkfire. I will publish an article on Linkfire in the next two weeks.

I am invested in good oil assets, but they have not moved as expected. The reason, I think, is that the markets changed. For share price to grow, the companies must deliver cash earnings. It is not enough to declare the cash is coming. The market wants to see the cash. If the cash is delivered, the share prices should re-rate. Both below companies are good examples of that.

My favourite oil assets

Africa Energy – AEC has been one of my most favourite assets. It has a 10% stake in one of the largest gas condensate deposits globally, just off South Africa. The operator of the asset is French Total. AEC declared it wants to derisk the asset and sell it. Earlier this year, AEC announced that Total aims to sign an offtake agreement with the South Africa government by October. When this happens, AEC will be in a position to sell its stake without problems. At least, that is what a leading Norweigan oil analyst told me today. Based on my analysis, the 11B/12B deposit value should be a multiple of current market capitalisation. I expect at least a 100%-200% return on the investment.

The stock has drifted down as retail got tired of waiting. Pity I am invested up to my own limits; otherwise, I would buy more.

There is a detailed thesis on this opportunity:

Africa Energy – The Highest Risk-Reward Opportunity Within Lundin Oil Group (OTCMKTS:HPMCF) | Seeking Alpha

Panoro – has been one of the best capital allocators in the industry. When others were scared, Panoro was buying. They bought assets when the oil price was USD 40. The results are impressive. According to Pareto, its oil revenues are going to rise from USD 27 million in 2020 to USD 173 million in 2021. Its Cash flows will increase from USD5 million in 2020 to USD120 million in 2021. The market capitalisation is around USD 200 million. The share price trades at PE of around 4. All these improvements are not reflected in the share price. Panoro is reporting 25/8. It should show material cash earnings improvement, and the share price should finally reflect this.

OTHER OPPORTUNITIES TO LOOK AT:

Quantafuel – the stock sold off 30% in the last 10 days on delay of Skive and CEO resignation. The management stepped in and started to buy shares. QFUEL had this moves before. These moves have so far been profitable. I played it three times. I am very long QFUEL. Thesis is below:

Quantafuel, The Global Leader In Chemical Recycling Of Plastic, Backed By BASF And Vitol Has Potential To Multiply Your Investment (OTCMKTS:QNTFF) | Seeking Alpha

Biovica – is one of the top picks for this quarter. The company is due to get FDA approval and start sales in the US. The company has 25 studies from leading US and EU hospitals that their breast cancer works, saves lives and costs of treatments. Biovica is to become a global leader in this novel way of testing for cancer. Xbrane, in a similar situation, doubled in two months prior to such an announcement. Biovica will most likely do as well. See the below article for the full investment case:

Biovica International Should Double On Novel Breast Cancer Test Launch In Q3 | Seeking Alpha

Linkfire. It is a recent IPO listed in Stockholm. It was placed at 11.20 SEK, it is now around 10 SEK. It is a play on the growth of music streaming and, in the next phase, movie streaming. Pareto will be publishing research in two weeks time. I am long and very bullish, Linkfire. I will publish an article on Linkfire in the next two weeks.

Summary

• Cancer diagnostics is a strongly evolving field. Biovica’s novel cancer test can detect breast cancer progress cheaper and much faster than current methods. Biovica is the global leader in the field
• Its unprecedented 30 clinical trials in the prominent US and European hospitals minimize the risk of FDA failure. Biovica expects FDA approval and US launch by the Q3 end.
• Share prices of pharma companies tend to move strongly before a major catalyst. Biovica should be a perfect example of this.
• Biovica is up almost 40% in last two weeks. This trend is most likely going to continue for at least one more month prior to FDA. The recent price move may indicate, that the FDA may come sooner than currently expected August.
• My price target in six weeks (prior to FDA) is 100-140 SEK. The current share price is 60 SEK. Very good upside for one month and half.

Full investment thesis

https://seekingalpha.com/article/4437698-biovica-international-should-double-on-novel-breast-cancer-test-launch-in-q3

When investing one thing to follow is macro. I follow Darius Dale for macro. Of all the research he is the most reliable. See 42macro.com.

His recent position is:

• inflation is decelerating and will be decelerating further. This has several implications – the inflation linked assets are loosing steem.
  • Commodities are decreasing – look at CRB index. Most commodities are going down with exception of oil. Oil is lately loosing stream too.
  • USD and other risk off assets are strengthening
  • investors are starting to rotate from inflation and growth assets into more defensivě plays
  • reopening stocks might be too risky to stay in – the expectations have been too high and will never be met
  • interest rates are going down – this should allow people to come back to tech and green stocks. As the economies will be growing less strong than they did in Q1/Q2, focus should be on high quality stocks.

