Salmon farming – Fondsfinans Aquaculture Sector Report

Transcription

Salmon farming – Fondsfinans Aquaculture
Sector Report
Sector Report
7 January 2015
Share data (NOK m)
06.jan.15
Sector
Aquaculture
Risk rating
Medium
Market cap (NOK m)
88 467
NIBD (NOK m)
17 200
EV (NOK m)
105 667
Volumes (t)
924
EV non-farming NOK m
17 053
EV upstream
88 614
EV/kg
96
Comp.
MHG
LSG
SALM
GSF
BAKKA
NRS
Rating
Target Upside
NEUTRAL
106
0%
NEUTRAL
290
5%
NEUTRAL
122
-6 %
NEUTRAL
31
8%
SELL
144
-17 %
NEUTRAL
60
-8 %
Company
Ticker
Marine Harvest
Lerøy Seafood Group
SalMar
Bakkafrost
Norway Royal Salmon
Grieg Seafood
MHG
LSG
SALM
BAKKA
NRS
GSF
2015
DPS Yield
7.4
7%
20.0
7%
7.0
5%
6.0
3%
2.0
3%
0.0
0%
2016
DPS
Yield
8.5
8%
20.0
7%
10.0
8%
6.8
4%
2.0
3%
0.5
2%
Moderate supply growth next years – Robust demand in core
markets – Russia, Ukraine and Brazil weak
We estimate moderate global supply growth ahead, at 3% (3%) and 4% (0%)
in 2015 and 2016. Norway should grow by 5% (5%) and 5% (3%) respectively.
In Chile, while farming conditions are improving, we forecast negative supply
growth of -6% in 2015 (-5%) as domestic players are reducing
production/sales Y/Y i.a. due to continued capital constraints. Chilean volumes
should stabilize in 2016, and we expect a return to growth from 2017 onwards.
Demand remains robust in core markets (EU and the US), and Asia (emerging
markets) continues to develop nicely. The USD and EUR have strengthened
significantly vs. NOK lately, contributing to stronger demand in EU and the US
in particular. In Russia, Ukraine and Brazil, the currencies are, however, very
weak, and demand develops clearly negatively. On balance, the global
demand/supply growth ratio remains positive for 2015E and 2016E. We
estimate global demand growth of just below 5% (6%) and 7% (5%) in the next
two years. while the Russian import ban is scheduled to last only until the
summer of 2015, we expect the Russian set-back to be a longer-term issue.
The Norwegian government is currently working on a white paper on long-term
growth opportunities for the industry which is to be presented before the
summer. We believe strict regulations based on environmental sustainability
are in the industry’s best long-term interest. We estimate moderate and stable
growth in Norwegian MAB capacity the next few years. Recently the
government issued 20 green licenses in addition to 15 last spring.
Based on updated market balance estimates and a significantly weaker NOK,
we maintain EUR 5/kg as our 2015E reference price (NOK 45 (43)). Strong
outlooks are reflected in shares. While we maintain Neutral recommendations,
except for BAKKA (Sell), we recommend investors to stick to the stocks that
provide the highest dividend yield; MHG and LSG.
Aquaculture peer group
Prepared by analysts:
Bent Rølland
Fondsfinans AS
TEL: +47 23 11 30 27
[email protected]
Philip M. Scrase
Fondsfinans AS
TEL: +47 23 11 30 23
[email protected]
MHG*
Current share price (NOK)
105.7
Share price target (NOK)
106
Upside to target
0%
Outstanding shares (mill)
410.4
MCap (NOK m)
43 377
2015E NIBD (NOKm)
9 025
EV (NOKm)
52 402
EV non-farming
9 126
2015 sales volume (HOG '000 t)
451
Theoretical farming capacity
573
Free capacity, %
21 %
Impl. EV farming (NOK m)
43 276
Impl. current EV/kg farming (NOK)
96
Trading discount to MHG (EV/kg)
Non-farming, % of EV
17 %
Impl EV/kg at target (NOK)
96
Impl EV/kg cap. at target (NOK)
76
NIBD per kilo fish (NOK)**
20
NIBD per share (NOK)**
22.0
EBITDA (2015)
6 170
EBIT (2015)
5 177
EPS adj (2015)
9.402
EV/EBITDA
8.5
EV/EBIT
10.1
P/E (adj.)
11.2
P/B
2.6
2015 DPS
7.4
Dividend yield
7%
Fondsfinans Research estimates and calculations.
LSG
SALM
GSF BAKKA
276.0
130.0
28.6
290
122
31
5%
-6 %
8%
54.3
113.3
112
14 973
14 729
3 194
2 273
2 514
1 445
17 246
17 243
4 639
2 859
1 520
0
165
136
69.5
191
156
98
14 %
13 %
29 %
14 387
15 723
4 639
87
116
67
-9 %
20 %
-30 %
17 %
9%
0%
93
117
70
79
95
50
14
18
21
42
22
13
2 515
2 312
724
2 135
2 056
584
26.4
13.1
3.34
6.9
7.5
6.4
8.1
8.4
7.9
10.5
9.9
8.6
1.9
2.6
1.2
20.0
7.00
0.00
7%
5%
0%
*) MHG incl Acuinova volumes
173.5
144
-17 %
48.9
8 484
663
9 147
1 308
46
65.0
29 %
7 839
170
78 %
14 %
139
98
14
14
1 101
982
15.5
8.3
9.3
11.2
4.1
6.00
3%
NRS
SSC
Total
65.5
60
-8 %
43.6
2 854
785
3 639
1 045
29.8
42
29 %
2 594
87
-9 %
29 %
87
56
26
18
368
322
5.27
9.9
11.3
12.4
2.3
2.00
3%
5.13
N.R.
Peers
167
856
423
1 279
0
27.0
32
16 %
1 279
47
-51 %
0%
16
2.5
88 467
17 128
105 595
15 858
924
1 157
20 %
89 737
97
Multiexp. Aq.Chile SSC (conv.)
130
N.R.
395
N.R.
5.13
N.R.
1 411
854
1 492
2 347
200
47
91
48 %
2 147
46
1 157
2 129
2 022
4 151
400
78
150
48 %
3 751
48
189.7
973
367
1 340
0
27.0
32
n.r.
n.r.
n.r.
32
26
14
FONDSFINANS AS, HAAKON VII’S GATE 2, P.O.BOX 1782 VIKA, NO-0122 OSLO, TEL: +47 23 11 30 00, FAX: +47 23 11 30 03, [email protected]
This report was prepared by an analyst employed by Fondsfinans AS, the Norwegian affiliate of Fondsfinans Inc., who is not registered as a research analyst with FINRA or subject to FINRA rules governing research.
See page 56-57 of this report for Important Disclosure Information.
1 340
50
Salmon farming – Fondsfinans Aquaculture Sector Report - Sector Report
Supply/Demand summary: Market balance and price estimates
Global supply: Very
moderate 2015E
growth, picking slightly
up in 2016E
Green licenses: 20
licenses in Northern
Norway approved in
December 2014. We
expect the remaining 10
“super green” to be
finalised during 1H15
Updated Fondsfinans
supply estimates
Green licenses and
additional MAB in
Norway included in
estimates throughout

2015 supply up 3%, 2016 supply growth of 4%

2015 European supply: +5%. Americas: - 2% (shift from 13% in 2014
including selling out the frozen inventory in Chile)
The table below sums up our supply forecasts and historical development in
each of the main production regions. Our updated estimates for Norwegian
harvesting take into account new green licenses as well as the proposed 5%
MAB increase in existing licenses. Given the strict proposed conditions for
increased MAB, we expect only a minority of farmers to purchase increased
MAB. 15 of 45 new green licenses were granted in March 2014, while the 20
regional licenses reserved for the northern counties Finnmark and Troms were
finally awarded on December 22 following a number of appeals. According to a
statement issued on December 22, the Norwegian Government aims to work
efficiently with finalising the awards of the final 10 “super green” licenses, though
without committing to a set time frame. Additional volumes to the market from
these licenses will primarily reach the market in 2017.
Global Supply Estimates per January 2015 - 1.000 t WFE Atlantics
Atlantic Salmon
2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2009
Norway
721
741
856
944 1 006 1 183 1 142 1 190 1 248 1 310 16 %
UK
137
136
143
142
155
159
158
164
177
189 5 %
Faroe Islands
19
35
47
42
56
70
72
81
72
78 34 %
Ireland
15
12
15
18
16
15
10
12
14
14 30 %
Iceland
2
1
1
1
1
3
3
4
6
8 0%
Russia
2
3
3
3
4
6
6
10
20
35 0 %
European supply
895
927 1 065 1 149 1 238 1 436 1 392 1 460 1 537 1 634 15 %
Chile
356
404
239
130
221
364
468
560
527
524 -41 %
Canada
110
119
115
118
110
137
115
106
124
120 -3 %
US
12
17
16
18
18
20
20
19
20
18 -6 %
Oceania
24
26
32
33
36
39
41
42
44
46 23 %
Americas supply
502
566
403
299
385
559
644
727
715
708 -29 %
Global supply
Supply Y/Y
Change in vol. Y/Y
1 397 1 493 1 467 1 448 1 623 1 995 2 036 2 187 2 252 2 342
11 % 7 % -2 % -1 % 12 % 23 % 2.0% 7.4% 3.0% 4.0%
133
96
-25
-19
175
372
40
151
65
91
-2 %
2010
10 %
-1 %
-11 %
17 %
0%
0%
8%
-46 %
2%
13 %
3%
-26 %
2011
7%
9%
34 %
-9 %
0%
33 %
8%
70 %
-7 %
2%
9%
29 %
2012
18 %
3%
24 %
-4 %
0%
50 %
16 %
65 %
24 %
7%
8%
45 %
2013
-3 %
-1 %
4%
-33 %
0%
0%
-3.1%
28 %
-16 %
4%
4%
15 %
-1 %
12 %
23 %
2%
2014
4%
4%
11 %
14 %
33 %
67 %
4.9%
20 %
-8 %
-6 %
4%
13 %
2015E
5%
8%
-11 %
23 %
50 %
100 %
5.3%
-6 %
17 %
5%
5%
-1.6 %
2016E
5%
7%
9%
0%
33 %
75 %
6.3%
-1 %
-3 %
-10 %
5%
-1 %
7% 3.0%
4.0%
Source: Fondsfinans Research
We conclude 7.4% global supply growth in 2014. Long-term outlook is strong,
with 2015E supply only up by around 3% Y/Y and 2016 growth of around 4%. We
forecast Chilean growth in 2015 to be negative, down by around 6%, as domestic
players have reduced stocking for a while Y/Y i.a. primarily due to capital
constraints. We expect the Chilean industry to stabilize in 2016 before growing in
2017.
