Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index.  In today’s report we take a bottoms-up view on developed ex-U.S. equities, highlighting stocks that present attractive buy opportunities within the Services, Consumer Discretionary, Consumer Staples, Energy, and Financials Sectors.

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index.  In today’s report we take a bottoms-up view on developed ex-U.S. equities, highlighting stocks that present attractive buy opportunities within the Services, Consumer Discretionary, Consumer Staples, Energy, and Financials Sectors.

Bottoms-Up View on Developed Markets: Actionable Stocks

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Norwegian Finans Holding ASA / Event-Driven

On 14 July, <a href="https://www.smartkarma.com/entities/nordax-group-ab" target="_blank" data-smartkarma-citation="entities:22439:1" rel="noopener">Nordax Group AB (NDX SS)</a>, through Nordax Bank, further raised its offer to acquire <a href="https://www.smartkarma.com/entities/norwegian-finans-holding-asa" target="_blank" data-smartkarma-citation="entities:26098:1" rel="noopener">Norwegian Finans Holding (NOFI NO)</a> to NOK 105/share, cum dividend, from NOK 100/share, for a total consideration of c. NOK 19.6 bn.
<ul>
<li>Nordax had already launched an <a href="https://platform.marketintelligence.spglobal.com/web/client?auth=inherit#news/article?KeyProductLinkType=2&amp;id=64047500" target="_blank" rel="noopener">improved offer</a> in May to acquire the entire outstanding share capital of NOFI, which is <a href="https://platform.marketintelligence.spglobal.com/web/client?auth=inherit#news/article?KeyProductLinkType=2&amp;id=64850383" target="_blank" rel="noopener">merging</a> with unit <a href="https://platform.marketintelligence.spglobal.com/web/client?auth=inherit#company/profile?KeyProductLinkType=2&amp;id=4536697" target="_blank" rel="noopener">Bank Norwegian ASA</a>, after its initial March offer of NOK 95/share plus dividend was rejected.</li>
<li>As mentioned in my previous insight <a href="https://www.smartkarma.com/insights/norwegian-finans-holding-nordax-bank-let-the-negotiations-begin" target="_blank" data-smartkarma-citation="insights:48944" rel="noopener">Norwegian Finans Holding - Nordax Bank: Let the Negotiations Begin</a>, the 4 March announcement has led to an <a href="https://mb.cision.com/Main/7708/3339233/1411921.pdf" target="_blank" rel="noopener">improved offer</a>, NOFI rejected Nordax's initial bid. NOFI said then it would grant Nordax access to a confirmatory due diligence process.</li>
<li>My previous (4 May) recommendation (<a href="https://www.smartkarma.com/insights/nordax-bank-sweetens-its-bid-for-norwegian-finans" target="_blank" data-smartkarma-citation="insights:51060" rel="noopener">Nordax Bank Sweetens Its Bid for Norwegian Finans</a>) was Long NOFI, TP 103.03 (with possible upside up to c. NOK 109.2, a 15% increase to the initial offer).</li>
<li>The best and final offer is 1.9% above my last TP and comes between the previous offer and the possible upside I pointed out.</li>
</ul>
The final offer, which follows the completion of due diligence, represents a 37.2% premium to NOFI's 3 March closing share price on Oslo Børs.
The offer is subject to acceptance by at least 90% of NOFI's shareholders, with Nordax Bank potentially lowering the acceptance threshold to two-thirds. Nordax Bank noted that, while it aims to acquire Bank Norwegian in full, it also "sees substantial merit in becoming a majority shareholder." Bank Norwegian is to become the ultimate parent following its merger with NOFI, expected to take place on 20 July.
Norwegian Finans investors Nordic Capital Fund VIII, Nordic Capital Fund IX and Finland-based Sampo Oyj are supporting the offer. Nordic Capital Fund IX and Sampo, which own 16.40% and 6.33% in Norwegian Finans, respectively, have conditionally agreed to exchange their shares in the company for shares in Nordax, subject to successful completion of the offer.
Offer document expected to be approved during the week of 2 August, with the acceptance period commencing thereafter (expected to last 20 business days). Completion of the offer in H2 2021, following receipt of regulatory approvals.
Gross spread is 1.9% (should be c. 6% annualised), reiterate long NOFI, TP 105/share.

On 14 July, Nordax Group AB (NDX SS), through Nordax Bank, further raised its offer to acquire Norwegian Finans Holding (NOFI NO) to NOK 105/share, cum dividend, from NOK 100/share, for a total consideration of c. NOK 19.6 bn.

