Category Archives: Uncategorized

TotalEnergies provided details of the “massive scale” South Africa discoveries. The details come from Total´s filing to the South Africa authorities. It concerns block 11B/12B that is 10% owned by the Africa Energy. Until now we had only speculation of the deposit size. Now we have a formal confirmation from the block operator.

Very positive for Africa Energy

Friday’s Clarskons note on Block 11B/12B

TotalEnergies reveals massive scale of its South African harsh environment gas discoveries

The scale of TotalEnergies’ gas discoveries from 2018 and 2020 in South Africa, the Brulpadda and Luiperd, has for the first time been publicly revealed in documentation the operator recently filed to South African authorities.

In total, TotalEnergies plans to spend $3bn to exploit the findings. Combined, the two discoveries (which came through only two wells) is said to comprise resources of 4.5 Tcf of gas, of which 3 Tcf of this volume is contained in Luiperd. First gas is targeted in 2027 given that all government approvals are received. To our knowledge, both discoveries were drilled by Odfjell Drilling’s (ODL, Buy) harsh environment semi the Deepsea Stavanger.

Further, as reported by Upstream, it is said that these resources may be enhanced by a proposed four-well exploration and appraisal drilling campaign being considered by the operator. In our view, a harsh environment rig is by all likelihood required, as weather conditions at the location includes both rough waves and one of the strongest ocean currents in the world, making the area one of the most challenging areas of operation. This seems to be reflected in the operator’s contracting efforts, with TotalEnergies already having 270 days of options on Odfjell Drilling’s the Deepsea Mira for work in South Africa starting in August 2024 (which may be for the program exploration and appraisal program outlined above).

Further, in our view, the operator will likely prefer Odfjell to undertake work, as it already has successfully carried out operations in the rather ‘untraditional’ environment in South Africa. The Mira will soon
mobilize from Norway to Namibia to commence the firm term of the TotalEnergies contract

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.

• Sedana Medical is a pioneer medtech and pharmaceutical company dedicated to making inhaled sedation a standard therapy in intensive care.
• Sedana is down 70% in last 12 months as investors sold the stock in anticipation that the end of Covid would harm Sedana´s revenues
• The concerns that caused the share price sell off were exaggerated – Sedana delivered excellent results today
• Revenues increased 27% vs Pareto forecasts and Gross Margin increased to 72%.

Sedana share price benefited from the Covid era. Investors sold off the stock heavily after Covid end not realising, that the Covid did help the company to increase its sales reach – Covid helped Sedana to establish itself at the market and gain new clients. Strong Q4 revenues evidence the trend.

Share price and Market capitalization graph by Tradingview

Pareto main highlights from the report:

Solid sales and strong gross margin

• Sales SEK 35.8m, some 27% above PASe
• Gross margin at 72% thanks to positive pricing and lower freight costs
• Opex slightly above our forecasts, but included one-time charges of SEK 4m, mainly related to organizational changes and the uplisting
  to Nasdaq main list.
• SM ended 2022 with SEK 608m vs PASe of SEK 639m
• Germany, still the largest market, by far but Other Direct Markets performed strongly with only a slight y/y decline
• Distributor markets, mainly Latin America, still suffers from major stocking effects related to Covid-19
• US trials proceeding according to plan
• Slight delay in the Spanish reimbursement process. However, the Spanish intensive care society, SEMICYUC, has issued new treatment
  recommendations for sedation and delirium, recommending Isoflurane as first line option, on the same level as propofol, for moderate and
  deep sedation.
• The process in the UK continues to puzzle us. NICE issued a positive guidance document in early 2022, and SM submitted Sedaconda for
  approval two years ago. The latest turn in this soap opera is that the UK authorities will come back with an update at the end of
  February/early March.
• ISCA-study published, concluding no improved clinical outcomes with inhaled sedation in Covid-19 related ARDS. This retrospective trial
  was conducted under very tough circumstances, and much indicates that inhaled sedation was started in sicker patients, who are more
  likely to have worse outcomes. However, the treatment was considered feasible and safe, while reducing requirements for other sedative
  agents.
• We will probably make limited changes to our forecasts, mainly related to a higher base coming into 2023 and Fx adjustments.
• We have a Buy recommendation and a TP of SEK 50

Our family office position

We have a small position in the stock. We are analyzing the stock further and may increase our holdings.

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.