Robust demand in core
markets, but Russia,
Ukraine and Brazil are
weak



Global demand/supply ratio remains positive, despite significant
Russian set-back
Prices will be strong, helped by significantly weaker NOK
The reversed cycle continues
The table sums up development in demand in the main global markets and our
estimates. Russian is substantially down. Even though the import ban is
scheduled to last only until the summer of 2015, we expect the Russian set-back
to be a longer-term issue. In addition to the ban, the rouble crash impacts Russia
demand severely. Ukraine remains affected by the Russian situation.
The table below provides updated demand estimates in all major regions in
globally. We estimate global 2015 and 2016 demand growth of around 5.5%.
Demand in non-European markets is stronger than in core markets (Europe).
Page 2
7 January 2015
Fondsfinans Research
Distribution of
consumption
Strong consumption
growth in Asia expected
to continue
Brazil affected by
weaker currency
Estimated consumption
per capita
Consumption. '000 WFE t
2005
EU countries
634
Norway
23
Russia
64
Ukraine
European consumption
732
European consumption Y/Y
US
302
Japan
57
Brazil
20
China/Hong Kong
21
Others (Aus,Kor,Can,Isr,Chi,Arg, Mex)
114
Americas + Asia
513
Consumption Americas+Asia Y/Y
Global consumption
1 245
Consumption growth Y/Y
0%
Ending stocks (freeze)
0
European supply
727
European supply/consumption balance
-5
European supply/consumption ratio
-1 %
Number of flights from Europe
Number of flights from Europe per week
EU countries
Norway
Russia
Ukraine
2006
3%
4%
-21 %
9%
1%
US
-3 %
Japan
-25 %
Brazil
25 %
China/Hong Kong
5%
Others (Aus,Kor,Can,Isr,Chi,Arg, Mex) 27 %
Americas + Asia
3%
Americas/Asia consumption share
42 %
Global consumtion growth Y/Y
2%
Airborne salmon obtains
a premium relative to
reference prices
European salmon:
~EUR 5/kg is the limit
Above EUR 5/kg =>
Over time, risk of
demand destruction
2006 2007 2008 2009 2010
650
709
744
766
739
24
26
31
33
34
51
73
75
78
100
12
14
18
19
18
737
822
868
896
891
1 % 11 %
6%
3 % -1 %
293
306
295
277
258
42
45
47
39
33
25
30
50
55
35
22
25
30
38
41
145
165
200
170
190
527
571
622
579
557
3%
8%
9 % -7 % -4 %
1 264 1 392 1 490 1 475 1 447
2 % 10 %
7 % -1 % -2 %
0
4
7
-1
0
753
895
927 1 065 1 149
16
74
59
169
258
2%
9%
7 % 19 % 29 %
142
655
526 1 500 2 300
3
13
11
30
46
2007
9%
8%
44 %
17 %
2008
5%
19 %
3%
29 %
2009
3%
6%
5%
6%
2011
794
38
132
19
983
10 %
285
45
45
48
216
639
15 %
1 623
12 %
0
1 238
255
26 %
2 266
45
2012
918
44
173
26
1 161
18 %
345
63
72
62
292
834
30 %
1 995
23 %
1
1 436
275
24 %
2 450
49
2013
907
45
157
31
1 141
-2 %
363
59
86
68
320
896
7%
2 037
2%
-1
1 392
251
22 %
2 235
45
2010
-4 %
3%
27 %
-5 %
2011
7%
12 %
33 %
6%
2012
16 %
16 %
31 %
37 %
2013
-1 %
2%
-9 %
19 %
2014 2015E
7%
7%
2%
4%
-22 % -48 %
-42 % -44 %
11 %
6%
3 % -1 %
4 % -3 % -6 % -7 %
6%
5 % -17 % -16 %
20 % 67 % 10 % -36 %
14 % 20 % 27 %
8%
14 % 21 % -15 % 12 %
8%
9 % -7 % -4 %
41 % 42 % 39 % 38 %
10 %
7 % -1 % -2 %
10 %
11 %
37 %
29 %
17 %
14 %
15 %
39 %
12 %
18 % -2 %
21 %
5%
39 % -6 %
60 % 19 %
29 % 10 %
35 % 10 %
30 %
7%
42 % 44 %
23 %
2%
2%
0%
10 % 10 %
5%
2%
12 % -17 %
26 % 20 %
19 % 15 %
14 % 10 %
47 % 49 %
7%
5%
Salmon export prices (weighted) - Norwegian border,
2000 2001 2002 2003 2004 2005
1Q
32.1 27.2 22.9 22.9 23.0 24.3
2Q
35.5 27.3 24.1 21.5 23.7 26.0
3Q
33.2 26.0 23.4 19.1 22.2 27.9
4Q
27.3 23.4 23.0 21.5 21.3 26.5
Year
32.0 26.0 23.4 21.2 22.5 26.2
Y/Y
4.2
-6.1
-2.6
-2.1
1.3
3.6
1Q Y/Y
4.3
-4.9
-4.3
0.0
0.1
1.3
2Q Y/Y
7.5
-8.2
-3.2
-2.6
2.2
2.3
3Q Y/Y
6.1
-7.2
-2.6
-4.3
3.1
5.6
4Q Y/Y
-1.3
-3.9
-0.5
-1.5
-0.2
5.2
Y/Y
15 % -19 % -10 % -9 %
6 % 16 %
1Q Y/Y
16 % -15 % -16 %
0%
0%
6%
2Q Y/Y
27 % -23 % -12 % -11 % 10 % 10 %
3Q Y/Y
22 % -22 % -10 % -18 % 16 % 25 %
4Q Y/Y
-4 % -14 % -2 % -7 % -1 % 24 %
EURNOK
EUR/kg, Norwegian Export price (HOG)
Y/Y
Source: Norway Statistics, Fondsfinans Research
7 January 2015
fresh HOG.
2006 2007
28.3 28.7
38.2 26.9
35.2 26.3
28.0 24.9
32.4 26.7
6.2
-5.7
4.0
0.4
12.2 -11.3
7.3
-8.9
1.5
-3.1
24 % -18 %
16 %
1%
47 % -30 %
26 % -25 %
6 % -11 %
8.1
8.0
4.03 3.33
-17 %
2014
975
46
123
18
1 162
2%
401
62
96
86
380
1 025
14 %
2 187
7%
-1
1 460
298
26 %
2 651
53
2015E
1 043
48
64
10
1 165
0%
441
63
80
103
437
1 124
10 %
2 289
4.7 %
-39
1 537
372
32 %
3 310
66
2016E Av.06-14
1 085
5%
50
8%
64
10 %
10
8%
1 209
5%
4%
4%
459
4%
65
3%
87
23 %
125
17 %
503
15 %
1 238
8%
10 %
2 447
7%
6.9 %
-143
1 634
426
35 %
2016E Av.06-14 Pop. (m) WFE kg/cap.
4%
5%
507
2.1
4%
9%
5
9.6
0%
14 %
144
0.4
0%
8%
44
0.2
4%
4%
3%
9%
21 %
15 %
10 %
51 %
7%
6%
4%
7%
22 %
19 %
14 %
9%
2014E and 2015E European
2008 2009 2010 2011 2012
26.3 29.2 33.3 40.3 27.4
26.4 34.0 39.1 37.7 28.4
28.5 32.6 38.8 28.4 27.1
26.9 28.1 38.5 25.2 27.6
27.0 31.0 37.4 32.0 27.6
0.4
3.9
6.4
-5.4
-4.3
-2.3
2.9
4.1
7.0 -12.9
-0.5
7.6
5.1
-1.4
-9.3
2.2
4.0
6.2 -10.3
-1.3
2.0
1.2 10.4 -13.2
2.4
1 % 14 % 21 % -15 % -14 %
-8 % 11 % 14 % 21 % -32 %
-2 % 29 % 15 % -4 % -25 %
9 % 14 % 19 % -27 % -5 %
8%
4 % 37 % -34 %
9%
8.2
8.7
8.0
7.8
7.5
3.29 3.55 4.67 4.10 3.70
-1 %
8 % 32 % -12 % -10 %
700
320
126
203
1357
321
2 327
3 027
43 %
1.7
1.4
0.5
0.4
0.1
1.4
0.5
0.8
destinations
2013 2014 2015E
36.2 46.8 48.9
41.9 41.2 47.7
39.1 36.7 41.2
38.5 41.4 44.2
39.7 41.0 45.0
12.1
1.3
4.0
8.8 10.6
2.1
13.5
-0.7
6.5
12.0
-2.3
4.5
10.9
2.9
2.8
44 %
3 % 10 %
32 % 29 %
5%
47 % -2 % 16 %
44 % -6 % 12 %
40 %
8%
7%
7.81 8.41 9.07
5.08 4.88 4.96
38 % -4 %
2%
Page 3
Historical price / standing biomass correlation
The table below gives an overview of the standing biomass in Norway
Estimated development
in Norwegian standing
biomass month by
month
Based on approximately 15 years of data, we calculate the following relationship
between Norwegian standing biomass (6 months delayed) and price changes.