Nordax had already launched an improved offer in May to acquire the entire outstanding share capital of NOFI, which is merging with unit Bank Norwegian ASA, after its initial March offer of NOK 95/share plus dividend was rejected.
As mentioned in my previous insight Norwegian Finans Holding - Nordax Bank: Let the Negotiations Begin, the 4 March announcement has led to an improved offer, NOFI rejected Nordax's initial bid. NOFI said then it would grant Nordax access to a confirmatory due diligence process.
My previous (4 May) recommendation (Nordax Bank Sweetens Its Bid for Norwegian Finans) was Long NOFI, TP 103.03 (with possible upside up to c. NOK 109.2, a 15% increase to the initial offer).
The best and final offer is 1.9% above my last TP and comes between the previous offer and the possible upside I pointed out.

The final offer, which follows the completion of due diligence, represents a 37.2% premium to NOFI's 3 March closing share price on Oslo Børs.
The offer is subject to acceptance by at least 90% of NOFI's shareholders, with Nordax Bank potentially lowering the acceptance threshold to two-thirds. Nordax Bank noted that, while it aims to acquire Bank Norwegian in full, it also "sees substantial merit in becoming a majority shareholder." Bank Norwegian is to become the ultimate parent following its merger with NOFI, expected to take place on 20 July.
Norwegian Finans investors Nordic Capital Fund VIII, Nordic Capital Fund IX and Finland-based Sampo Oyj are supporting the offer. Nordic Capital Fund IX and Sampo, which own 16.40% and 6.33% in Norwegian Finans, respectively, have conditionally agreed to exchange their shares in the company for shares in Nordax, subject to successful completion of the offer.
Offer document expected to be approved during the week of 2 August, with the acceptance period commencing thereafter (expected to last 20 business days). Completion of the offer in H2 2021, following receipt of regulatory approvals.
Gross spread is 1.9% (should be c. 6% annualised), reiterate long NOFI, TP 105/share.

As mentioned in my previous insight <a href="https://www.smartkarma.com/insights/norwegian-finans-holding-nordax-bank-let-the-negotiations-begin" target="_blank" data-smartkarma-citation="insights:48944" rel="noopener">Norwegian Finans Holding - Nordax Bank: Let the Negotiations Begin</a>, the 4 March announcement has led to an <a href="https://mb.cision.com/Main/7708/3339233/1411921.pdf" target="_blank" rel="noopener">improved offer</a>, just above my TP (NOK 100/share with no dividend adjustment vs. NOK 103 cum dividend), after Norwegian Finans Holding (NOFI) rejected Nordax's initial bid.
<ul>
<li>The improved offer is subject to a 90% acceptance threshold, but Nordax could lower the threshold to two-thirds of 's shares.</li>
<li>NOFI said it will now grant Nordax access to a confirmatory due diligence process.</li>
</ul>
In rejecting the initial offer, Norwegian Finans Holding said the proposal was not in the best interest of its shareholders and that the initial price significantly undervalued the company. Nordax subsequently said it was not pursuing the initial offer, but noted that it was evaluating all options.
The new indicative offer represents an improvement of 11.1% vs. the 4 March offer, and a premium of 30.6% to the undisturbed share price on 3 March 2021 and 49.8% to the 6-month VWAP. It also represents 10.8x P/Fwd E (above the 3-year average of 7.8x), 1.7x P/Fwd BV (same level as the 3-year average of 1.7x P/BV).
On 4 May, the share price increased by c. 10% vs. the previous close. Gross spread to the revised indicative offer is 1.5% (closing should happen at the beginning of Q3).
Median implied valuation (across different multiples) is NOK 109 per share, which reflects better prospects and economic recovery (management was upbeat during Q1 results presentation).
Recommendation is long NOFI, TP NOK 100/share. With the possibility of further upside as I do not rule out completely that the Board succeeds to extract a higher offer, up to NOK 109.

As mentioned in my previous insight Norwegian Finans Holding - Nordax Bank: Let the Negotiations Begin, the 4 March announcement has led to an improved offer, just above my TP (NOK 100/share with no dividend adjustment vs. NOK 103 cum dividend), after Norwegian Finans Holding (NOFI) rejected Nordax's initial bid.

The improved offer is subject to a 90% acceptance threshold, but Nordax could lower the threshold to two-thirds of 's shares.
NOFI said it will now grant Nordax access to a confirmatory due diligence process.

In rejecting the initial offer, Norwegian Finans Holding said the proposal was not in the best interest of its shareholders and that the initial price significantly undervalued the company. Nordax subsequently said it was not pursuing the initial offer, but noted that it was evaluating all options.
The new indicative offer represents an improvement of 11.1% vs. the 4 March offer, and a premium of 30.6% to the undisturbed share price on 3 March 2021 and 49.8% to the 6-month VWAP. It also represents 10.8x P/Fwd E (above the 3-year average of 7.8x), 1.7x P/Fwd BV (same level as the 3-year average of 1.7x P/BV).
On 4 May, the share price increased by c. 10% vs. the previous close. Gross spread to the revised indicative offer is 1.5% (closing should happen at the beginning of Q3).
Median implied valuation (across different multiples) is NOK 109 per share, which reflects better prospects and economic recovery (management was upbeat during Q1 results presentation).
Recommendation is long NOFI, TP NOK 100/share. With the possibility of further upside as I do not rule out completely that the Board succeeds to extract a higher offer, up to NOK 109.