• HydrogenPro is Pareto´s top hydrogen exposure idea
• HydrogenPro booking its first revenues from the USD >50m Mitsubishi order.
• 1000% revenue growth in 2023 – Pareto estimates 2023 revenues at 64 mln USD vs last year 6 mil USD. In H2’23 FID is expected regarding the DG Fuels project and expansion announcements as further triggers.
• HydrogenPro trades at 2x/1x EV/sales on our 23E/24E, vs hydrogen peers at 12x/7x, and EV/Backlog of 2x vs electrolyser peers at 8-9x.

Pareto research summary:

First revenues from USD >50m Mitsubishi order booked
HydrogenPro reported NOK 25m in Q4 revenues, of which ~14m from the ACES project (Mitsubishi) in the US. Its organization continues to grow which cause the higher cost base. The company completed tests of its electrolysers (world’s largest) which proved the readiness for large scale hydrogen production, although it is still working with Mitsubishi on some fine-tuning. The readiness for large-scale delivery was further underlined in Q4 with final upgrades on its China facility.

Small adjustments to estimates
We make limited estimate changes on the back of the quarterly report.
HydrogenPro reiterates that 90% of the USD >50m purchase order will be booked as revenue in 2023. Although it states a higher gross margin level on the contract than it has had in 2022 (22%), we keep our 20% estimate for now. The company expects FID on the DG Fuels’ Louisiana, US, project in the latter half of 2023, with the final stages of FEED being completed now. We have previously included revenues with full effect in Q4’23, but we now push these slightly and mainly include revenues from 2024 onwards which explains the drop in our 2023E revenues. The project has a value potential of USD >500m for HydrogenPro. With 100% off-take for initial production at the plant, DG Fuels is already looking at a second in Maine, US. Overall, we reiterate our main thesis, seeing solid growth prospects for HydrogenPro. We still include a NOK 250m equity raise to facilitate for the targeted manufacturing capacity expansions in 2023.

Still a top hydrogen exposure with further de-risking potential in 2023
HydrogenPro trades at 2x/1x EV/sales on our 23E/24E, vs hydrogen peers at
12x/7x, and EV/Backlog of 2x vs electrolysers peers at 8-9x. With the growth it
faces and further de-risking potential with delivering on the ACES order and a
massive DG Fuels potential, we find it to be an attractive hydrogen exposure. We keep our NOK 50 TP (DCF with 12% WACC and fully diluted share count) and reiterate Buy.

Pareto valuation graphs:

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.

Last year Biovica was last year one of the “biggest looser” positions. We believe Biovica has the potential to become one of the biggest winners. Pareto in its research stated:

… By no fault of its own, the flood of COVID-19 diagnostics has stalled Biovica’s submission for over 1.5 years, causing a continuous decline in the share price ….. As we believed in 2020 that DiviTum will reach FDA approval based on the produced clinical evidence and that it will reach significant sales due to the clear value proposition within a clear patient population (treatment monitoring), we continue to do so today.

We are of the same view. We have doubled our stake in Biovica through the capital raise and subsequent purchases.

Highlights of Pareto Securities research report on Biovica:

Long and tough road behind
By no fault of its own, the flood of COVID-19 diagnostics has stalled Biovica’s
submission for over 1.5 years, causing a continuous decline in the share price.
With the FDA approval finally obtained in July 2022, the market conditions dictated a strong discount for autumn 2022’s rights issue while causing a 37.5% dilution – beating the share price down to the current low levels.

Clear value in HR+ metastatic breast cancer & strong sales team
DiviTum is the odd outlier among many blood-based tests, it works and delivers the most critical information obtained from imaging techniques such as CT scans and MRI, if a tumor is growing or not, easier, cheaper, and earlier.
Sales estimates While we modelled a slow ramp up, we expect the company to become profitable in 2025 and exceed USD 100m in sales by 2029. We were very conservative this time and there is a good chance that the company will beat our estimates.

Clinical data strenght

The topline conclusion from DiviTum’s clinical data within MBC is that it can predict whether a patient is not progressing within the coming 30 days (treatment is working) with 96.7% accuracy and the coming 60 days with 93.5% accuracy. This indicates that frequent testing allows for a sort of “live monitoring” of what the cancer is doing. That this is not common is
supported by the fact that it is the first such blood-based biomarker approved by the FDA.

Key points and 2023 outlook

CLIA lab certification granted with sales to start this month
On 8 February, Biovica announced that the company’s laboratory in San Diego has received the CLIA certification from California Department of Public Health. The certification allows the lab to handle human blood samples and marks the final milestone before DiviTum’s US market launch.