Norwegian biomass change Y/Y and average historical price change
(5 month time lag to Y/Y biomass)
30 %
y = 4.9458x2 - 2.0244x + 0.1625
R² = 0.9155
25 %
20 %
15 %
10 %
5%
-10 %
0%
0%
-5 %
5%
10 %
15 %
20 %
25 %
-5 %
-10 %
-15 %
More supply and demand details
Regulatory regime changes in Norway: The Government to offer 5%
capacity increase + 1H15 White paper on long-term growth
+5% MAB in Norway
proposed from 2015
onwards
No rolling average MAB
In June 2014 the Government announced that it intends to offer salmon and trout
farmers to increase its capacity (maximum allowed biomass, MAB) by 5 percent
starting in 2015, thus affecting effective production capacity from the summer of
2015 onwards.
Simultaneously, the Government turned down the alternative proposal from the
previous Government of a 12-month rolling average MAB, which is clearly
positive, as this would have led to a potentially larger production increase and
high biological risk.
Farmers will be charged NOK 1.5m for the increase of each license, implying a
Page 4
7 January 2015
Strict environmental
criteria; effective
capacity increase
significantly less than
5%
cost of growth of NOK 30m for each full license-equivalent. Very strict
environmental criteria will apply to the entire license that is expanded, and we
consider it likely that only a minority of the farmers will apply for increased
capacity. This implies that aggregate capacity will increase by significantly less
than five percent. The suggestion has been on a public hearing, and a final
decision is likely to be announced shortly.
The table below sums up MAB capacity changes in 2014 and our expectations
for 2015 to 2017. We expect moderate and stable growth in Norwegian MAB
capacity the next few years, averaging around 4% p.a.
Overview of Norwegian
MAB capacity 20142017E. Relatively
moderate growth of
around 4% p.a.
Date
Licenses
28.03.2014
Green licenses - Group B (auction)
21.08.2014
Temp. MAB increase - Russian ban
31.12.2014
Green licenses - Group A (Northern Norw ay)
15.03.2015
Offer to purchase 5% extra MAB
31.03.2015
Reversal of temporary MAB
30.06.2015E Remaining green licenses (C)
15
20
%
'000 t
Consideration
equivalents
NOK m
MAB
'000 t
1%
12
15
904
824
6%
49
61
0
873
2%
19
20
200
892
2%
16
22
524
909
-6 %
-49
-61
0
859
1%
8
10
100
867
01.04.2016E Expected additional MAB
3%
26
32
780
893
01.04.2017E Expected additional MAB
4%
36
44
1 072
929
14 %
116
144
3 580
4%
29
36
Aggregate MAB grow th 2014-2017E
10
License
Est. MAB im pact
#
45
Average annual grow th
White paper
predictability
White paper to be
presented in 2Q15:
Long-term growth
opportunities in Norway
Public consultation
paper: Periodic rulebased regional MAB
adjustments based on
environmental
indicators
on
long-term
Norwegian
growth:
Sustainability
and
The Norwegian government is currently working on a white paper on facilitating
sustainable and predictable long-term growth in the Norwegian aquaculture
industry. The white paper is to be presented to Parliament during the spring of
2015. In the public consultation paper, three alternative models are discussed:

Continuation of the current system of sporadic allocation rounds

A fixed annual growth rate in MAB

Periodic rule-based regional MAB adjustments (both increases and
reductions) based on enviromental indicators. This seems to be the
preferred solution
Taking local conditions
into account in a rulebased systems seems
sensible
We believe strict regulations based on environmental sustainability are in the
industry’s best long-term interest. We consider a system that takes local
conditions into account, and sets the basis for growth in a fair and transparent
manner, to be sensible.
Increased MAB to be
purchased based on
“market price”. New
licenses will be awarded
through auctions
The consultation paper suggests that farmers should pay a fee based on a
market price for increased MAB, while new licenses primarily will be awarded
through auctions. This seems fair.
Separate production
areas with own stocking
zones. Coordinated
fallowing
The consultation paper suggests the following three key elements:
In the consultation paper the Government stresses the importance predictability
and sustainability. The Government considers environmental sustainability to be
the single most important condition for further growth within aquaculture, and
suggest that this should be the only issue to be considered. Market conditions
are not to be part of the consideration from the Government.

The Norwegian coastline will be divided into separate production areas
with their own stocking zones
o
Coordinated fallowing
o
Each license will be linked to a production zone. Access to
7 January 2015
Page 5
permanent transfer of licenses from environmentally challenged
zones to sustainable areas
o
Environmental
indicators

Regulatory actions will be triggered by rules based on a system of
environmental indicators
o

Temporary higher
maximum allowed
standing biomass due
to the Russian ban
Reversal ultimo March
2015
No new licenses or increased MAB will be awarded before the
proposed new zones are into force (the suggested 5% MAB
increase for the spring of 2015 will not be affected)
Indicators for mortality/losses and sea lice, escapes, resistance
and use of medication are to be considered
The industry players will to a larger extent be resposible in finding joint
solutions to environmental challenges in their local areas
In July 2014 the Norwegian Government announced that it will temporarily
increase the maximum allowed biomass (MAB) for salmon and trout farmers by
6% and 20% respectively until the end of March 2015. This as a result of the
Russian import ban that is creating a more challenging market situation for the
industry. While the change of regulations implies reduced harvesting volumes
and better price achievement in the high season this autumn, aggregate supply
will increase later on. Increased capacity and standing biomass per license, will
increase biological risks as in addition to weakening average prices in the
marketplace through the winter, and with a higher biomass going into the
spring/summer next year. In addition, higher prices this autumn than otherwise
would have been the case, will make it more challenging to develop existing and
new markets to take on more volumes following Russia's exit.
The charts below illustrates Norwegian standing biomass and the theoretical
capacity with the announced changes to the regulatory regime.
Norwegian standing biomass and theoretical farming capacity – New
governmental capacity to be implemented
Close to full capacity
utilization in Norway,
including temporary 6%
increase in MAB
New licenses provide
moderate medium
growth potential
Y/Y development in
standing biomass given
6% temporarily increase
in MAB (until April 1)
Page 6
7 January 2015
Estimated Norwegian standing biomass, divided into fish generations:
High seawater temperatures this autumn/winter increasing biological risk.
Ability to control sea lice levels “significantly reduced for large parts of the
coast”
Significantly more
delousing of 2013G
than 2012G
Higher feeding factor on
2013G vs. 2012G
Relatively high
biological risk
Norwegian authorities:
“Deteriorating and poor
effect of treatment
chemicals”.
“Significantly reduced
ability to control sea lice
levels”
Going into the summer, the Norwegian Food Safety Authority issued a statement
announcing stricter enforcement of sea lice regulations, pointing at the risk of
serious sea lice issues. The authorities stress that the limit of 0.5 adult female
lice per fish is a maximum, and that farmers need to initiate treatments or other
measures well before this level is reached. However, the unusually high
seawater temperatures actually contributed to lowering the sea lice pressure this
summer Y/Y.
With higher biomass in the sea (+6% MAB) and higher-than-normal sea water
temperatures going into the winter, biological risk is currently relatively high. On
December 22 2014, the Norwegian Food Safety Authority issued a statement
commenting that it has been demanding for the industry stay within the sea lice
limit this summer and autumn, and that the number of treatments and increased
use of medication have increased and that “deteriorating and poor effect of
treatment chemicals” is being experienced”, leading some farmers to
compensate through increased dosages, longer treatment periods and combining
different treatments, in many cases contrary to advise from suppliers of
medications and officials. The authorities further comment that “the farming
industry’s ability to control sea lice levels with medication is significantly
reduced for large parts of the coast”.
7 January 2015
Page 7
Norwegian feeding data
Given the current sea lice situation in Norway and new farming capacity ahead,
we estimate 2015 feeding growth of 4% Y/Y. Summer feeding growth will
probably be higher than the full-year average in order to catch up, as the sea lice
situation should improve after the winter. The feeding level estimates are based
on successful spring delousing in March.
Historical Norwegian feeding distributed per quarter. 2015 is based on
Fondsfinans estimates
Norwegian feeding
1Q
2Q
3Q
4Q
Full year feeding
1Q
2Q
3Q
4Q
Full year feeding Y/Y
2005
125 100
180 800
347 400
252 900
906 200
6%
1%
13 %
24 %
12 %
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015E
127 700
178 900
175 500
183 400
187 500
187 800
275 800
213 000
285 500
285 850
192 500
236 300
233 000
272 800
269 800
286 100
320 500
293 000
344 000
359 210
375 700
420 100
433 800
507 100
516 700
585 300
602 000
631 000
606 200
640 642
292 400
306 300
352 500
406 100
391 300
449 900
464 000
484 000
500 400
520 416
988 300 1 141 600 1 194 800 1 369 400 1 365 300 1 509 100 1 662 300 1 621 000 1 736 100 1 806 118
2%
40 %
-2 %
5%
2%
0%
47 %
-23 %
34 %
0%
6%
23 %
-1 %
17 %
-1 %
6%
12 %
-9 %
17 %
4%
8%
12 %
3%
17 %
2%
13 %
3%
5%
-4 %
6%
16 %
5%
15 %
15 %
-4 %
15 %
3%
4%
3%
4%
9%
16 %
5%
15 %
0%
11 %
10 %
-2 %
7%
4%
Average sea water temperatures in Norway through the year –
The charts below illustrate the development in sea water temperatures in the
various Norwegian counties. The mild winter contributed to accelerate feeding in
1H14. During summer, however, sea water temperatures were higher than
optimal. High temperatures have, in most regions, reduced normal summer
biomass and feeding growth. Fish mortality during the summer and autumn has
been considerably higher than normal.