In summary – Scandinavia green stocks were hit early this year when people became were scared of inflation. The inflation worries are starting to disappear. Might be time to start increasing exposure back into those stocks that sold off. High quality should perform better.

IDEAS FOR FURTHER RESEARCH:

Quantafuel – the stock sold off 30% in the last 10 days on delay of Skive and CEO resignation. The management stepped in and started to buy shares. QFUEL had this moves before. These moves have so far been profitable. I played it three times. I am long QFUEL. Very long.

Biovica – it is one of the top picks for this quarter. The company is due to get FDA approval and start sales in the US. The company has 25 studies from top US and EU hospitals, that their breast cancer works, safes lives and costs of treatments. Biovica is to become a global leader in this novel way of testing for cancer. Xbrane in similar situation doubled in two months prior such announcement. Biovica will most likely do as well. See the below article for full investment case:

Biovica International Should Double On Novel Breast Cancer Test Launch In Q3 | Seeking Alpha

Linkfire. It is a recent IPO listed in Stockholm. It was placed at 11.20 SEK, it is now around 10 SEK. It is a play on growth of music streaming and in the next phase movie streaming. Pareto will be publishing research in two weeks time. I am long and very bullish Linkfire. I will publish an article on Linkfire in the next two weeks.

In the last few days, Quantafuel managers reported the below transactions :

• 7/7/2021 – Kjetil Bøhn, Special Advisor in Quantafuel ASA, has today bought 20,000 shares in Quantafuel ASA through his wholly owned company KB Management AS, at a price of NOK 33.30 per share. After the transaction, Kjetil Bøhn and affiliates holds 3,677,050 shares and 600,000 options in Quantafuel ASA.

• 6/7/2021 – Kristian Flaten, CFO in Quantafuel ASA, has today bought 2,000 shares in Quantafuel ASA at a price of NOK 35.10 per share. After the transaction, Kristian Flaten holds 5,000 shares and 200,000 options in Quantafuel ASA.

• 5/7/2021 Wenche Teigland, Member of the Board of Directors in Quantafuel ASA, has today bought 1,430 shares in Quantafuel ASA at a price of NOK 35.10 per share. After the transaction, Wenche Teigland holds 1,430 shares and 40,000 options in Quantafuel ASA.

Quantafuel also announced purchase of land for building next large plant in Denmark:

Today, Quantafuel is pleased to announce the purchase of a 14.5-acre site, with an option to purchase an additional 12 acres in Esbjerg, Denmark. Here, Quantafuel plans to build one of the biggest plastic waste sorting plants in Europe, which also will be the first of its kind in Denmark. See the link below for more details on this

Media – Quantafuel

All the above news are positive. Despite that the shares is still in negative momentum. I believe one quarter commercionalisation delay due to the delayed supply of new equipment caused by COVID situation at Quantafuel supplies does not justify 30% decline in Quantafuel market cap this week. I understand retail is selling and institutional investors are buying…

We spoke to the senior management on Tuesday. The link to the minutes from the call are below:

Minutes of the call with Quantafuel management today | Fit Investment Ideas

Other opportunities for further research:

1. Biovica. I recommend reading the below article. It was published yesterday. Its publication caused the share price move by 13.4%. My base case is, that the share price should double by September launch of its novel cancer test in the US.

https://seekingalpha.com/article/4437698-biovica-international-should-double-on-novel-breast-cancer-test-launch-in-q3

2. Linkfire. It is a recent IPO listed in Stockholm. It is a play on growth of music streaming and in the next phase movie streaming. I am long and very bullish Linkfire. I will publish an article on Linkfire in next two weeks.

