Aker ASA: Eyeing Cognite IPO, Possibly as Early as 2025

Aker ASA (OTCPK:AKAAF) (ISIN:NO0010234552 for the OSE listing) continues to trade significantly below NAV, which has been the basis of our coverage for some time, which is not reasonable given that the portfolio elements accumulate. Aker Carbon Capture has merged with Schlumberger (SLB), which was perhaps the weakest asset in the portfolio, and what remains on the industrial side are solid businesses. While some of the declines can be attributed to pressure on oil, which is affecting Aker ASA’s largest holding of Aker BP (OTCQX:AKRBF), we see a potential catalyst from Cognite’s IPO as early as 2025, which will launch in markets that still value AI-related stocks today as its ARR and cash flow profile continues to improve. Aker ASA remains a bargain, though The pressure from oil cannot be denied as production cuts ease and speculation mounts about US industrial conditions.

Aker ASA NAV

We normally do our own NAV calculations because of the mark-to-market effects, but even with fairly conservative assumptions the values ​​are quite close as the stocks that make up the portfolio have not moved much since the end of June and where they have moved they have been offset by other stock movements. The NAV figure provided is above and has been updated relatively.

Cognite is still valued at a 2021 precedent, which is concerning because that was before the cost of capital rose. On the other hand, AI is hyped now, so valuations like this could still hold. Furthermore, the company is significantly advanced and the backing of Aker ASA doesn’t really have any reflexivity risks associated with funding – although it is close to cash flow positivity anyway.

Headline revenues for Cognite are up around 10%, but ARR, which reflects annual subscriptions for its industrial AI and digital twin product, is up 42% YoY in the current quarter and monthly active users have doubled. Negative EBITDA margins are shrinking from -15.4% to -13.3%. Cognite is 10% of the NAV picture for the company. Continued growth coupled with an IPO outlook once the company becomes more sustainable in the US markets, potentially in 2025, could significantly increase the fair value of the holding company as it re-enters primary markets in a frothy environment for AI. Current given values ​​for Cognite are around 6x price/annual revenue. While you might think it strange, the median multiples for AI companies are above 20x P/S right now. Furthermore, Cognite’s ARR is growing rapidly, with sales always lagging ARR figures due to revenue recognition. The annualized sales figures therefore give a distorted picture.

Aker BioMarine is performing well. They have partially divested their krill-based feed business, which we have always liked and found to be very valuable, which is confirmed by this transaction. The shares have almost tripled since about this time last year. They are also announcing an extraordinary dividend related to the divestment.

Aker Solutions (OTCPK:AKRTF) has a large backlog and big profits. Except for a few rare cases where oil and gas EPC projects were poorly quoted and assessed, all players in this segment are seeing significant growth in backlogs and projects. Despite the drop in oil prices, levels are still well above breakeven and therefore the strategic interest in developing oil assets is more important than anything else.

For Aker BP, a straightforward Norwegian continental shelf E&P company, there are some natural volume declines that will eventually be offset. However, there are concerns about the oil price. Supply constraints are being gradually eased by OPEC+ and that is saving oil from price pressure from weak Chinese and EU industrial activity levels. The US is also a concern now, although to a lesser extent. There are signs that things are slowing down on the industrial front, which of course relates to end-market oil demand.

Conclusion

We do not necessarily expect Cognite’s IPO by Aker ASA to significantly increase its value.

But what we notice is that the price changes of Aker BP and Aker ASA are very close to each other since two years ago. This cannot be explained well, as the other components of the Aker ASA portfolio performed very well. The defensive stance of the Aker ASA portfolio should have been more obvious than trading in line with Aker BP, which is only about 50% of NAV.

Overall, we think the quality of Aker ASA is being ignored. They have strong assets and not everything is tied to the oil commodity. We think they are the better way to approach Aker BP, and also a more attractive overall play. The NAV discount is around 35%. That is significant.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Be aware of the risks associated with these securities.