Page 8
7 January 2015
High seawater
temperatures this
summer limiting growth
in some regions. High
temperatures continuing
through autumn/early
winter
Shift in feeding growth through 2014. Mild winter. High summer sea water
temperatures continuing into autumn and winter.
The chart below shows sea water temperatures in the Norwegian salmon farming
counties as of the end of November 2014.
7 January 2015
Page 9
And October:
Source: FHL
Fish health considerations – Pancreases Disease (PD) and Amoebic Gill
Disease (AGD)

PD in Norway limiting 2015 feeding and supply growth

Additional fallowing of sites and production areas
In general, rapid sea water temperature changes are negative for healthy and
sustainable biomass development. This has been the case in Norway in 2014,
and the number of PD incidents is significantly up Y/Y equal to 52% YTD. As of
the end of November, 19% of all farming sites were affected by PD in 2014.
PD sites have to be fallowed for a longer period than normal. Official PD statistics
are now counting 138 sites, and the PD situation will contribute to limiting the
supply growth for next year. The PD situation also contributed to forced
harvesting this summer.
The table below sums up the development in Norwegian PD as of end November
2014.
Page 10
7 January 2015
PD established in
previously unaffected
areas: Mid Norway in
particular
Rogaland, Hordaland
and Sør-Trøndelag
more affected than
other counties
PD sites in Norw ay
2007 2008 2009 2010 2011
Finnmark
2
3
0
0
0
Troms
0
0
1
0
0
Nordland
0
2
0
0
0
Nord-Trøndelag
0
0
0
0
1
Sør-Trøndelag
0
0
1
0
3
Møre og Romsdal
23
18
7
7
9
Sogn og Fjordane
20
12
8
12
16
Hordaland
42
53
44
44
46
Rogaland
11
19
5
21
14
Agder
0
0
0
0
0
Total
98
107
66
84
89
Y/Y
9 % -38 % 27 %
6%
% of sites affected
14 % 15 %
9 % 12 % 13 %
Source: The Norwegian Veterinary Institute, Fondsfinans Research
2012 2013
1
2
1
0
0
0
2
0
24
32
21
21
20
5
51
28
17
12
0
0
137
100
54 % -27 %
19 % 14 %
2H11
0
0
0
0
3
6
7
24
6
0
46
6%
AGD sites in Norw ay
2012 2013 Jan
Feb
March April May June July
Troms
Troms
Nordland
Nord-Trøndelag
Sør-Trøndelag
Møre og Romsdal
5
2
1
Sogn og Fjordane
12
2
1
1
1
Hordaland
2
19
6
Rogaland
3
20
1
1
Agder
Total
5
56
11
1
3
1
0
0
0
2H12 2H13 '12TD '13TD
1
1
1
2
0
0
1
0
0
0
0
0
2
0
2
0
20
26
21
25
9
15
20
20
10
1
19
5
27
14
48
28
5
5
17
11
0
0
0
0
74
62
129
91
61 % -16 %
-29 %
10 %
9 % 18 % 13 %
Aug
Sept
Oct
Nov
1
2
4
2
5
1
3
1
3
1
9
1
3
3
11
8
14
'14TD # sites % cap.
0
63
0%
0
53
0%
2
144
1%
2
50
4%
34
60
57 %
19
70
27 %
8
56
14 %
50
151
33 %
23
56
41 %
0
9
0%
138
712
19 %
52 %
19 %
'14TD
0
0
0
0
2
20
9
19
2
0
52
# sites 2014, % cap.
63
0%
53
0%
144
0%
50
0%
60
3%
70
29 %
56
16 %
151
13 %
56
4%
9
0%
712
7%
Amoebic gill disease (AGD)
AGD is caused by the amoeba Paramoeba perurans, and created significant
challenges for farmers in the UK from 2012 before being detected in southern
Norway in late 2012. While the impact in terms of mortality seems under
relatively good control, farmers in affected regions experience increased cost
related to both treatment and prevention/readiness measures.
The table below provides an overview of reported AGD cases in Norway. It is not
mandatory to report AGD-outbreaks to the authorities, and the list is
consequently fully not complete. Nonetheless, the disease has spread
significantly during the last couple of years, becoming prevalent not only in
Hordaland, but Sogn og Fjordane and Møre og Romsdal, further up the coastline,
which is worrisome but not surprising.
AGD is less prevalent in areas with low salinity, and treatment with freshwater is
usually effective. Normally the disease is less of an issue when seawater
temperatures drop below 7 C, which means that the risk should be lower in the
coming months.
Coho, trout and
Atlantics in Chile
Chile supply profile
The table below shows our estimates on total Chilean volumes of salmonids Y/Y
(Atlantic salmon, Coho (Pacific Salmon) and sea trout). The growth rate for 2013
was around 28%. For 2014 we forecast supply growth for all species combined to
around 11%. For 2015 supply growth should be negative due to capital
constrains and reduced 2014 stocking. The table below provides more details.
7 January 2015
Page 11
Chile biology improving.
Region XI re-stocking
ahead
Chile, Atlantic salmon
2004 2005
January
26
29
February
28
31
Mach
28
34
April
28
32
May
25
32
June
26
30
July
27
31
August
30
35
September
31
33
October
32
32
November
34
35
December
33
32
Total Atlantics
346
385
Growth Y/Y
11 %
1Q volumes
82
94
2Q volumes
79
94
3Q volumes
87
98
4Q volumes
98
99
1Q volumes
15 %
2Q volumes
19 %
3Q volumes
12 %
4Q volumes
1%
2006
32
26
30
27
34
30
31
36
27
32
33
31
369
-4 %
2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E
33
35
39
13
12
22
39
44
40
44
28
27
31
11
11
24
41
45
42
42
32
28
32
9
14
28
41
60
44
42
29
29
22
11
13
27
39
47
44
42
27
32
15
13
15
30
33
46
44
42
27
30
15
10
16
29
34
43
44
42
29
35
15
9
21
32
37
45
43
45
32
34
15
9
22
32
38
51
43
45
24
36
13
9
25
34
36
48
45
45
34
33
14
12
24
38
44
47
46
45
30
41
14
12
24
36
44
45
46
45
30
44
14
12
23
34
40
40
46
45
356
404
239
130
221
364
468
560
527
524
-3 % 13 % -41 % -46 % 70 % 65 % 28 % 20 % -6 % -1 %
89
90
94
96
-6 %
-4 %
-4 %
-3 %
94
89
103
82
91
53
86
105
43
95
118
41
6 % -5 % 15 %
-9 % 11 % -42 %
-9 % 23 % -59 %
-1 % 24 % -65 %
34
34
28
36
-67 %
-36 %
-36 %
-14 %
37
45
68
72
10 %
33 %
147 %
101 %
74
86
97
107
101 %
92 %
43 %
49 %
122
149
126
107
135
132
111
144
131
129
132
138
63 % 23 % -15 %
25 % 27 % -2 %
14 % 29 % -9 %
20 %
3%
5%
128
126
135
135
2%
-5 %
3%
-2 %
Global supply development – Month by month
The table below sums up our global supply forecast distributed month by month
(all major regions combined).