Nordax Bank Sweetens Its Bid for Norwegian Finans

Nordax Bank AB, an operating subsidiary of <a href="https://www.smartkarma.com/entities/nordax-group-ab" target="_blank" data-smartkarma-citation="entities:22439:1" rel="noopener">Nordax Group AB (NDX SS)</a> <a href="https://www.nordaxgroup.com/press/press-release?id=7391406612A0C42C&amp;s=dmikIYbSfxEP9ngUIjPntDreWGJQfkRPT5iQLS0AADk" target="_blank" rel="noopener">announced on 4 March that it intends to launch a tender offer</a> to acquire <a href="https://www.smartkarma.com/entities/norwegian-finans-holding-asa" target="_blank" data-smartkarma-citation="entities:26098:1" rel="noopener">Norwegian Finans Holding (NOFI NO)</a> at NOK 95 per share in cash. This values the equity of Norwegian Finans at NOK 13.7 bn.
Sampo Oyj and Nordic Capital Fund IX, which hold a respective 6.33% and 16.40% stake in Norwegian Finans Holding, have agreed to exchange Norwegian Finans shares for those of Nordax.
<ul>
<li>Nordic Capital and Sampo acquired Nordax Bank in 2018 and delisted it in April 2018.</li>
</ul>
Nordax will launch the offer subject to receiving access to the company and its subsidiary Bank Norwegian, and completing due diligence.
<ul>
<li>Nordax said it intends to acquire 100% of Norwegian Finans Holding but it "also sees strong merit in becoming a majority shareholder".</li>
<li>Norwegian Finans Holding's board of directors has not rebuffed the offer and has said it will consider any offer, although it has advised its shareholders to refrain from taking any action before its recommendation. The negotiations will certainly involve a higher offer, in my view.</li>
</ul>
Due to Norwegian Finans fully digital and effective operating model (cost-income ratio of 23.2% in 2020, see table further in the Insight), the entity has superior risk-adjusted profitability and elevated capitalization (Return on Average Equity of 18.2% and CET1 of 22% in 2020), even amid constraints during 2020 due to the pandemic.
Norwegian Finans shares are trading above the offer on expectations of a sweetened offer and closed at NOK 100.5 (10.3x P/Fwd E, and 1.6x P/BV) on 8 March, that is 5.8% above the offer price.
By using a group of comparables, mean implied valuation (across different multiples) is NOK 103.03 per share, which should be the lower range of a sweetened offer. On a Fwd P/E basis, implied valuation is NOK 113.84 per share. This reflects upside to the share price. A sweetened offer could be at least 8.4% higher, i.e. NOK 103.03.
Recommendation is LONG, TP 103.03 (with possible upside up to c. NOK 109.2, a 15% increase to the initial offer).

Nordax Bank AB, an operating subsidiary of Nordax Group AB (NDX SS) announced on 4 March that it intends to launch a tender offer to acquire Norwegian Finans Holding (NOFI NO) at NOK 95 per share in cash. This values the equity of Norwegian Finans at NOK 13.7 bn.
Sampo Oyj and Nordic Capital Fund IX, which hold a respective 6.33% and 16.40% stake in Norwegian Finans Holding, have agreed to exchange Norwegian Finans shares for those of Nordax.

Nordic Capital and Sampo acquired Nordax Bank in 2018 and delisted it in April 2018.

Nordax will launch the offer subject to receiving access to the company and its subsidiary Bank Norwegian, and completing due diligence.

Nordax said it intends to acquire 100% of Norwegian Finans Holding but it "also sees strong merit in becoming a majority shareholder".
Norwegian Finans Holding's board of directors has not rebuffed the offer and has said it will consider any offer, although it has advised its shareholders to refrain from taking any action before its recommendation. The negotiations will certainly involve a higher offer, in my view.