Early adopters call (KOLs) expected within three months after launch
As part of Biovica’s market launch activities, we expect the company to hold a KOL / early adopters call within three months after launch. This will provide insight to the interest in DiviTum and help with gauging its market potential.

Capital Markets Day expected in 1H 2023 with update on commercial launch progress

Besides the Q3 2022/2023 report on 16 March 2023, we also expect Biovica to hold its Capital Markets Day in the first half of 2023 with focus on providing an investor update on how the commercial launch in the US is going as well as potentially laying out the strategy for Europe.

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 wrote here on our new long Hafnia position this week. I enclose Pareto comment on Hafnia from this morning.

I enclose a thesis on Rec Silicon Short. We sold shares short yesterday.

Pareto comment on Hafnia:

HAFNI NO – HAFNI: Another day of significant increases in Asian MR-rates, up 10-15% and have now doubled over the past week.. USD 40,000/day for non-eco ships, and this rise is the steepest we have seen ever since Russia invaded Ukraine. Clearly tight markets there with many ships positioning themselves for a tight Atlantic market post Feb 5th. Hafnia gambled on that and kept most of their fleet in Asia, which now pays off handsomely. Still expect a tighter Atlantic though, with LRs now starting to move up as well. Time to be really bullish here again, NAV in HAFNI is NOK 65 and growing 10% per quarter..

Rec Silicon Short thesis

There are two main reasons to be short Rec Silicon.

• Share issue imminent – The company will need to do around 100 million USD equity financing. With the off take agreement announced this week that resulted in 25% share price increase. The company may take advantage of the share price increase to raise capital – the financing could happen any day now.
• Global silicon oversupply this year. The global silicion production should increase this year by at least 25%. Some analysts even talk about 70% production increase this year. The market will be oversupplied, which should not help the silicon price.

THe company needs to finance USD 270 million this year to be able to start the production. ON the top of this they will need to refinance USD 110 million bond issue maturing in April. A lot of funding needed in these markets.

Rec Silicon is a retail stock. Retail stocks tend to overshoot any good/or bad news and than fade it. The share price increased materially on the off-take agreement, and it has been slowly going down in the last two days. We shorted the stock yesterday in anticipation of the financing, that may come any day. Equity financing would decrease the stock price by 10-20%. Even if the share financing would not happen now the stock should be slowly decreasing anyway.

If the financing does not happen in a week or two. We will most likely close the short.

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.

Last year the two top trades were Product and LNG tankers. Both trades doubled invested capital. Last week Oaktree sold half of their position in Hafnia that depressed Hafnia share price by 10%. Our family office bought in the SPO and bought in the market on that day so we are fully positioned in Hafnia up to our stock/sector investment limit.

The main reason for buying back is the forthcoming sanctions on EU purchases of Russian diesel that come into effect on 5th February.

Hafnia is top pick by Pareto, Fearnley and DNB securities.

• Pareto has a price target 80 NOK, 54% upside from current share price
• Fearnley has a price target of 73 NOK, 40% upside from current share price
• DNB has a price target of 73 NOK, 40% upside from current share price

Sanctions favour Hafnia

From 5 February, 2023 the EU entities are not allowed to buy products from Russia. This will result in Russia selling their diesel outside of EU and EU exporting diesel from the middle east and further. The average distance for EU products will increase materially. That should push the rates higher.

Pareto research dated 17/1/23 stated on this:

70% of the Russian diesel trade originates from the Baltic, the remainder from the Black Sea. Data from Facts Global suggest that the tonne-miles on that latter 30% will “only double”, while the Baltic flows will rise by more than 4x

The shipping rates increases may come with some time lag – before the sanctions Russians were trying to sell to the EU as much as possible – that resulted in Europe´s being well supplied with diesel.

Hafnia continues to screan cheap relative to peers

Hafnia is trading at 10% discount to peers.

Hafnia should report the best quarter ever with highest dividends

The best ever quarter expected with the company making more than 10% of its market capitalization in the quarter and expected to pay out 3 NOK per share, which implies 23% annualized dividend yield.