Monthly global supply
profile (all major
regions)
European supply
Page 12
Global supply of Atlantic salmon, All major regions (ex. Coho and trout). WFE tonnes '000
2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 07/06 08/07
January
101
112
122
105
103
131
157
157
164
175 8 % 11 %
February
97
108
110
103
99
135
145
149
160
165 9 % 11 %
March
117
110
124
117
117
164
161
183
175
178 12 % -6 %
April
101
110
115
100
108
140
149
173
175
178 11 % 9 %
May
109
121
106
106
117
153
153
176
176
179 9 % 11 %
June
113
116
106
115
125
165
146
172
176
179 15 % 2 %
July
106
115
107
111
129
155
152
172
175
184 19 % 8 %
August
112
114
107
106
129
166
159
183
177
185 10 % 1 %
September
110
123
121
124
151
170
177
188
193
199 7 % 12 %
October
128
131
131
133
155
185
196
199
202
207 14 % 2 %
November
135
139
130
137
165
190
195
187
200
205 8 % 3 %
December
128
147
138
137
167
175
175
174
190
199 4 % 15 %
Year
1 357 1 446 1 415 1 393 1 564 1 928 1 966 2 112 2 162 2 235 10 % 7 %
1Q supply
315
330
355
325
319
430
463
489
498
518 10 % 5 %
2Q supply
323
347
327
321
350
457
448
521
527
537 12 % 8 %
3Q supply
328
352
335
341
409
490
488
543
546
569 11 % 7 %
4Q supply
391
417
399
406
487
550
566
560
591
612 9 % 7 %
European supply. WFE ' t Atlantics
2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E
January
60
67
73
83
83
100
107
106
114
121
February
61
73
69
83
81
101
94
98
108
113
March
76
73
82
98
94
125
109
115
121
126
April
62
70
82
80
87
102
100
117
121
126
May
72
79
80
85
93
112
110
122
122
127
June
76
75
81
96
100
125
103
122
122
127
July
67
71
83
92
98
112
106
118
122
129
August
70
69
83
86
98
122
112
124
124
130
September
77
78
98
104
116
123
133
130
137
144
October
85
88
109
110
120
135
143
141
145
152
November
97
88
107
114
130
142
142
131
143
150
December
89
92
113
114
133
128
125
123
133
144
Total
891
923 1 061 1 145 1 233 1 427 1 383 1 446 1 511 1 591
1Q supply
197
213
225
263
258
326
310
320
342
360
2Q supply
210
224
243
262
280
339
313
361
365
381
3Q supply
214
218
264
282
311
357
350
372
384
404
4Q supply
270
268
329
339
383
405
410
394
420
447
7 January 2015
09/08
9%
1%
12 %
4%
-13 %
-8 %
-7 %
-6 %
-2 %
0%
-6 %
-6 %
-2 %
8%
-6 %
-5 %
-4 %
10/09
-14 %
-6 %
-5 %
-13 %
1%
8%
4%
-1 %
2%
1%
5%
-1 %
-2 %
-8 %
-2 %
2%
2%
11/10
-2 %
-4 %
-1 %
8%
10 %
9%
16 %
22 %
22 %
17 %
21 %
22 %
12 %
-2 %
9%
20 %
20 %
12/11 13/12
27 % 20 %
37 %
7%
40 % -2 %
30 %
7%
31 %
0%
32 % -11 %
20 % -2 %
28 % -4 %
13 %
5%
20 %
6%
15 %
2%
4%
0%
23 %
2%
35 %
8%
31 % -2 %
20 %
0%
13 %
3%
14/13 15/14 16/15
0% 4%
7%
3% 7%
3%
13 % -4 %
2%
16 % 1 %
2%
15 % 0 %
2%
18 % 2 %
2%
13 % 2 %
5%
15 % -3 %
5%
6% 3%
3%
1% 2%
3%
-4 % 7 %
3%
0% 9%
5%
7% 2%
3%
5% 2%
4%
16 % 1 %
2%
11 % 1 %
4%
-1 % 6 %
3%
Y/Y
10/09 11/10 12/11 13/12 14/13 15/14 16/15
13 % 1 % 20 % 7 % -1 % 7 % 7 %
19 % -3 % 26 % -7 % 4 % 10 % 5 %
19 % -3 % 33 % -13 % 6 % 5 % 5 %
-3 % 8 % 18 % -2 % 17 % 3 % 5 %
7 % 9 % 21 % -2 % 11 % 0 % 4 %
19 % 4 % 24 % -18 % 18 % 0 % 4 %
10 % 7 % 15 % -6 % 11 % 4 % 6 %
4 % 13 % 25 % -8 % 11 % 0 % 5 %
6 % 12 % 6 % 8 % -2 % 5 % 5 %
1 % 9 % 12 % 6 % -2 % 3 % 5 %
7 % 14 % 9 % 0 % -8 % 9 % 5 %
1 % 16 % -3 % -2 % -2 % 8 % 9 %
8 % 8 % 16 % -3 % 5 % 5 % 5 %
17 % -2 % 26 % -5 % 3 % 7 % 5 %
8 % 7 % 21 % -8 % 15 % 1 % 4 %
7 % 11 % 15 % -2 % 6 % 3 % 5 %
3 % 13 % 6 % 1 % -4 % 7 % 6 %
Change in global supply Y/Y (ex. trout and
2006
2007
January
4 600
7 300
February
-1 200
8 100
March
2 300
12 100
April
-7 000
9 900
May
7 900
9 200
June
7 800
14 400
July
-1 150
17 020
August
5 520
9 750
September
-6 580
7 050
October
3 460
15 300
November
5 840
10 100
December
-3 100
5 300
Volume increase Y/Y
18 390 125 520
Volumes (kt)
1 231
1 357
Supply growth Y/Y
2%
10 %
Vol growth 1H Y/Y
14 400
61 000
Vol growth 2H Y/Y
3 990
64 520
Source: Fondsfinans data and estimates
coho). All
2008
10 600
11 100
-6 800
9 500
12 500
2 300
8 780
1 650
13 550
3 100
3 940
18 700
88 920
1 446
7%
39 200
49 720
major regions combined. Distributed month by month
2009
2010
2011
2012
2013
2014E
10 400 -17 000
-1 900
28 000
26 000
0
1 300
-6 500
-4 400
36 400
9 900
4 100
13 300
-6 100
-600
47 000
-2 500
21 200
4 900 -15 100
8 100
31 900
9 400
23 600
-15 600
600
10 600
36 300
200
22 400
-9 400
8 600
10 000
39 700 -18 700
26 500
-8 500
4 100
18 100
26 300
-3 400
20 100
-6 600
-600
23 000
36 200
-6 100
23 700
-2 400
2 700
26 800
19 000
7 700
10 300
200
1 200
22 300
30 400
10 800
2 700
-8 740
6 500
28 300
25 300
4 400
-8 100
-9 300
-700
30 500
7 400
200
-700
-30 440 -22 300 170 800 363 900
37 900 145 800
1 415
1 393
1 564
1 928
1 966
2 112
-2 %
-2 %
12 %
23 %
2%
7.4 %
4 900 -35 500
21 800 219 300
24 300
97 800
-35 340
13 200 149 000 144 600
13 600
48 000
2015E
6 600
10 500
-7 900
1 800
500
3 900
3 300
-5 900
5 800
3 100
13 100
15 600
50 400
2 162
2.4 %
15 400
35 000
2016E
11 500
5 500
3 500
3 500
3 000
3 000
9 000
8 000
6 000
5 500
5 500
9 500
73 500
2 235
3.4 %
30 000
43 500
Demand remains robust in core markets. Russia and Ukraine
set to remain weak. Brazil affected by weak BRL
Alternative markets
replacing Russia –
Volumes are being
absorbed
Ukraine and Brazil
Positive product
development in Europe
and the US
Demand has developed strongly both in traditional and new markets during the
last few years. Distribution of incremental demand has been more even across
markets than what has traditionally been the case, reflecting that the industry has
built and continues to develop new markets globally. While price volatility in the
run-up to the recent Christmas season indicates that the absence of Russian
demand clearly is an issue, the broader consumer base for salmon has proved
supportive in easing the channeling of salmon into other markets as Russian
imports came to a halt. The temporary increase in Norwegian MAB has also
clearly eased the situation in the short term by reducing harvesting pressure in
the short term. Naturally, Ukraine remains weak, while the high growth in Brazil in
recent years has halted due to the significant weakening of the BRL.
The trends towards more fresh, rather than frozen fish, and more value added
processed products, have continued to contribute to increased demand through
the value chain in established markets. We expect these trends to continue, and
we also observe that new markets continue to come online. We also see some
initial steps towards building the foundations for more stable markets through
longer-term industry contracts. This is a part of MHG’s strategy of integration and
consolidation of the industry, which longer term could imply higher valuation
multiples if successful.
Consumption. '000 WFE t
2005
EU countries
634
Norway
23
Russia
64
Ukraine
732
European consumption Y/Y
US
302
Japan
57
Brazil
20
China/Hong Kong
21
Others (Aus,Kor,Can,Isr,Chi,Arg, Mex)
114
Americas + Asia
513
Consumption Americas+Asia Y/Y
Global consumption
1 245
0%
Ending stocks (freeze)
0
European supply
727
European supply/consumption balance
-5
European supply/consumption ratio
-1 %
Number of flights from Europe
Number of flights from Europe per week
2006 2007 2008 2009 2010
650
709
744
766
739
24
26
31
33
34
51
73
75
78
100
12
14
18
19
18
737
822
868
896
891
1 % 11 %
6%
3 % -1 %
293
306
295
277
258
42
45
47
39
33
25
30
50
55
35
22
25
30
38
41
145
165
200
170
190
527
571
622
579
557
3%
8%
9 % -7 % -4 %
1 264 1 392 1 490 1 475 1 447
2 % 10 %
7 % -1 % -2 %
0
4
7
-1
0
753
895
927 1 065 1 149
16
74
59
169
258
2%
9%
7 % 19 % 29 %
142
655
526 1 500 2 300
3
13
11
30
46
7 January 2015
2011
794
38
132
19
983
10 %
285
45
45
48
216
639
15 %
1 623
12 %
0
1 238
255
26 %
2 266
45
2012
918
44
173
26
1 161
18 %
345
63
72
62
292
834
30 %
1 995
23 %
1
1 436
275
24 %
2 450
49
2013
907
45
157
31
1 141
-2 %
363
59
86
68
320
896
7%
2 037
2%
-1
1 392
251
22 %
2 235
45
2014
975
46
123
18
1 162
2%
401
62
96
86
380
1 025
14 %
2 187
7%
-1
1 460
298
26 %
2 651
53
2015E
1 043
48
64
10
1 165
0%
441
63
80
103
437
1 124
10 %
2 289
4.7 %
-39
1 537
372
32 %
3 310
66
2016E Av.06-14
1 085
5%
50
8%
64
10 %
10
8%
1 209
5%
4%
4%
459
4%
65
3%
87
23 %
125
17 %
503
15 %
1 238
8%
10 %
2 447
7%
6.9 %
-143
1 634
426
35 %
Page 13
EU countries
Norway
Russia
Ukraine
2006
3%
4%
-21 %
9%
1%
US
-3 %
Japan
-25 %
Brazil
25 %
China/Hong Kong
5%
Others (Aus,Kor,Can,Isr,Chi,Arg, Mex) 27 %
Americas + Asia
3%
Americas/Asia consumption share
42 %
Global consumtion growth Y/Y
2%
2007
9%
8%
44 %
17 %
2008
5%
19 %
3%
29 %
2009
3%
6%
5%
6%
2010
-4 %
3%
27 %
-5 %
2011
7%
12 %
33 %
6%
2012
16 %
16 %
31 %
37 %
2013
-1 %
2%
-9 %
19 %
2014 2015E
7%
7%
2%
4%
-22 % -48 %
-42 % -44 %
11 %
6%
3 % -1 %
4 % -3 % -6 % -7 %
6%
5 % -17 % -16 %
20 % 67 % 10 % -36 %
14 % 20 % 27 %
8%
14 % 21 % -15 % 12 %
8%
9 % -7 % -4 %
41 % 42 % 39 % 38 %
10 %
7 % -1 % -2 %
10 %
11 %
37 %
29 %
17 %
14 %
15 %
39 %
12 %
18 % -2 %
21 %
5%
39 % -6 %
60 % 19 %
29 % 10 %
35 % 10 %
30 %
7%
42 % 44 %
23 %
2%
2%
0%
10 % 10 %
5%
2%
12 % -17 %
26 % 20 %
19 % 15 %
14 % 10 %
47 % 49 %
7%
5%
2016E Av.06-14 Pop. (m) WFE kg/cap.