I had an opportunity to join a call with Quantafuel management today. The participants were Dr Lach and the CFO Kristian Flatten:

• Dr. Lach joined Quantafuel from BASF this year. He did most of the talking. He is a brilliant mind, very smart and very knowledgeable. He comes out like a natural leader. He would be an ideal CEO for Quantafuel in my view.
• While Kjetil (previous CEO) was an overpromise and underdeliver CEO, Dr. Lach is the solid German – underpromise and overdeliver kind a guy.
• He confirmed that Kjetil wanted to free his hands for other projects for some time. The plan was for Kjetil to leave in mid year after Skive one line continuing production milestone achieved. Kjetil agreed with the board, that he would leave despite Skive still in progress. I understand from them, that there is no more story to this.
• Dr. Lach reconfirm the production milestones defined in the press release published at the end of June. The Skive full production target on all lines has been postponed from Q3 to Q4. In my view it is a delay, that is not material for the longer term value of the company.
• We discussed output prices for which Quantafuel sells its products to BASF. The price is now around USD 1000 per ton. The price reflects that when the contract with BASF was negotiated, the oil prices were much lower than they are today. The contract will be renegotiated at some point and Quantafuel expects a price improvement.
• We also discussed, whether there will be enough plastic for Quantafuel to process. Dr. Lach explained, that Europe produces 60 million tons of plastic and produces 20 million tons of plastic waste. Out of this 15 million tons is suitable for chemical recycling. Skive is the largest chemical recycling plant in the world. Its capacity is 2O thousand tons per year. You can make a calculation, how many Skive size plants are now needed in Europe.
• Quantfuel contemplates listing on the main market in Oslo. At the moment most foreigners can not buy Quantafuel shares in Oslo, as most online platforms and smaller brokers do not allow purchases of shares listed on Euronext Growth market. The listing on the main market would expand investor universe outside Nordics, which would broaden the investor universe, increase liquidity and help the share price. Foreigners can buy the German listing, but that is not very liquid and therefore it is not the preferred option. We were not able to get a grip on the timing of this. It is my impression that it is rather in the coming months than weeks.
• The next catalyst will most likely be appointment of the permanent CEO and further details that should be published latest during the Q2 call scheduled for 31.8.
• In my view the market correction of around 20% is hard to understand. After the call I spoke to my Norweigan broker. They are trying to buy the stock for their clients, but there is very few sellers at these price levels. That is an encouraging sign, that the share price may reached a bottom.
• Subscribe to my blog below to receive further updates on Quantafuel

Other opportunities for further research:

1. Biovica. I recommend reading the below article. It was published yesterday. Its publication caused the share price move by 13.4%. My base case is, that the share price should double by September launch of its novel cancer test in the US.

https://seekingalpha.com/article/4437698-biovica-international-should-double-on-novel-breast-cancer-test-launch-in-q3

1. Linkfire. It is a recent IPO listed in Stockholm. It is a play on growth of music streaming and in the next phase movie streaming. I am long and very bullish Linkfire. I will publish an article on Linkfire in next two weeks.

• Three months ago, I wrote an article for SA on Xbrane. I predicted a strong share price growth by the Phase 3 readout. Xbrane doubled.
• Biovica is a similar case. It should double in the next three months. For the same reasons as Xbrane did.
• Cancer diagnostics is a strongly evolving field. Biovica’s novel cancer test can detect breast cancer progress cheaper and much faster than current methods.
• Its unprecedented 30 clinical trials in the prominent US and European hospitals minimize the risk of FDA failure. Biovica expects FDA approval and US launch by the Q3 end.
• Share prices of pharma companies tend to move strongly before a major catalyst. Biovica should be a perfect example of this.

https://seekingalpha.com/article/4437698-biovica-international-should-double-on-novel-breast-cancer-test-launch-in-q3

The global market leading marketing platform for music labels and artists.

I am long Linkfire. I think it is a case, that is worth to do some work on. They are the market leader and they will drive the industry consolidation.

• Top major music labels use Linkfire with a combined market share of 70%

• Marketing platform services more than 85,000 users as of 2020• In 2020, Linkfire connected 1.5B consumers to music products (48 per second)
https://investors.linkfire.com/investors#reports-and-presentations

XBrane announced today the positive Phase 3 study data and application for FDA approval. I am taking my profits. I first wrote about it when it was about 70 SEK. Now it is 170 SEK. The company will need raise cash and it will take some time for the company to get the FDA approvals. There may not be happening much for the next year, so I am taking my profits and redirecting my attention to Biovica – see my previous comments on this. I believe that Biovica will double in the next two months as retail will get excited on the forthcoming FDA approval and product launch in the US. See past posts for details and links to research.

I wrote here several times about NSKOG. I am long and I like the story. It is cheap vs peers and its green itiatives at valued at zero. Pareto analyst believes the green intiatives have value equal to its mkt cap. It is cheap. And it is very cheap when paper prices are raising as global paper production capacity is decreasing. ABG belives NSKOG is a takeover candidate. See older posts for details on the above.

