In mid April 2021 I wrote about XBrane for the first time. I recomended the investment based on the below thesis. At that time Xbrane was trading around 78 SEK. I sold today part of my holdings at 145 SEK. The idea generated 85% return over less than two months, which is over 500% annualised return.

Xbrane Partners With Bausch & Lomb To Enter USD 12 Billion Market | Seeking Alpha

The reason for the share price growth was the imminent announcement of Phase 3 results. These shares always perform well prior to such important announcements. It traded so well that I started reducing my position, because I am concerned, that the stock went up so much, that we may have a sell the fact situation. The share price could drop significantly even on the positive announcement. Even if it does not fall, the company may raise additional capital, which may push the share price down. So if you have generated good return, it may be a time to consider taking some money off the table.

There is a very similar situation boiling. Biovica International. It is due to announce the FDA approval during the 3Q21 – within three months or so from now. As with Xbrane, the share price should start reacting before the announcement. My base case is that the share price should double by that time.

The company is hosting Investor day on JUne 9. – see the Press Releases – Biovica

The company has an extensive clinical validation in collaboration world leading cancer centers for its cancer product:

• 22 studies with peer-reviewed publications – 2,867 patients
• 10 ongoing studies in collaboration with Johns Hopkins, Mayo Clinic, SWOG and more

The product has been submitted for FDA approval that is due to be received during 3Q21. The company should start performing well. In my experience the share prices of such companies go up before the investor day (9 June) and before the major announcement (FDA approval in Q3). The stock already started moving from mid May. I would expect this to accelerate in early June before the Investor day. I expect furthe share price growth during the Q3 before the announcement. I have a medium size position in Biovica. The current share price is 41 SEK, Pareto has a price target of 103 SEK.

The link to presentation:

PowerPoint Presentation (hemsida.eu)

We have been very bullish on Norske Skog. Pareto and Sparebank has added today NSKOG to their top ideas:

Pareto Securities today:

Pareto Securities Top Ideas for Norway published today:

Equity Portfolio Norway – May closed out Q1 reporting season and global equity markets were flattish with inflation in focus. Our portfolio returned 1.5% m/m, falling short of OSEBX at 2.8% m/m – but remain ahead of the index for the year. Our best performer FLNG (+26.0%) was countered by three shares trading down double digits (BWE, ICEGR and OHT). Five stocks beat the index in May. For June, we make eight changes to our portfolio, replacing AKER, BWE, FLNG, ICEGR, KIT, MWTR, OHT and VOLUE with ACC, BONHR, BWLPG, DNO, ELK, HUNT, NSKOG and PEXIP, keeping AFG and AUSS.

NSKOG NO – Attractive valuation support on the tail of earnings trough

We find a significant revaluation potential, as the market moves out of the trough and profitability for NSKOG’s legacy business improves. A support that should crystalize with new publication paper prices announced early July. Here, NSKOG targets 15-20% price uplift for H2’21 and into 2022, which seems likely following 3.3mt capacity cuts for the industry (about 20% of total market). Valuation is undemanding, trading at 4.1x EV/EBITDA’22E (incl. the 26% stake in Circa) at consensus estimate. Our SOTP of NOK 64/share, leaves ~80% upside to the share price. With more project updates expected throughout the year, combined with recovering publication paper prices, we find the entry point highly attractive. We reiterate Buy, TP NOK 50.

Sparebank Research today:

SB1M TOP PICKS FOR JUNE: BUY: We add Xplra, Hexagon Composites, Cadeler, Okea, Yara, and keep SATS, Schibsted, Norske Skog, Lerøy Seafood. Removiing Salmar, Telenor, Genel, Subsea 7 and Circa Group. SELL: Avanza (new), Hexagon Purus (new), XXL, SAS. Removing ITM Power, DNO, KOA and Fjordkraft

Newsprint prices could normalise in 2H 2021 -> material upside for the NSKOG share, in our mind

We estimate that run-rate EBITDA could be around “over-the-cycle” EBITDA of NOK1bn in 2H 2021

