Nel (Sell, TP: NOK6.00) - Downward spiral could jeopardise growth plans
With the share price a downward spiral, we believe Nel’s access to fresh capital at accretive terms, which has been its main advantage over the past couple of years, could come to an end. As highlighted earlier, we estimate that there is a meaningful shortfall (NOK2.0– 2.5bn) to fully scale up Herøya and the planned 4GW Gigafactory. With a shareholder base consisting mostly of retail investors and reduced investor appetite, we could see a scenario where the funding gap results in the stock trading at a discount (compared to a premium) to fair value. Hence, we maintain our longstanding SELL and have cut our target price to NOK6 (7), supported by fundamental and peer group valuations.NEL ASA develops diagnostic tests for early detection of diseases. Co.'s patented method is based on identifying disease-specific gene expression signatures from sample materials, such as blood. Co.'s products in development phase include MCItect, for patients with Mild Cognitive Impairment (MCI) aimed to detect Alzheimer disease within two years prior to onset of dementia, and ADtect, for the detection of mild to moderate Alzheimer disease, as well as one project in discovery phase, namely AMYtect, for brain amyloid detection.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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