4%
5%
507
2.1
4%
9%
5
9.6
0%
14 %
144
0.4
0%
8%
44
0.2
4%
4%
3%
9%
21 %
15 %
10 %
51 %
7%
6%
4%
7%
22 %
19 %
14 %
9%
700
320
126
203
1357
321
2 327
3 027
43 %
1.7
1.4
0.5
0.4
0.1
1.4
0.5
0.8
With moderate global supply growth the next years, farm gate prices should still
have sound support. However, we expect price sensitive consumers and
competition from alternative proteins to discourage permanently higher prices,
and we do not expect prices significantly above EUR 5/kg HOG to be
sustainable. Given the significant weakening of the NOK, we increase achieved
NOK prices accordingly.
The tables below sum up our price forecasts for 2014 and 2015 for the main
markets and species.
European reference salmon price estimates
Quarterly salmon
reference prices
(Europe)
Historical prices and
price changes Y/Y
Significantly weaker
NOK supporting
demand in international
markets
Salmon export prices (weighted) - Norwegian border,
2000 2001 2002 2003 2004 2005
1Q
32.1 27.2 22.9 22.9 23.0 24.3
2Q
35.5 27.3 24.1 21.5 23.7 26.0
3Q
33.2 26.0 23.4 19.1 22.2 27.9
4Q
27.3 23.4 23.0 21.5 21.3 26.5
Year
32.0 26.0 23.4 21.2 22.5 26.2
Y/Y
4.2
-6.1
-2.6
-2.1
1.3
3.6
1Q Y/Y
4.3
-4.9
-4.3
0.0
0.1
1.3
2Q Y/Y
7.5
-8.2
-3.2
-2.6
2.2
2.3
3Q Y/Y
6.1
-7.2
-2.6
-4.3
3.1
5.6
4Q Y/Y
-1.3
-3.9
-0.5
-1.5
-0.2
5.2
Y/Y
15 % -19 % -10 % -9 %
6 % 16 %
1Q Y/Y
16 % -15 % -16 %
0%
0%
6%
2Q Y/Y
27 % -23 % -12 % -11 % 10 % 10 %
3Q Y/Y
22 % -22 % -10 % -18 % 16 % 25 %
4Q Y/Y
-4 % -14 % -2 % -7 % -1 % 24 %
EURNOK
EUR/kg, Norwegian Export price (HOG)
Y/Y
Source: Norway Statistics, Fondsfinans Research
fresh HOG.
2006 2007
28.3 28.7
38.2 26.9
35.2 26.3
28.0 24.9
32.4 26.7
6.2
-5.7
4.0
0.4
12.2 -11.3
7.3
-8.9
1.5
-3.1
24 % -18 %
16 %
1%
47 % -30 %
26 % -25 %
6 % -11 %
8.1
8.0
4.03 3.33
-17 %
2014E and 2015E European
2008 2009 2010 2011 2012
26.3 29.2 33.3 40.3 27.4
26.4 34.0 39.1 37.7 28.4
28.5 32.6 38.8 28.4 27.1
26.9 28.1 38.5 25.2 27.6
27.0 31.0 37.4 32.0 27.6
0.4
3.9
6.4
-5.4
-4.3
-2.3
2.9
4.1
7.0 -12.9
-0.5
7.6
5.1
-1.4
-9.3
2.2
4.0
6.2 -10.3
-1.3
2.0
1.2 10.4 -13.2
2.4
1 % 14 % 21 % -15 % -14 %
-8 % 11 % 14 % 21 % -32 %
-2 % 29 % 15 % -4 % -25 %
9 % 14 % 19 % -27 % -5 %
8%
4 % 37 % -34 %
9%
8.2
8.7
8.0
7.8
7.5
3.29 3.55 4.67 4.10 3.70
-1 %
8 % 32 % -12 % -10 %
destinations
2013 2014 2015E
36.2 46.8 48.9
41.9 41.2 47.7
39.1 36.7 41.2
38.5 41.4 44.2
39.7 41.0 45.0
12.1
1.3
4.0
8.8 10.6
2.1
13.5
-0.7
6.5
12.0
-2.3
4.5
10.9
2.9
2.8
44 %
3 % 10 %
32 % 29 %
5%
47 % -2 % 16 %
44 % -6 % 12 %
40 %
8%
7%
7.81 8.41 9.07
5.08 4.88 4.96
38 % -4 %
2%
Competition from substitutes – Competitiveness in the market
The figure below shows the relative development in salmon prices compared to
FAO’s index of meat prices. Feed raw material prices affect the production cost
of meat significantly more, and faster than for salmon. As crop based feed raw
material prices come down, we expect meat prices to become more competitive
vs. salmon, especially in the US market.
Page 14
7 January 2015
Meat could become
increasingly competitive
vs. salmon, in particular
in the US, driven by
lower crop based feed
raw material prices
BioMar 3Q14 report
Chile: Improving
biology, but a long way
to go yet
Chile: Fair 3Q growth
rate Y/Y driven by
positive biology
EWOS: Similar market
comments at 3Q
EWOS 3Q: 9% global
feed market growth in
2014 YTD
Always risk of
unsustainable use of
chemical treatments
EWOS: Chile market
grew 9% YTD at 3Q
Use of Salmosan
temporarily relieving
biology
Feeding data is an important source and cross-check for assessing underlying
biological status and future supply volumes from Chile. The BioMar 3Q report
issued in November 2014 includes some interesting comments:
“In the Americas, the larger overall market combined with BioMar's slightlyabove-normal market share made for very strong volume growth. Conversely, the
Q3 market share in Chile last year was below normal.”
“Unexpectedly, BioMar's other core market, Chile, grew at a fair year-on-year
rate in the third quarter. Positive biological developments in the Chilean fish
farming industry drove much of the improvement, and the situation is now
reason-ably under control and continuing to improve. As a result, fish farmers
were generally able to postpone harvesting their salmon, thereby increasing the
average harvesting weight by a large margin. Obviously, this has had a positive
effect on feed market volumes.”
We consider the use of Salmosan as the key factor behind the reported
improvements in Chilean biology. However, we stress that there is always a risk
that chemical treatments may be used one-sidedly and unsustainably, over time
increasing risk of resistance.
“The Chilean feed market also grew year-on-year in the second quarter, in large
part due to the progress made in respect of the biological challenges in the
region. The situation seems to be moving in the right direction, although there is
still a long way to go. Also, the financial reports released by BioMar's customers
were encouraging in the sense that they indicate a general improvement in the
companies' financial situation. No year-on-year growth is expected in the fish
feed market in the second half of 2014.”
According to EWOS’ 3Q14, report, the Chilean market grew 9% in volume terms
in 2014YTD, similar to global feed volume growth.
CEQ and MHG see encouraging signs on biology in Chile, but underlying
measures are needed in order to secure sustainability
Both Cermaq and Marine Harvest have reported on improving operations in
Chile, while costs remain high. MHG in particular has pointed to the introduction
of Salmosan (chemical treatments) having temporarily relieved some of the
pressure on biology, though intensive use of this is not a sustainable long-term
7 January 2015
Page 15
MHG: We believe in
Chile, intends to take
part in consolidation
MHG: Underlying
improvements needed
in Chile
solution to the Chilean sea lice issues.
Despite still high need for treatments in Chile, we see a positive shift in the
communicaion from MHG regarding Chile, with the CEO stating at 2Q that “we
believe in Chile” and that improved coordination is starting to yield effects, though
it is not enough, and that MHG intends to take active part in consolidation in the
region.
At 3Q however, the company once again pointed to the need of structural
measures to return to a sustainable development in Chile: “The improved
performance can mainly be ascribed to the introduction of the sea lice drug
Salmosan. The underlying biological situation in the region is however still
concerning, and underlying improvements are required to meet sustainability
metrics.”
While significant challenges and risks remain in Chile, SRS in particular, the
authorities and leading industry players seem to have a joint understanding of the
root causes. Production plans are becoming more coordinated. Density in Region
X and XI will have to come down, while Region XII is emerging as a new growth
region, where sea lice levels are lower.
The illustrations below give an overview over farming sites and the nine macro
zones in Chile.