We keep our Buy recommendation and NOK50 target price after the Q1 2021 report. The key reasons why we recommend buying
NKSOG is i) NSKOG is in our mind an acquisition target, ii) newsprint prices are increasing in Asia/North America and we argue that this
is will affect newsprint prices in Europe from 2H 2021 (management comments at the Q1 2021 presentation supports our view) and iii)
we estimate that the conversion from newsprint to container board is accretive for shareholders in NSKOG. The main concern for
investors in NSKOG is in our mind lack of cash flow to cover capex and risk for capex overruns. We expect that cash flows will increase
with a stronger market and argue that the risk profile for the conversion capex is not as high as investors interpret. With newsprint
prices 15% below 2019 level and an EBITDA-margin around 11%, NSKOG’s market cap could increase with NOK5.7bn – which is more
than the containerboard conversion capex -> attractive risk/reward, in our mind.
• We would not be surprised if NKSOG is acquired by StoraEnso. Our take is that NSKOG fits well with StoraEnso as i) StoraEnso is
currently evaluating a consumer board investment in Skoghall with an estimated capex of EUR800 to 850m, ii) StoraEnso expects
growth from building solutions and biomaterials (fit with NSKOG’s Circa, Cebina, bio-composites and FibreMatrix) and iii) a NSKOG
acquisition would be a small ad-on for StoraEnso (NSKOG’s market cap is 3% of StoraEnso’s market cap). In addition, we estimate
that OceanWood, which owns 42.85% of NSKOG has an IRR of 16% if it exits its investment at current market cap.
• Newsprint prices expected up from 2H 2021 – prices have started to increase in Asia/North America. Our take is that more than
25% of newsprint capacity will be taken out in 2020/2021 (based on announcements from UPM, StoraEnso and SCA). Our take is
that this will have a positive effect on prices from 2H 2021. The effect of lower supply has in our mind had an effect on prices,
especially in Asia, and according to our knowledge NKSOG is now exporting to exporting to Asia. Our assumption on higher prices as
production is down is supported by statements from RISI the last months commenting in the price increases in Asia and this will
most likely affect Europe from 2H 2021. Management comments at the Q1 2021 presentation supports our view, in our mind
• Accretive containerboard conversion we argue investors are too concerned about capex overruns and funding. Based on the
margin competitors are reporting, we argue that the containerboard conversion is accretive for NSKOG. The capex for NKSOG is
sizable compared to its size, but we that expect cash flow from operations and increased leverage will be sufficient to cover the
capex from late 2021 to 1H 2023. The EUR350m containerboard conversion is a sizeable investment for NSKOG, but the capex
should in our mind be split according to the risk for the different capex components. We have divided the capex into three risk
categories and see low capex risk for increased storage capacity and water treatment (estimate EUR70m of capex) and medium risk
for OCC* treatment (estimate EUR140m of capex) and higher risk for conversion capex (estimate EUR140m of capex).
Source: NSKOG, SpareBank 1 Markets, RISI and Bloomberg *old corrugated container

If you follow this blog, you know by now, that I am bullish chemical recycling of plastic. The reason is simple. We can not ship the used plastic to China nor dump it to the sea. I just saw to good articles that summaries the bullish case for the plastic recycling:

European plastics manufacturers plan 7.2 billion Euros of investment in chemical recycling :: PlasticsEurope

Recycling and the future of the plastics industry | McKinsey

IN the recycling area I like most the Quantafuel story, the article below summarizes well the reasons:

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

I also like the Dutch PRYME. It is two years behind Quantafuel, but it trades at 1/10 of QFUEL mkt cap. The PRYME should multiply and so will Quantafuel.

On May 12 I posted Quantafuel will never be so cheap. I argued that it is the time to buy before the company reports Q1. The share price on that day was around 28 NOK. Two weeks later it is trading around 44 NOK – 57% up. Congratulations to all who listened!

I believe that Quantafuel is still early innings. If they deliver on their Q1 call promise to run line 1 by the end of June at full capacity, than the share price should return to September highs of 70-80 NOK. If the company announces meeting the deadline, the share price should breach 100 NOK. These are my targets. Quantafuel is my second largest positon, right after Energy Recovery (ERII). I wrote on ERII here many times before.

I am bullish Biovica International. The company is hosting Investor day on JUne 9. Press Releases – Biovica

The company has an extensive clinical validation in collaboration world leading cancer centers for its cancer product:

• 22 studies with peer-reviewed publications – 2,867 patients
• 10 ongoing studies in collaboration with Johns Hopkins, Mayo Clinic, SWOG and more

The product has been submitted for FDA approval that is due to be received during 3Q21. The company should start performing well. In my experience the share prices of such companies go up before the investor day (9 June) and before the major announcement (FDA approval in Q3). The stock already started moving from mid May. I would expect this to accelerate in early June before the Investor day. I expect furthe share price growth during the Q3 before the announcement. I have a medium size position in Biovica. The current share price is 42 SEK, Pareto has a price target of 103 SEK.