Fearnley Securities research on Hafnia dated 4/1/23:

Pareto note from yesterday morning:

HAFNI NO, TORM DC, STNG US – Tankers – MR rates in Asia posting further 5 – 10% gains this morning, very positive to see. FGE (oil macro) is out saying they have it from two different sources that Russian diesel exports could be higher in February than in January, and that based on this they would expect strong freight rate momentum from the second half of the month. Our case is unchanged, we expect rates to be higher in 2023 than in 2022 (when HAFNI generates NOK 16 of EPS) – with recent weakness being due to EU inventory builds in Q4, lower USGoM exports (due to refinery outages) and lower Chinese long-haul exports. A few months from now we will see large volumes of Russian diesel to the MEG and Asia – and similar volumes then back to the EU.

I believe product tankers will be strong trade for the year, as diesel is much harder to replace than crude. Not sure we will double the money here, but substantial return is expected.

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.

Calliditas is a commercial stage biopharmaceutical company based in Sweden. Its first product Tarpeyeo has been selling in the US and its sales are doubling every quarter. European sales should start in 2023 with EU partner Stada “becoming the first and only approved medication for IgA nephropathy in EU for patients with primary IgA with rapid disease progression” (see: https://www.calliditas.se/en/wp-content/uploads/sites/2/2022/11/calliditas-q3-2022-presentation.pdf

We bought into the story late last year with average price around SEK90. Current share price is around SEK100.

Redeye states in their research that the base case valuation of SEK280 should be reached within 12-24 months. Pareto Securities views Callidias as one of the most interesting companies in the Swedish pharma universe.

Redeye Research Summary:

Positive triggers ahead

Redeye updates its outlook on Calliditas, anticipating US launch support and the European launch over the next 12 months, along with long-term study support for Tarpeyo and feedback from the competition. We increase our Base Case to SEK290 (280) with a Bull Case of SEK500 (450) and a Bear Case of SEK95 (125). Current share price is SEK100

Support from the Tarpeyo launch
We expect Tarpeyo to reach SEK3,557m in sales in the US as early as 2024e. We are confident thanks to the supporting scientific evidence to date and its ability to secure a high degree of coverage and reimbursement less than nine months since launch. For 2023, we point towards the expanded specialist sales team, support from the long-term eGFR outcome, and the pending European launch (under trade name Kinpeygo).

Future competition needs to clear a high bar
Tarpeyo has already established the most important competitive advantages:
first-mover advantage, an expanding body of clinical specialist experience, a safe product, and solid efficacy. This puts it in a good position to extend its lead once the results from the NefIgArd Part B study are released in H1 2023.

Valuation
We point to 200% upside to our Base Case of SEK290, although the timing for this depends on the equity market, the emerging competition, and Tarpeyo launch support. In our view, Calliditas has the advantage of a favourable status quo, in which no news is good news.

Full research available below for free:

Click to access calliditas_january_20231.pdf

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

Linkfire is down 90% since its IPO despite growing strongly, strong improvements in financial performance, cash breakeven to be reached in 1Q23, and new contracts with strong partners. The only mistake they made – they raised capital in a worst time. We believe Linkfire reached a bottom and should be one of the most promising positions for the next year.

Over the last few weeks we have increased our position several times. It is now a material position for our family office and we would be among the top 20 largest investors.

I enclose summary of the Pareto research published yesterday.

Pareto on LInkfire:

Entering FY’23 with cash and momentum Linkfire reported a strong Q3’22 report, showing 43% revenue growth on a constant currency basis (65% incl. FX), and earlier in December communicated that the company had completed the first tranche of its capital raise, raising DKK 22.5m from the issue of 55.5m new shares. Furthermore, the company showed signs of a much lower opex cost-base in Q3 (down 22% q/q from Q2), strengthening our belief in its path to EBITDA profitability in FY’23. We reiterate our Buy recommendation with a raised TP of SEK 1.48 (1.30), which corresponds to EV/S of 2.4x on 2024E.  What to expect in terms of revenue growth going forward? Closest in time, we expect Q4’22 to be strong in terms of topline growth, where we expect 60% growth y/y, including FX effects. This will be driven by a large amount of consumer connections, as the fourth quarter typically has the greatest amount of traffic flowing through Linkfire’s smart links, as well as being the time of year when the effect of renegotiated contracts with the large music labels typically shows. Furthermore, we expect the company to show a greater RPM in Q4 than in Q3, driven by further monetization optimization of its traffic. For FY’23, we expect the revenue growth to be weaker than in FY’22, and fall in the middle of its new communicated growth target of 20-40% organic topline growth, where we estimate 31% growth. For FY’24, we expect 23% organic revenue growth. Expecting cost base to be smaller in FY’23 than in FY’22 We expect the staff costs to decrease by 22% y/y between FY’22 and FY23, driven by further staff reductions. In terms of other opex, we expect to see these decrease greatly y/y also between FY’22 and FY’23. Given these expected reductions in the cost-base, we expect Linkfire to reach an EBITDA result of DKK -118K for FY’23, despite estimating a relatively conservative topline growth of 31% for FY’23, as mentioned above.  Valuation remains too low given cash inflow from the capital raise We believe that Linkfire, following both the tranches of the capital raise, where we expect the second one to be completed in Q1’23, will not need to take in any further capital until the company reaches profitability, assuming that the company shows a strong cost-control going forward. Given this, we argue that the financial risk has significantly decreased in the company compared to earlier this year. With a valuation entailing a significant discount to peers, 1.9x on 2024E EV/S vs the peer median at 3.7x (a discount of ~50%), we repeat our Buy recommendation and raise our TP to SEK 1.48 (1.30) on the back of the strong performance in Q3 and lower perceived financial risk, resulting in a slightly lower WACC.

