AEG: From Forest to Factory to Fuel [BUY]

Since our initiation report on Active Energy Group in March 2015, a lot has changed. The JV  with the Canadian Metis aboriginal settlements (in which AEG has a 45% stake) finally received the go-ahead from the authorities in Alberta, albeit with minor conditions, to proceed with the deal on commercialization of the mature timberlands, and AEG now expects to begin forestry operations in 1Q2016. The company’s core business in Ukraine experienced some turbulence, including the break-down of the old chipping machine in July 2015 and the short-term spike in prices of raw timber as a result of the ban on roundwood export from Ukraine and Bulgaria. Despite that, AEG reported that it was able to get back on track with its capacity expansion plan, installing a new wood chipping line in October 2015, although the commissioning of the softwood wood chipping line is now expected in 2016. And last but not least, the company recently announced a 51% owned JV with Biomass Energy Enhancements LLC (USA) to exclusively commercialize a new biomass fuel manufacturing process (“AEG CoalSwitch”), stating that the new technology process could produce fuel out of timber residues and waste with energy content similar to coal, while simultaneously being contaminant-free. This will allow power generating customers of AEG CoalSwitch to use the new fuel in coal-fired power stations without costly retrofitting, reconstruction or output losses. 

[BUY] Astarta: revision of target price (August 20, 2015)

On August 18, 2015 Astarta [AST PW] published its financial results for 1H2015. The company’s revenues were down by 23% y/y to EUR 126 mn, while gross profit declined by 15% y/y to EUR 94 mn in 1H2015 (including EUR 49 mn of change in fair value of biological assets and agricultural produce). Astarta reported an EBITDA of EUR 81 mn (-22% y/y) and an EBITDA margin of 70% for 1H2015 (adjusting for change in fair value of BA: 32%). The company’s net income was up by 95% y/y to EUR 23 mn for the first six months of 2015.

[BUY] Cub Energy: revision of target price (August 14, 2015)

On August 13, 2015 Cub Energy [KUB CN], a Canadian oil&gas exploration and production company with assets in Ukraine, announced its financial results for 2Q2015 and 1H2015. The company reported sales of USD 2.6 mn (-22% y/y) and pro-rata revenue (including 30% share in Kub-Gas LLC) of USD 12.4 mn (-36% y/y) in 1H2015 as a result of a decrease in production volumes (-19% y/y) and lower realized price (USD 7.5 per Mcf) due to lingering effects of the government legislation attempting to reserve a large share of the natural gas market for the state-owned Naftogaz of Ukraine. 

[BUY] Active Energy: revision of target price (August 13, 2015)

On August 12, 2015 Active Energy Group [AEG LN], an international supplier of wood chip and forestry and natural resources development company, published a trading update for its wood chip division. The company reported 1H2015 wood chip shipping volumes at 103,733 tonnes and commented that 2015 profits will likely be below expectations due to delays in equipment installation and a short-term surge in log prices.

[BUY] Astarta: From Sugar to Protein (July 30, 2015)

Astarta is a leading producer of sugar and soybeans in Ukraine, as well as a major grain exporter. The company operates sugar refineries and leases 245,000 hectares of land on which it cultivates sugar beet, grains and oilseeds. The company has a dominant position in the country’s sugar industry with a 23% share of the domestic market. Astarta’s newly launched soybean segment has performed very well since its launch in 2014, with the segment’s revenues already accounting for 21% of total sales, and the company occupying a 22% share in the domestic soybean market. Astarta is substantially domestic-oriented, but exports are increasing (24% of total sales in 2014).