The link to presentation:

PowerPoint Presentation (hemsida.eu)

I wrote last week that Hofseth Biocare share price should react positively to strong Q1 numbers, that I expected. I was right on the Q1 numbers. The company reported product sales revenues 100% up yoy. Unfortunately the financials were misunderstood. In 1Q20 the revenues included insurance payment which represented 50% of revenues in 1Q21. So including this insurance claim settlement the revenues were flat. But if you compare sale of products vs sales of products the revenues were up 100%. Unfortunately many people looked at the top line only and did not look at detail. As a result the company sold off by 15%. I spoke to IR who indicated that the positive revenue growth should continue and Q2 should be even better. The share price should catch up. I do like the story. I enclose resources for further study:

Investment thesis:

Top Value Creation Play In Biocare (OTCMKTS:HOFBF) | Seeking Alpha

Company latest presentation:

The medicine of tomorrow (hofsethbiocare.com)

Quarterly report

Hofseth BioCare | Stock Exhange Notices

Fearnely research:

Elliott JOnes is the best analyst on Quantafuel. His bullish research summary below:

1st Operating Revenues at Skive: a Major Statement Made

QFUEL recently announced their 1q21 results, posting first ever operative revenues delivered from BASF for Skive product. Total sales were NOK3.4m (inc. Geminor additional income of NOK1.7m), EBITDA of NOK-30.5m and an adj. net income of NOK39m. Skive guidance for stable production of 2 lines by the end of this quarter is reiterated (a major milestone), whilst capex is held steady. Kristiansund’s chemical
recycling pilot plant has produced first oil, whilst the company’s primary strategic partners remain as supportive as ever. We push back timing of full utilization Skive and Esbjerg, however these revisions are insignificant to long term value. We reiterate Buy, TP of NOK95/sh, with an unchanged investment case but a better entry point.

Skive operations – a major company milestone is hit
QFUEL announced the significant feat of first ever operational revenues at Skive. The company continues to enhance systems to reach stable and continuous production, capex is held steady and guidance of “proof of concept” by the end of this quarter is re-iterated. Furthermore, QFUEL’s second chemical recycling facility in Kristiansund produced first oil
– rounding off an impressive operational quarter for the company.

Partners and further newsflow demonstrates clear support and validation. The company’s existing primary strategic partners (BASF, Vitol, Kirkbi) remain fully supportive in the QFUEL process (despite a recent secondary sale causing the market to potentially think otherwise). Furthermore, recent news including management share purchases and an environmental application acceptance for Esbjerg adds to support for
the stock going forward. Moreover, recent partnerships upstream (Corepla, REMONDIS)
provides even further validation and paves the way for a future rollout across Europe.

Valuation
We maintain our previous valuation methodology and confirm that the near-term estimate revisions are insignificant to long-term value. All valuation drivers are held steady – we hold revenue from feedstock to USD30/tonne, sales price at USD824/tonne and a European capacity rollout of >2m tonnes plastic by 2029. We see a highly attractive
investment proposition, especially at current share price levels.

Quantafuel is now quite active on FB. Do follow their web site, if you are interested in the company. The link is below:

Quantafuel | Facebook

Yesterday they made the following announcement. I found it very bullish:

Curious to see what is going on at our plant in Skive, Denmark? Here, we have built the first, and to our knowledge, the only fully automated and continuous process plant transforming mixed waste plastic into high quality products. We are convinced that this approach is essential in our strategy to become the market leader within chemical recycling of plastic!

Last week, we were able to reach full line production capacity of 625 kg per hour in a controlled and stable process. Now we are focusing on increasing operational uptime at high production capacity into weeks, and then months. Watch this space!

The trade for this week is Hofseth Biocare. The investment story is at the link below:

Top Value Creation Play In Biocare (OTCMKTS:HOFBF) | Seeking Alpha

Hofseth Biocare is reporting their Q1 tomorrow. It should be very strong Q1. In the quarter they achieved significant sales wins. They started selling their salmon oil products on Amazon UK and Cosco UK. I placed the name of their salmon oil product into google and the first two search items were from Cosco UK and Amazon UK. Apart from that they also sent the first delivery to Nestle owned Garden of life, that is due to lunch a new product range in August using their protein. In summary the Q1 tomorrow should be very strong and the share price should jump swiftly up. I am long Hofseth.