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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.

Africa Energy is a 10% owner of the block 11B/12B, on of the largest gas condensate discoveries globally in the last few years. The block is majority owned and operated by Total. Total is now working on commercialisation of the plot.

We had a call with Africa Energy yesterday. Below are minutes of the call.

Financing

• AEC announced on Monday a USD 5 million bridge loan from its main shareholders — Africa Oil, HCI (the largest shareholder of Impact Oil & Gas) and the Lundin family. No other borrowing facilities currently.
• The company had a cash balance of USD 7 million as of the end Q3 and spent approximately USD 5 million on the Gazania well in Q4
• Total disposable cash, therefore is about USD 6 million (projected as of Q4 end) after the bridge loan and Q4 overhead
• Annual burn is about USD 3 million
• The South Africa team is working for Africa Oil as well – costs reimbursed to AEC
• The company has very little CAPEX until the investment decision in 2024
• Only investments are into Total’s development plans and analysis, which are not significant

Block – 2B

• Eco still sees an upside there. AEC assumes zero value and zero future spending

Block 11B/12B

• AEC is now a pure play on Block 11B/12B
• Block 11B/12B is potentially bigger than John Svedrup, Europe’s largest operating offshore oil field. AEC owns a 10% stake in 11B/12B
• The operator, Total, applied for production rights in September 2022. Approval is expected in 12-18 months after submission – early 2024
• Final Investment Decision (FID) expected shortly after PR approval – in 2024
• Luiperd production wells should be drilled in 2025
• The Subsea pipeline should be built in 2026
• The first gas and condensate production is expected 24-36 months after FID – most likely in 2027
• Total is now negotiating an offtake agreement with two potential customers in Mossel Bay – Eskom and PetroSA 
• A government guarantee is required to reduce the credit risk of both off-takers 
• Total is motivated to do this asap
• South Africa has rolling blackouts for 6 hours per day and has no other large infrastructure projects to help the economy. SA should act fast, but SA civil servants in state-owned companies like Eskom and PetroSA are worried about making big decisions during corruption investigations (The CEO of Eskom stepped down recently)
• SA can make a lot of money from tax and royalties when Block 11B/12B is producing

11B/12B economics

• Block 11B/12B had five identified prospects on 2D seismic in the Paddavissie Fairway 
• Of the five prospects, two were large discoveries: Brulpadda (2019) and Luiperd (2020)
• Discovered deposits are estimated by the government at 3.4 trillion cubic feet of gas and 192 million barrels of condensate; AEC says over a billion barrels of oil equivalent have been discovered
• Brulpadda and Luiperd discoveries have de-risked the other three prospects, which now also have 3D seismic 
• The phase 1 development is proceeding only with Luiperd. Other prospects will come later as the local gas market grows
• Luiperd could supply Mossel Bay customers for at least 20 years
• IF the offtake agreement is set above the price that PetroSA was recently paying for gas (USD 6 per thousand cubic feet), AEC could receive net USD 50 million in free cash per year for its 10% interest (net to AEC after all taxes and royalties) 
• AEC’s 10% share of the capital expenditures for Phase 1 would represent approximately USD 250 million, but this spending does not start until after the final investment decision in 2024 
  • 70% can be financed with development loan financing
  • 30% (USD 75 million) by AEC – potentially by Scandinavian bonds
  • A small part of the 30% may be financed by an equity issuance in 2024
• The aggregate Luiperd net CF to AEC is estimated to be at least USD 1 billion over 20 years period
• Total is also looking at FLNG as an alternative to supplying Mossel bay customers. The costs of FLNG might be a bit higher, the timing might be broadly similar, but the FLNG would have a higher production (since it would not be limited by the Block 9 pipeline capacity) and a higher international sale price for the gas with less credit risk for the offtake.
• Luiperd is just one of the five 11B/12B prospects. Total upside is blue sky
• Block sale strategy – the best time to exit – after the gas agreement and development concept is finalized