Due to Norwegian Finans fully digital and effective operating model (cost-income ratio of 23.2% in 2020, see table further in the Insight), the entity has superior risk-adjusted profitability and elevated capitalization (Return on Average Equity of 18.2% and CET1 of 22% in 2020), even amid constraints during 2020 due to the pandemic.
Norwegian Finans shares are trading above the offer on expectations of a sweetened offer and closed at NOK 100.5 (10.3x P/Fwd E, and 1.6x P/BV) on 8 March, that is 5.8% above the offer price.
By using a group of comparables, mean implied valuation (across different multiples) is NOK 103.03 per share, which should be the lower range of a sweetened offer. On a Fwd P/E basis, implied valuation is NOK 113.84 per share. This reflects upside to the share price. A sweetened offer could be at least 8.4% higher, i.e. NOK 103.03.
Recommendation is LONG, TP 103.03 (with possible upside up to c. NOK 109.2, a 15% increase to the initial offer).

Norwegian Finans Holding - Nordax Bank: Let the Negotiations Begin

Small & Mid Cap focused Value Investor

Gokul Raj. P

Equity Bottom-Up

Norwegian Finans Holding ASA / Equity Bottom-Up

Core Investment Thesis: NOFI is a highly scalable unsecured consumer lending FINTECH business with stellar return ratios (ROE of 40% &amp; ROA of &gt; 4%), healthy growth and available at attractive 12.2X FY17 earnings. NOFI is a new age lending business with a good management team that is taking advantage of technology disruptions to build a solid business. NOFI can generate sustainable across-the-cycle ROE’s of 20-25% and ROA’s of 2.5% with an organic growth of 10-15%+ for the next many years. The company continues to grow by expanding the market and taking market share from established rivals with its low-cost automated digital lending platform (50% NII CAGR for the last 5 years and ~10-15%+ expected growth for the next 5 years).It is a highly scalable business: NOFI which is a 2 Billion USD market cap business operates with less than 70 employees across 4 countries (During inception, it had around 60 employees). It is a trailblazer in this industry and has created several copycats including Komplett Bank, Mono Bank, Insta Bank, Ya Bank etc. Consumer lending in the Nordic markets is underpenetrated as % of GDP: Norway (3%), Sweden (4%), Finland (4%), Denmark (6%),  Vs UK (9%), USA (11%). The strong lender protection in these markets along with other factors such as high mobile tech penetration, stable economic conditions and welfare societies has allowed NOFI to grow profitably.

Core Investment Thesis: NOFI is a highly scalable unsecured consumer lending FINTECH business with stellar return ratios (ROE of 40% &amp; ROA of &gt; 4%), healthy growth and available at attractive 12.2X FY17 earnings. NOFI is a new age lending business with a good management team that is taking advantage of technology disruptions to build a solid business. NOFI can generate sustainable across-the-cycle ROE’s of 20-25% and ROA’s of 2.5% with an organic growth of 10-15%+ for the next many years. The company continues to grow by expanding the market and taking market share from established rivals with its low-cost automated digital lending platform (50% NII CAGR for the last 5 years and ~10-15%+ expected growth for the next 5 years).It is a highly scalable business: NOFI which is a 2 Billion USD market cap business operates with less than 70 employees across 4 countries (During inception, it had around 60 employees). It is a trailblazer in this industry and has created several copycats including Komplett Bank, Mono Bank, Insta Bank, Ya Bank etc. Consumer lending in the Nordic markets is underpenetrated as % of GDP: Norway (3%), Sweden (4%), Finland (4%), Denmark (6%),  Vs UK (9%), USA (11%). The strong lender protection in these markets along with other factors such as high mobile tech penetration, stable economic conditions and welfare societies has allowed NOFI to grow profitably.  

Norwegian Finans Holding (NOFI) – Quality Growth Business @ Affordable Valuations !!

Norway

Norwegian Finans Holding ASA is a bank holding company. The Company's subsidiary provides banking services in Norway.

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Norwegian Finans Holding ASA (NOFI NO)

Bottoms-Up View on Developed Markets: Actionable Stocks

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index. In today’s report...

Vermilion Research

Nordax/NOFI: Best and Final Offer

Nordax Bank AB further raised its offer to acquire NOFI to NOK 105/share, just 1.9% above my prior TP. Gross spread is 1.9% (should be c. 6%...

Jesus Rodriguez Aguilar

Nordax Bank Sweetens Its Bid for Norwegian Finans

As previously highlighted, Nordax has sweetened its offer. Long NOFI, TP NOK 100 (10.8x P/Fwd E and 1.7x P/Fwd BV). Gross spread is 1.5%, with...

Jesus Rodriguez Aguilar

Norwegian Finans Holding - Nordax Bank: Let the Negotiations Begin

Norwegian Finans's board of directors has not rebuffed the offer. Negotiations will involve a higher offer, in my view. Shares are trading on...

Jesus Rodriguez Aguilar

Norwegian Finans Holding (NOFI) – Quality Growth Business @ Affordable Valuations !!

Core Investment Thesis: NOFI is a highly scalable unsecured consumer lending FINTECH business with stellar return ratios (ROE of 40% & ROA of...

Gokul Raj. P

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