The nine macro zones
Region X and XI
Source: Multiexport Foods
Page 16
7 January 2015
Overview of sites in
Region X, XI and XII
MHG mainly exposed to
Region X
Source: Subpesca
Raw material intensive
industry
Increased competition
and reduced margins
for feed producers
BioMar 3Q14:
Norwegian feed market
“extremely competitive”
Marine feed ingredient prices sharply up in 2014: Peru volumes absent.
Soymeal prices sliding in 2H2014
Fish feed is the single largest cost component in salmon farming, constituting
around 45-50 % of the operating production cost. The cost structure in feed
production is raw material intensive, with materials typically accounting for
around 80 % of production cost.
Marine Harvest has now successfully entered the fish feed business, initiating
commercial production from its first plant during the summer 2014 (220 000 t
feed capacity). The plant is already running at full capacity utilization. Nutreco
has from the summer 2013 increased its capacity at Averøy by 150.000 t.
Consequently, the competition between feed suppliers is up, putting pressure on
margins. Longer term the spare capacity will probably narrow. However, MHG
will be in a position to increase capacity in order to maintain moderate margins in
the feed industry.
However, despite lower feed margins, feed prices are currently being increased
by approximately 10% on average, as marine raw material prices are sharply up
due to the lack of supply from Peru, where the second fishing season of 2014
was cancelled due to the state of the biomass/el Niño.
Simultaneously, soy meal and other crop raw material prices are down Y/Y. The
charts and graphs below provide more details.
7 January 2015
Page 17
The figures below show the price development for important input factors
in salmon feed
Chicago soybean meal
price development
Soy meal; USD/t
1Q price
2Q price
3Q price
4Q price
1Q YoY
2Q YoY
3Q YoY
4Q YoY
Full year average
Y/Y
USDNOK
NOK price per ton
Y/Y increase
2005
170
203
197
178
187
2006
175
182
176
165
2%
-10 %
-11 %
-8 %
174
-7 %
2007
213
211
239
292
22 %
16 %
36 %
77 %
239
37 %
2008
347
356
368
265
63 %
69 %
54 %
-9 %
334
40 %
2009
296
363
343
305
-15 %
2%
-7 %
15 %
327
-2 %
2010
279
281
306
337
-6 %
-23 %
-11 %
10 %
301
-8 %
6.04
1 816
2011
367
354
353
301
32 %
26 %
16 %
-11 %
344
14 %
5.65
1 942
7%
2012
336
411
513
455
-9 %
16 %
45 %
51 %
429
25 %
5.83
2 503
29 %
2013
419
433
450
430
25 %
5%
-12 %
-5 %
433
1%
5.88
2 548
2%
2014
447
483
397
375
7%
12 %
-12 %
-13 %
426
-2 %
6.35
2 703
6%
Source: Bloomberg, Fondsfinans Research
Page 18
7 January 2015
Fish meal prices:
2013: +12%
2014: +5%
Second Peruvian fishing
season cancelled –
Lack of fish meal supply
Fish meal, USD/t
1Q price
2Q price
3Q price
4Q price
1Q YoY
2Q YoY
3Q YoY
4Q YoY
Full year average
Y/Y
USDNOK
NOK price per ton
Y/Y increase
2005
609
632
676
723
660
2006
715
817
1 111
1 237
17 %
29 %
64 %
71 %
972
47 %
2007
1 183
1 137
919
911
65 %
39 %
-17 %
-26 %
1 036
7%
2008
978
1 075
1 051
895
-17 %
-5 %
14 %
-2 %
1 000
-4 %
2009
918
964
1 150
1 448
-6 %
-10 %
9%
62 %
1 121
12 %
2010
1 703
1 805
1 511
1 439
86 %
87 %
31 %
-1 %
1 614
44 %
6.04
9 747
2011
1 704
1 384
1 390
1 258
0%
-23 %
-8 %
-13 %
1 433
-11 %
5.65
8 094
-17 %
2012
1 241
1 481
1 642
1 795
-27 %
7%
18 %
43 %
1 541
8%
5.83
8 986
11 %
2013
2 070
1 909
1 500
1 448
67 %
29 %
-9 %
-19 %
1 729
12 %
5.88
10 169
13 %
2014
1 511
1 695
1 848
2 216
-27 %
-11 %
23 %
53 %
1 819
5%
6.35
11 553
14 %
Source: Bloomberg, Fondsfinans Research
Industry structure – Potential for further consolidation (potentially all
farming regions)
Mitsubishi Corporation
entering global salmon
farming with the
acquisition of Cermaq
The autumn of 2014 saw consolidation/M&A activity in both Norway and Chile.
The major transaction was Mitsubishi Corporation’s bid for Cermaq in September
and subsequent 100% acquisition and delisting, following CEQ being reclassified
as a pure financial investment by the Norwegian Government, the majority
shareholder, in June (Disclosure: Fondsfinans acted as advisor to Cermaq in the
transaction). From an industry structure perspective, it is interesting that a major
global integrated industrial conglomerate enters the global salmon farming
industry on this scale.
MHG completes
acquisition of former
Acuinova Region XI
assets for USD 125m
On December 24 2014 MHG announced the completion of the purchase of the
assets of the former Chilean farming company Acuinova S.A. The agreed
purchase price for the assets is USD 125 million. The asset purchase is
subjected to VAT of approximately USD 10 million and will be financed
temporarily by Marine Harvest. The VAT is fully refundable.
Capacity 40’ t HOG,
2015 production
According to a separate statement published on September 15 2014 the assets
7 January 2015
Page 19
Processing facility
represent a capacity to produce about 40 thousand tonnes HOG per annum.
The asset purchase includes a hatchery, a smolt facility, 36 sea water licences
and a primary and secondary processing facility, all located in Chile's Region XI.
The biomass included in the deal is expected to generate a harvest volume of
about 15 thousand tonnes HOG in 2015.
Softer ownership
limitations in Norway
open for consolidation
In 2013 ownership limitations in the Norwegian industry were softened
considerably, raising the ceiling was raised from 25% to 40% ownership of
Norwegian licenses. MHG owns around 24% of the licenses in Norway, and the
company has expressed an ambition to move to 40% over time.
guidance of 15’ t
Higher ownership in a given coastal region will presuppose i.a. a higher share of
local processing. The new rules related to local processing will apply over a five
year period, implying that companies will have sufficient time to adapt following
any acquisitions.
Given strong outlooks for the industry, limited organic growth potential for most
companies and statements from leading industry players regarding ambitions to
grow, we expect to see further consolidation of the industry ahead.
Page 20
7 January 2015
Risk assessment
The sensitivity of key assumptions is very high, with salmon prices being the key
factor. Salmon prices around the world will differ from market to market. In
Europe, fish sales are primarily settled in EUR, while US sales are settled in
USD. The larger companies in the sector have EUR and USD debt in order to
hedge FX risks. The smaller companies in the sector are financed by NOK debt.
In general, fish disease outbreaks represent considerable costs to producers that
are affected. Some fish diseases, like Pancreas Disease (PD) and IPN, and
parasites like sea lice, represent running costs related to vaccination and other
preventive measures, in addition to the risk of forced harvesting, reduced quality
and price achievement in case of actual outbreaks. Historically, fallowing waters
after PD incidents has proven efficient in terms of reducing the risk of new
outbreaks on the following generations in a local area, and we expect the number
of PD incidents in Norway to be much lower this year. On the other hand, the
industry in general has at times benefited from high prices due to reduced supply
in the aftermath of disease outbreaks.
Company specific fish diseases could always hit long term underlying values in
fish farming. In the Northern hemisphere, 2Q and 3Q is normally high season for
potential fish diseases (whereas the risk profile through the year is more or less
reverse in Chile). The risk increases in summer and in 3Q when the sea water
temperatures and the density in the cages are at peak. In opposite, 4Q and 1Q
are normally low season for fish diseases at the Northern Hemisphere.
The current Aquaculture Law in Chile came into force in April 2010 and was
revised in May 2013. Cermaq points to the root causes being inadequate
enforcement of regulations and a lack of coordination between farming
companies. I.a. to address these underlying issues, CEQ and Marine Harvest, in
particular, have taken the initiative in establishing the Global Salmon Initiative
(GSI), a major industry-led sustainability initiative comprising 15 companies
representing 70% of the global salmon farming industry. In Chile the GSI had
engaged a sea lice coordinator (Mr. Oscar Garate) with relatively broad powers
in enforcing delousing and forced harvesting within the separate macro
cultivation zones, and according to CEQ coordinated treatment against sea lice
has shown promising results in some of the macro zones (in total 53
neighbourhoods inside the 9 macro zones) it has been introduced so far. This
fish health system should, over time, contribute to more sustainable long term
farming conditions. Reduced standing biomass in Region XI should help longer
term conditions. Fallowing trout sites in Region X should also help longer term
conditions as the trout is sensitive to sea lice and SRS. Some farmers will in
addition probably switch to Coho production (Region X), a species that is more
robust against sea lice.
Delousing of standing biomass in Chile with “Salmosan” has given significant
positive effects last year. In the long run, “Salmosan” is, however, not a
sustainable solution to the sea lice issues. Finally, less 2015 standing biomass
more regular fallowing of major sea waters should help sea water conditions.
7 January 2015
Page 21
Marine Harvest ASA
4Q14 Preview
Results date:
7 January 2015
4 February 2015
Sector
Aquaculture
Reuters/ Bloomberg
MHG
Risk rating
Medium
410.4
Market cap
43 500
Net interest bearing debt
8 660
Enterprise value
52 160
Free float %
77 %
Average volume (thous)
2 468
High/ low 52w
105.7 / 63.1
Weight OSEBX %
3.6554
Rel. Perf % (3/6/12 mts)
25/ 33/ 41
Abs. Perf. % (3/6/12 mts)
22/ 24/ 45
Curr
Prev
Chg
Chg
MNOK/tons
2015E
2015E
2016E
2016E
2015E
2016E
Revenues (incl Morpol)
29 262
27 578
30 586
28 114
6%
9%
EBITDA
6 170
5 738
6 799
6 252
8%
9%
OpEBIT (ex IFRS)
Prev
Curr
5 177
4 745
5 806
5 259
9%
EPS adj.