Quantafuel newsflow continues. If you are interested in the company, do follow their FB page. I discovered that only yesterday. They do publish some interesting news flow there. Today, Fearnley Securities published the following note on Quantafuel:

Fearnley today:

Quantafuel (Buy, TP NOK 95/sh)
Environmental Impact application for Esbjerg site approved
Further to QFUELs positive Q1 update to the market at the end of last week, the company announced yesterday that Esbjerg City Council has unanimously approved QFUELs Environmental impact application for their planned new recycling plant in Esbjerg, with the project consisting of a feedstock pre-treatment plant integrated with a chemical recycling plant. Whilst stable and continuous production (on two lines) at Skive is the key trigger point to our mind next up, we view the news as a clear sign that things are being set up for the next plant location. This news also follows key members of the management team (Dr. Christian Lach, deputy CEO and CCO and Kristian Flaten, CFO) buying shares in the company – a strong sign of support for the company’s plans. The market has clearly agreed with us on the 1q21 update and subsequent news, and our view is that the recent share price rally may continue.3Reply19:42 AM

Some weeks ago I wrote here about XBrane Biocare. At that time the share price was below 90 SEK. Today it is 135 SEK. Up 50%. The reason is simple. These shares move when there is a catalyst coming. For XBrane it is the results of the Phase 3 study, that should be published most likely in this Quarter. They now have all the data and processing it. They said that the chance of success is 90%. My target is 150 SEK for the end of this quarter and 200 SEK by the end of the year.

Very similar play is Biovica. Biovica has tested their cancer product in major US hospitals (Mayo Clinic, Stanford, etc). They published more than 10 studies with US major hospitals. They are due to announce FDA results during Q3. The share price has not moved, yet. It should and most likely will, as the Q3 results are coming near. I believe the share price should easily double by Q3. Attractive risk reward.

HOfseth Biocare is publishing its Q1 this week. I participated on investor call where they said that the Q should be much higher revenues due to strong sales on Amazon, Cosco and LIdl. It is a one week trade. The share price could easily jump by 10-20% on the results. Not bad for one week exposure.

Congratulations to those who bought with me Quantafuel last week before the Q1 as I suggested in two posts last week. 31% in three days is a decent return.

I believe that this is just the beginning for Quantafuel. This is trending stock. I believe we have seen a bottom last week. The share price peaked around 80 NOK in September. If the company delivers as they promised on the call, I believe we will see 100 NOK in H2. When they start building a plant with a strategic partner, the share price will be heading to 200NOK. Quantafuel is my second largest position, after ERII (Energy Recovery).

Please note that Dr. Lach who joined Quantafeul from BASF reported share purchases on Friday:

Dr. Christian Lach, Deputy CEO and Chief Commercial Officer in Quantafuel ASA, has today bought 13,500 shares in Quantafuel ASA at a price of NOK 34.98 per share. After the transaction, Dr. Christian Lach holds 13,500 shares and 450,000 options in Quantafuel ASA. Kristian Flaten, CFO in Quantafuel ASA, has today bought 3,000 shares in Quantafuel ASA at a price of NOK 34.70 per share. After the transaction, Kristian Flaten holds 3,000 shares and 200,000 options in Quantafuel ASA.

Africa Energy has not been going as I expected. Since I wrote about it in September, the share price is 40% down. Despite the successful drilling results of 11B/12B, one of the largest deposit of gas condensates in the world, where AEC owns 10% interest. I believe that there were two reasons for the decline. Retail sold the fact and uncertainty over negotiations with the South Africa Government. I believe that AEC bottomed last week. There are two reasons for this:

• The South African Government submitted the new Energy bill to the parliament. It indicates an agreement – see the article below
• The drilling campaign on 2B plot is in progress – in the past AEC share price was growing as the drilling progressed. I expect this time it will be the same, multiplied by the South Africa agreement resolution.

https://www.bizcommunity.com/Article/196/834/215818.html

Petroleum Bill has lift off at last

14 May 2021

South Africa’s gas potential, and interest from investors, meant government was under pressure to forge ahead with its legislative reforms needed to address upstream issues – which, until yesterday, have been in limbo.

In a media statement released on 13 May 2021, the Ministry in the Presidency announced that Cabinet has approved the submission of the draft Upstream Petroleum Resources Development Bill to Parliament.

“The Upstream Petroleum Bill was first published in the Government Gazette on 24 December 2019. Written submission from industry stakeholders were submitted by 21 February 2020. Government consultations on the industry submissions were conducted by the Department of Mineral Resources and Energy and the Petroleum Agency between April and May 2020. In September 2020 Government verbally presented its proposed amendments to the Upstream Petroleum Bill to industry stakeholders, which amendments aimed to address the concerns of raised by industry stakeholders,” says Megan Rodgers, director at Cliffe Dekker Hofmeyr (CDH) and head of the firm’s oil and gas sector.