Shareholders

• 66% of shares are held by insiders – 36% Impact, 20% Africa Oil, 6% Lundin family, 4% Management
• 34% are retail and institutional investors

Near-term Catalysts

• Town hall meeting with shareholders – early in 2023
• Gas price agreement finalization – could come early in 2023
• Completion of the development concept – who we are supplying under what terms
• Resource report by an independent auditor – after the offtake price and development concept are known
• Exit or develop Block 11B/12B

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.

Finansavisen yesterday reported about a letter sent to the Mintra CEO Kevin Short by a shareholder asking for a buyback.

Both the letter and the link to the article is below:

Dear Kevin,

We have been your loyal shareholder since the Mintra IPO and have bought additional shares in the market.

We are writing to encourage Mintra to buyback its shares to correct the market mispricing and improve the liquidity.

The Covid era hit Mintra hard, sending its share price almost 80% lower. Under your leadership, Mintra’s share price performed well this year but is still around 50% below its IPO price of 9.7 NOK in October 2020. The share price would need to double to reach its IPO pricing. 

Mintra is one of the cheapest stocks in the Scandinavian tech universe while generating strong cash flows and having one of the highest EBITDA margins in its sector. Both Pareto and Sparebank analysts believe that your share price is undervalued. So do we. 

The time to do a buyback is now

You repeatedly stated on your investor calls that you are looking for further takeover targets. Takeovers may require equity issuance. Financing a takeover with your stock at current price levels makes any takeover less attractive. Mintra is also rumoured to be a takeover candidate for its two largest shareholders. That should not happen based on the current share price levels.

Put the high cash balance to work

Mintra has a large underutilized cash balance. We estimate that your year-end cash balance should exceed 140 million NOK, representing around 15% of your market capitalization. Buying your shares cheaply is a very attractive investment opportunity for Mintra.

There are multiple reasons for the buyback:

Increase investor confidence

Covid has hammered investor confidence in Mintra and caused an 80% drop in its share price. A buyback is a confidence rubber stamp from the management that the share price is undervalued. Such a signal is long overdue. 

Close the valuation gap – remove the Covid era discount

Mintra is trading at 2.6 times sales, one of the cheapest vs its Norwegian peers. At the same time, Mintra has one of the highest EBITDA margins in the sector. To illustrate Mintra low pricing, we include below the Sparebank slide from their TMT & Small Cap: SaaS Weekly Playbook dated 28.11.2022. 

Improve liquidity

Mintra is not a very liquid stock. There is empirical evidence that liquidity improves with raising the share price. A successful buyback should increase both Mintra’s share price and its liquidity.

Enable capital raising for acquisition growth

The industry is consolidating. Mintra has been a successful acquirer and is looking for further acquisitions. Mintra’s low share price is limiting the company’s ability to raise capital efficiently for future acquisitions. At the current share price, Mintra’s ability to acquire other companies using its shares as a currency is hampered.

Enable takeover at a fair price

The two largest shareholders’ industrial holdings Todjur and Ferd, control 42% of Mintra’s capital. Both primarily work with private companies. They already wanted to buy Mintra before its IPO. Todjur and Ferd have been increasing their positions and are rumoured to be considering taking Mintra private. Pareto and Sparebank analysts have written about it several times. The buyout premiums this year in Norway have been between 29% and 110% (see below). The latest takeover transaction on Readly was announced with a 59% premium this week. For illustration, if such a premium was applied to Mintra’s current stock price, the resulting buyout price would be 20% below its IPO price from two years ago. That would still undervalue Mintra. A buyback should help the share price to correct and move it to more appropriate levels that could serve as a basis for a takeover.

Dear Kevin, under your leadership Mintra’s business is performing well. Its share price did not recover from the Covid shock. It is negatively affecting the company’s prospects. A stronger and more valuable Mintra is in our common interest.

Kind regards,

Jan Martinek

Link to Finansavisen article:

https://www.finansavisen.no/nyheter/teknologi/2022/12/07/7967115/mintra-eier-krever-tilbakekjop

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.