Saga Pure trading at 175-194 % of NAV (price target 2.2-2.9 NOK)

Saga Pure ( SAGA ) is an investment company focusing on renewable and clean energy. Their investments are in both publicly traded companies and in private companies. The largest shareholder is Øystein Stray Spetalen.

The company was previously named Saga Tankers and owned stocks in S.D. Standard Drilling, an indoor sport arena and other smaller investments. Prior becoming an investment company the company owned various tanker vessels that was sold in 2011 and 2012. The company launched a new strategy in the fall of 2020 where investments would focus on renewable and clean energy. With a new strategy they divested what they considered outside the Company's main investment focus (except Vistin Pharma and Element), hired a new CEO (Bjørn Simonsen) and have issued shares a number of times to fund future investments.

According to my calculations, Saga Pure is currently trading at 175-194 % of net asset value. My price target is 2.2-2.9 NOK per share.

The company published a prospectus 11th of January 2021 as they are doing three subsequent offerings after the a number of private placements. According to my understanding of the prospectus:

Net asset value as of 15th of January 2021 before execution of subsequent offerings:

• Sum listed investments (fair value, market price): 325.94 MNOK
  
• Sum investment in private companies (investment value): 65 MNOK
  
• Net cash-liabilities: 517.1 MNOK
  
• Cash received from partial divestment of Everfuel ASA: 13.3-101.5 MNOK
  
• NAV: 921.34-1,009.54 MNOK
  

In addition to the assets listed above they have an nine-month option for a 30 MNOK investment in Bergen Carbon Solutions.

NAV per share:

• Post private placements (469,149,831 shares), NAV 1,96-2,15 per share
  
• Post private placements + CEO options (484,149,831 shares), NAV 1,96-2,15 per share
  
• Post private placements + CEO options + Subsequent offering I (488,149,831 shares), NAV 1,97-2,15 per share
  
• Post private placements + CEO options + Subsequent offering II (493,049,831 shares), NAV 1,98-2,15 per share
  
• Post private placements + CEO options + Subsequent offering III (497,849,831 shares), NAV 2.00-2.17 per share
  

If we assign the cash holdings with a value 20-50% above NAV the price target for Saga Pure is 2.2-2.8 NOK per share. If we value investment in private companies (executed in 11th and 28th of december 2020) at double the investment price target is 2.3-2.9 per share.

Investments:

• Everfuel ( EFUEL ), 1.8 million shares, listed on Euronext Growth, market price as of 15th of January 2021 153 NOK, fair value 275.4 MNOK
  
• Vistin Pharma ( VISTN ), 2,284,280 shares, listed on Oslo Stock Exchange, market price as of 15th of January 2021 20 NOK, fair value 45.69 MNOK
  
• Element (OSL:ELE), 970 thousand shares, listed on Oslo Stock Exchange, market price as of 15th of January 2021 5 NOK, fair value 4.85 MNOK
  
• Horisont Energi ASA, 35 MNOK, not listed, fair value at investment date 35 MNOK
  
• Bergen Carbon Solutions AS, 30 MNOK (+option agreement with the right to invest additional 30 MNOK in a nine-month period), not listed, fair value at investment date 35 MNOK
  
• Sum listed investments (fair value, market price): 325.94 MNOK
  
• Sum investment in private companies (investment value): 65 MNOK
  

Capitalization and indebtedness adjusted for post-balance sheet events, private placements and investments:

• Cash: +537.2 MNOK (including private placements, excluding potential proceeds from subsequent offerings)
  
• Trading securities: +18.1 MNOK
  
• Long term debt: -0 NOK
  
• Other current financial debt: -38.2 MNOK (including 35 MNOK investment in Horisont Energy)
  
• Net cash-liabilities: 517.1 MNOK
  

Other noteworthy changes in balance sheet:

• Saga Pure has divested 700,000 shares in Everfuel between 29th of October 2020 and 6th of January 2021. Bringing their investment from 2.5 million shares to 1.8 million shares. The price for the 700,000 shares sold is unknown. The market price per share has a low of 19 NOK and a high of 145 NOK in the same period. This will have a positive effect on their cash holding by 13.3 - 101.5 MNOK.
  

Private placements since 20th of October 2020:

• Number of shares prior 20th of October 2020: 286,149,831
  
• 54,000,000 (2020-10-20), gross proceeds 70.2 MNOK, cost 1.5 MNOK, net proceeds 68.7 MNOK
  
• 34,000,000 (2020-11-30), gross proceeds 54.4 MNOK, cost 1.2 MNOK, net proceeds 53.2 MNOK
  
• 35,000,000 (2020-12-14), gross proceeds 73.5 MNOK, cost 1.3 MNOK, net proceeds 72.2 MNOK
  
• 30,000,000 (2020-12-21), gross proceeds 87 MNOK, cost 2.0 MNOK, net proceeds 85 MNOK
  
• 30,000,000 (2020-12-29), gross proceeds 123 MNOK, cost 2.0 MNOK, net proceeds 121 MNOK
  
• Number of shares post private placements: 469,149,831
  

Number of shares available in subsequent offerings:

• 4,000,000, price 2.1 NOK per share, potential gross proceeds 8,4 MNOK (bringing the total number of shares to 473,149,831)
  
• 4,900,000, price 2.9 NOK per share, potential gross proceeds 14,21 MNOK (bringing the total number of shares to 478,049,831)
  
• 4,800,000, price 4.1 NOK per share, , potential gross proceeds 19,68 MNOK (bringing the total number of shares to 482,849,831)
  

Subscription period ends on 27th of January for all three subsequent offerings.

Number of shares the board has allocated to share options (25 million shares authorized to allocate for options for employees and key persons):

• 5,000,000, strike 1.5 NOK
  
• 5,000,000, strike 2.0 NOK
  
• 5,000,000, strike 2.5 NOK
  
• 10,000,000, authorized but not allocated
  

Other information from the prospectus:

• Saga pays a fee on a total of NOK 200,000 ex. VAT each month to Ferncliff Holding AS for consultancy services carried out by Martin Nes and Øystein Stray Spetalen. Ferncliff Holding AS is a company owned and controlled by director and main shareholder in Saga, Øystein Stray Spetalen.
  
• The Company pays on a hourly basis for back-office services such as accounting, and a monthly fee for rent of office premises and common costs.
  

Comment:

The market seems to be bouncing of 3.50 for the time being. I expect that it will continue so until 27th Jan when the subsequent offering is completed.

Comment:

They have completed the subsequent offerings are completed. Offering I and II was oversubscribed, in offering III 828,592 shares were subscribed. According to my calculations the total number of shares is now 493,878,423.

One of their investments, Horisont Energi, has been noted on Euronext Growth. They are currently trading at 85 NOK per share. Saga Pure owns about 1,850,000 shares increasing NAV somewhat, but still far below marketcap of Saga.

Trade closed: target reached