“A significant and welcomed amendment to the Upstream Petroleum Bill, would be the introduction of the petroleum right, which will govern the key terms of both the exploration and production phase. We expect to see the introduction of a retention permit which is to be granted in instances where development and production of petroleum not possible owing to unfavourable market or economic conditions and to enable a petroleum right holder to undertake gas market development, if so applicable. We also expect to see the end of granting of technical cooperation permits.

“We hope to see black-owned oil and gas companies having the right to dilute both shareholding equity and participating interest in order to raise funding to meet its participating share of costs,” said Rodgers.

She added that CDH would like to see recoverability on the state carry with a percentage of the state’s annual share of production to be allocated for repayment of its proportionate share of exploration and production costs. “We also hope to see all references to production bonus and petroleum rent tax removed from the Upstream Petroleum Bill, given these fiscal terms had not been fully formed and created investor uncertainty.”

I enclose the important parts from the report:

• We have operated a production line in Skive, Denmark, at full capacity with the right
  balance between gas and oil production and increased operational stability. With these
  major achievements we target proof-of concept in Q2 2021 and full production end of
  Q3 2021, as announced earlier.
• We are also pleased to confirm that we have started feeding plastics into the new technology test plant in our second plant in Kristiansund, Norway
• Quantafuel’s strategy is to build large-scale Plastics-to-Liquid (PtL) process plants at multiple locations throughout Europe, and in due time expand into other high-interest geographical regions. With NOK 577 million in cash by end of Q1 2021, and strong support from our three strategic partners, BASF, Vitol
  and Kirkbi (LEGO foundation), we are in a strong position to continue our journey shaping the chemical recycling market for plastic.
• In Skive, Quantafuel has built the first, and to our knowledge, only fully automated and continuous process plant transforming mixed waste plastic into high quality products. We are convinced that this approach is essential in our strategy to become the market leader within chemical recycling of plastic.
• Now that we are getting increasingly closer to this point, we have started to firm up our roll-out plan for
  Europe by signing an agreement with Corepla and Saipem for the Italian market and with BASF and Remondis targeting the German market, as well as other potential markets.
• We are working on a feasibility study with VTTI, a subsidiary of Vitol and ADNOC, with the aim of bringing a project on their zero-emissions site in Amsterdam to Final Investment Decision (FID) as soon as possible.
• During the first quarter, we concluded the purchase of 40% of Geminor, a Norwegian logistics- and recycling company with a presence in 11 countries and an annual turnover close to EUR 200 million, with an
  option to acquire the remaining outstanding shares.  Besides better-quality feedstock that in turn will improve product quality, we will considerably improve prices for feedstock. How much this will be is difficult to determine as it will change from contract to contract, but in certain cases we find it likely to improve financials with EUR 100 per ton or more.
• Europe has set a target of a 55% recycling rate by 2025. Denmark’s target is even higher, with
  a requirement of 65% for packaging material – post-consumer waste.
• The Kristiansund plant is currently recycling and producing plastic fractions from industrial and
  private plastic waste from the north-west coast of Norway. At our plant in Kristiansund, we are also testing
  new reactor design for future plastic-to-liquid plants. The chemical recycling pilot and reactor design testing is conducted in partnership with BASF. 
• Esbjerg plant – Quantafuel has been working on establishing a first large-scale plant in Denmark for the past two years, and after assessing more than 40 potential sites we selected a plot outside Esbjerg. Building and environmental permit applications were submitted six months ago, and we expect to receive final approval soon.

Watching Q1 presentation is a must for anybody intersted in QFUEL:

https://www.quantafuel.com/investors/reports-and-presentations

Link to the full report:

qfuel-q1-2021-report.pdf (d1kc1xo119v43s.cloudfront.net)

During the last two weeks I doubled my position on Quantafuel. I believe it will never be so cheap. I believe the Q1 call should change the share price trajectory upwards.

I expect that on Friday the company will report several positives:

1. First revenues from product sales to BASF – not sure how material the sales will be, but this is a proof that the product is as promised
2. Reiterate their goal to have continues production by Q2 end – the continues production will be the game changer for the company and its shareholders fortunes
3. Update on production – I understand from talking to broker’s analysts that they are making a good progress towards a continues production
4. BASF deputy CEO introduction – the appointment of Dr. Lach is very significant for Quantafuel. He comes from the position as Project Lead ChemCycling in BASF. He was on the board of three plastic recycling companies. He choose Quantafuel, because it is the most ambitious company in this area. He knew what Quantafuel does and what the others do. His arrival is rubber stamp on Quantafuel future. I expect him to speak at the Q1 call for the first time.

I like the below investment case summary:

https://seekingalpha.com/article/4378135-quantafuel-global-leader-in-chemical-recycling-of-plastic-backed-basf-and-vitol-potential-to

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