Today NSKOG annouunce investment decision on paper capacity conversion into renewable cardboard that is in high demand. See the summary below

On route to become a leading European recycled containerboard producer
NSKOG has made the final investment decision to convert one paper machine at the Golbey (France) site from standard newsprint to recycled containerboard. This is the second site NSKOG will convert (follows Bruck, Austria) and an important step to become a leading recycled containerboard supplier in Europe. The conversion at Golbey will add a further 550kt of cost-competitive and low-emission capacity, starting in Q3’23 – about a year after Bruck. The production will be 100% based on recycled fibre and green energy generated from a new biomass plant at the site. This will bring NSKOG’s total containerboard capacity up to 760kt. The investment is estimated at EUR 250m, fully financed (i.e. 70% debt, 30% cash), and expected to generate EBITDA NOK 700-800m p.a. based on historical prices. Also, conversion will reduce NSKOG’s publication capacity, thus contributing to balance the market, and increase exposure to containerboard which is a growing market (2-3% growth rate). Based on our SOTP, no value seems to be reflected besides the legacy publication business trading at 4.1x EV/EBITDA’21E (consensus). We reiterate Buy, TP NOK 50.

Fully financed – capex 70% debt financed, remaining covered by cash on balance

NSKOG today announced the final investment decision to convert one machine at the Golbey (France) industrial site from standard newsprint to recycled containerboard. Link. NSKOG will invest approx. EUR 250m in the conversion of Golbey PM1, and a syndication of financing facilities of approximately EUR 175m is being finalised, subject to final documentation and final approval from the relevant export credit agency (i.e. 70% debt financing). The remaining investment amount will be covered by cash on balance and cash flows from operations.

Containerboard EBITDA potential of NOK 700-800m based on historic prices
Recycled containerboard production at Golbey PM1 will start in Q4’23, about one year after the start- up of the Bruck PM3, allowing for stepwise commercial introduction of the containerboard volumes. Full production of 550kt of lightweight testliner and fluting is expected in H2’26, allowing for a normal start-up curve. In parallel, Veolia Industries Global Solutions and NSKOG, will construct a green energy biomass facility adjacent to the Golbey industrial site. This facility will provide cost-efficient and sustainable steam to be used for both containerboard and newsprint production. In total, 760kt containerboard capacity (i.e. Bruck and Golbey) should generate an EBITDA of ~NOK 700-800m p.a. from 2025/26, based on historical trend prices for containerboard and recycled fibre.

Buy, TP NOK 50 reiterated
The conversion of Golbey is an important step towards sustainable and growing markets, supporting valuation and the long-term potential. The former should crystalize as the market moves out of the trough and profitability for NSKOG’s legacy business improves (H2’21 with higher publication prices). Valuation is undemanding, trading at ~4.1x EV/EBITDA’22E (incl. the 26% stake in Circa) at consensus estimate (3.7x excl. Circa). Our SOTP of NOK 63/share, leaves ~75% upside to the share price. We expect a positive earnings trend into 2022, and more project updates throughout the year. We thus find the upside attractive, and reiterate Buy and TP of NOK 50/share

Friday was bloody. The markets are quite high and becomming fragile. I wrote here about many long ideas, that I played. I have been torturing myself how to hedge against violent downturn. I am looking at short ideas, that are short based on its fundamentals – that will go down it good or bad markets. Any suggestions appreciated.

So far, I like the most Sparebank idea – short Avanza. The idea behind the idea is simple – people in lockdown had a lot of free time. Many started to gamble at the stock maret. Many used Avanza trading platform. As a result Avanza commissions trippled. Avanza made most money on fx comissions as gamblers were buying US stocks.

As Scandinavia has reopened, people went to work and have much less time. Avanza trading revenues should decrease significantly Sparebank believes. That is not priced in. It is their top short idea for this month published last week.

Two days ago in their daily report the wrote:

(-) AVANZA: We inlcuded AZA among our Monthly funding candidates for June as we consider both earnings estimates and fwd P/E to be too optimistic. Earlier this week we got an interesting US datapoint as JP Morgan guided Q2 trading revenues down 38% from same period last year. Previously, Citigroup guided on a 30% drop in their Q2 numbers. The reduced trading revenues are obviously from highly elevated levels, but we believe that this trend will continue and put pressure on AZA’s shareprice.

I am short Avanza and I increased short yesterday.

I am still bullish on some stocks. My favourites are Biovica and Quantafuel. See previous posts for reasoning. I believe that both have doubling potential on the major catalyst in the next two months. The same as XBrane did, about which I wrote here many times before.