A small cap net-net where the stock has not reacted to easily digestible catalysts

Up to +131% return potential in 3.5 years, with a 33% margin of safety on today's price, supported by a large cash position and a minimum payment for the remainder of their Joint Venture stake.

Let me start this off by saying that I am neither a professional investor, analyst nor a financial advisor. I’m simply a Europoor who invests his own pocket money as a hobby.

Aker Carbon Capture ($ACC.OL) is a pure-play carbon-capture company that was spun-off from Aker Solutions in 2020.

The company has formed a Joint Venture with SLB for substantially all of its business and has received a cash payment for 80% of the JV.

ACC retains a 20% interest in the JV with a put option to sell the remaining 20% of the JV.

The stock is currently trading at 83% of NCAV (A net-net, that is)

Market cap: NOK 3.55B

NCAV: NOK 4.27B

Cash position: NOK 4.5B

There is further upside from:

1.       A potential performance-based payment up to: NOK 1.36B by 2025-2027.

2.       The sale of the remaining 20% stake in the JV: NOK 1.03B – 2.575B by 2027-2028.

There are currently no publicized plans for the future of the business or plans for capital allocation. Management has denied to comment on either point until the board has formulated a plan.

I speculate that they have structured the deal in this way to exit the business completely and I, quite frankly, see a fat dividend as the most likely outcome, as well as the HoldCo being fully winded down by ~2028.

I don’t expect meaningful expenses nor meaningful cash burn, as SLB has completely taken over funding of the JV.

Imminent upside potential (before any cash burn): +49%

- Equates to a Margin of safety of 33%.

Total upside potential in 3 years, at ceiling of seller’s call option (before any cash burn): +117%

Total upside potential in 3.5 years, at ceiling of buyer’s call option (before any cash burn): +131%

IRR scenarios:

Performance payment achieved; Put option exercised; 3Y IRR: 23%

Everything goes wrong; Put option exercised; 3Y IRR: 14%

The downside is protected by a large cash position in what is now essentially a holding company. Heads, I win. Tails, I win more.

Breaking down the math of the catalysts:

Additional info:

• ~43% of the stock is owned by Aker Horizons Holding ASA, the former parent company of Aker Carbon Capture ASA, prior to their 2020 spin-off.

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