9.40
8.33
10.62
9.52
13 %
12 %
DPS
7.40
7.40
8.50
7.50
0%
13 %
Margin per kilo (HOG)
2015E
2015E
2016E
2016E
2015E
2016E
Farming Norw ay
11.82
11.70
12.60
12.52
1%
1%
Farming Faroe
14.30
13.55
14.72
12.62
6%
17 %
Farming Scotland
10.43
10.65
11.59
12.62
-2 %
-8 %
Farming Canada
12.78
10.37
13.80
10.38
23 %
33 %
Farming Chile/US
8.27
7.25
9.53
9.03
14 %
6%
22 %
Farming Ireland
Average farm ing m argin
7.28
6.69
11.61
9.50
9%
10.96
10.58
11.81
11.52
4%
10 %
3%
Feed margin, kg
0.38
0.38
0.39
0.39
0%
0%
MHG Pieters (pw /kg)
0.57
0.46
0.33
0.33
25 %
0%
Morpol VAP (pw /kg)
5.15
3.42
4.99
2.81
50 %
78 %
2015E
2015E
2016E
2016E
2015E
2016E
263 000 263 000 272 000 265 000
0%
3%
Farm ing volum es
Farming Norw ay
Farming Faroe
Share Price: NOK 106
Target: NOK 106 (96)
Strong outlook reflected in the share price – Attractive yield
Share data (NOK m)
Estim ate changes
NEUTRAL
2 000
2 000
8 000
8 000
0%
0%
Farming Scotland
63 000
63 000
63 000
61 000
0%
3%
Farming Canada
37 200
37 200
34 000
34 000
0%
0%
Farming Chile/US
74 000
70 000
75 480
71 400
6%
6%
Farming Ireland
10 200
10 200
12 000
12 000
0%
0%
Upstream volum es
449 400 445 400 464 480 451 400
1%
3%
Feed volumes
221 536 221 536 221 536 221 536
On December 24 MHG announced the completion of the acquisition of the
defunct Acuinova’s assets in Region XI in Chile for USD 125m (NOK 950m at
USDNOK of 7.6). The acquisition is very attractive, providing MHG with zone
control and increased farming capacity of 40’ t (at EV/kg capacity of NOK
24/kg) as well as processing capacity and a hatchery which the company has
been lacking in the region. 2015 harvesting should be around 15’ t.
We expect MHG to report 4Q14 op EBIT of NOK 945m, including a NOK 20m
contribution from the feed division. Morpol should report strong op EBIT in high
season; we estimate NOK 135m (10% margin), while VAP Europe remains
weak (break-even). We expect a quarterly DPS of NOK 1.10, on par with the
payment made in October.
The NIBD target of NOK 7.5b is being reviewed, and at 3Q the CFO indicated
room for higher gearing, and implicitly, more dividends ahead. With a
significantly weaker NOK, MHG’s debt capacity measured in NOK increases,
and a new NIBD target could, as we see it, implicitly be up to NOK 9b.
According to the CFO, the company aims to switch to reporting in EUR rather
than NOK, preferably within the next twelve months.
MHG continues delivering on the long-term strategy of positioning itself as an
integrated protein company, establishing feed production and taking an
industry leader position in developing consumer brands internationally. We
increase SOTP values of NOK 106 (96) per share, as a weaker NOK (stronger
EUR) drives estimates higher, implicitly corresponding to P/E 10x (10x) 2016.
While estimated dividend yield of 7-8% in the next years and the long-term
integrated protein story are attractive, we maintain our MHG Neutral
recommendation.
Key figures
2011
2012
2013
2014E
2015E
2016E
3Q13
4Q13
Total revenues
16 228
15 527
19 247
25 152
29 262
30 586
4 307
6 743
6 234
6 484
6 996
EBITDA
3 589
1 278
3 990
5 113
6 170
6 799
973
1 269
1 160
1 193
1 678
OpEBIT (ex IFRS)
2 720
644
3 209
4 168
5 177
5 806
792
1 035
912
945
1 430
2 531
765
3 340
4 155
4 955
5 604
824
1 029
943
835
1 411
40
83
87
20
20
20
266
170
-91
196
255
247
17
64
75
135
35
0%
0%
MHG Pieters (VAP)
61 467
61 467
60 667
60 667
0%
0%
EBIT farming
Morpol (VAP)
49 500
46 737
49 500
42 737
6%
16 %
OpEBIT Feed
EBIT Morpol
EBIT VAP Europe
108
6
-59
-56
35
20
-11
-37
-27
0
2
IFRS biomass adj.
-1 326
350
1 825
-962
0
0
-113
1 155
71
0
0
1 395
PTP
1 325
789
3 500
1 902
5 077
5 733
560
1 687
511
770
Reported EPS
0.264
0.112
5.959
2.989
9.402
10.617
0.102
2.990
0.537
1.426
2.584
EPS adj.
0.510
0.211
3.556
6.862
9.402
10.617
0.146
1.239
0.790
1.426
2.584
Chilean volumes
Bent Rølland
Fondsfinans AS
TEL: +47 23 11 30 27
[email protected]
Philip M. Scrase
Fondsfinans AS
TEL: +47 23 11 30 23
[email protected]
3Q14 4Q14E 1Q15E
26 824
40 222
28 281
66 902
74 000
75 480
5 886
14 136
16 736
16 000
18 750
Norw egian volumes
217 510
255 306
222 494
254 080
263 000
272 000
53 066
68 581
64 299
66 000
59 000
Upstream vol.
343 685
392 310
343 741
414 252
449 400
464 480
80 890
103 378
107 332
100 500
102 150
16 %
14 %
-12 %
21 %
8%
3%
-13 %
0%
33 %
-3 %
11 %
DPS
0.80
0.10
2.09
8.34
7.40
8.50
1.2
5.00
1.00
1.10
1.85
CFop
2 771
1 553
1 982
3 049
4 451
5 273
560
-51
875
-362
1 344
NIBD
6 484
5 399
7 797
8 660
9 025
8 512
7 882
7 797
7 232
8 660
8 535
2.1
1.8
1.7
Volumes Y/Y
EV/ Sales
EV/ EBITDA
10.2
8.5
7.7
EV/EBIT
12.5
10.1
9.0
P/E adj
15.4
11.3
10.0
P/B
3.0
2.6
2.3
NIBD/kg
22
21
19
FONDSFINANS AS, HAAKON VII’S GATE 2, P.O. BOX 1782 VIKA, NO-0122 OSLO, TEL: +47 23 11 30 00, FAX: +47 23 11 30 03, [email protected]
This report was prepared by an analyst engaged by Fondsfinans AS, the Norwegian affiliate of Fondsfinans Inc., who is not registered as a research analyst with FINRA or subject to FINRA rules governing research.
Marine Harvest estimates
The table below sums up the latest MHG volume guidance (ex. Acuinova) and
our estimates.
Marine Harvest ASA
2012
2013
2014E
2015E*
2016E
2014
2015
13/12 Y/Y
14/13 Y/Y
Vol
Vol
FF Vol
FF Vol
FF Vol
Curr guid
Guidance
Grow th
Grow th
HOG incl Morpol p.f.
Farming Norw ay
15/14 Y/Y 16/15 Y/Y
Grow th
Grow th
255 306
222 494
254 080
263 000
272 000
254 000
263 000
-13 %
14 %
4%
3%
6 893
5 665
9 218
2 000
8 000
9 000
2 000
-18 %
63 %
-78 %
300 %
Farming Faroes
Farming UK
40 261
48 390
49 482
63 000
63 000
49 500
63 000
20 %
2%
27 %
0%
Farming Canada
40 221
33 059
28 879
37 200
34 000
29 000
37 000
-18 %
-13 %
29 %
-9 %
Farming Chile
40 222
28 281
66 902
74 000
75 480
66 500
55 000
-30 %
137 %
11 %
2%
9 407
5 852
5 691
10 200
12 000
6 000
10 000
-38 %
-3 %
79 %
18 %
Farming Ireland
Total farm ing
392 310
343 741
414 252
449 400
464 480
414 000
430 000
-12 %
21 %
8%
3%
Europe farming
311 867
282 401
318 471
338 200
355 000
318 500
338 000
-9 %
13 %
6%
5%
80 443
61 340
95 781
111 200
109 480
95 500
92 000
-24 %
56 %
16 %
-2 %
Americas farming
Source: Fondsfinans Research, MHG *) 2015 FF volumes incl Acuinova (15 000 t HOG for 2015 - capacity: 40 000 t HOG)
MHG global harvesting
profile
Marine Harvest ASA
2Q 2013
3Q 2013
4Q 2013
1Q 2014
2Q 2014
3Q 2014
2QE 2015
3Q Y/Y
4Q Y/Y
1Q Y/Y
2Q Y/Y
HOG incl Morpol
Vol
Vol
Vol
Vol
Vol
Vol
Vol
Vol
Vol
p.f
p.f
p.f
p.f
Farming Norw ay
53 892
54 196
68 928
55 107
68 674
64 299
66 000
59 000
67 000
19 %
-4 %
7%
-2 %
Farming Faroes
Farming UK
Farming Canada
2 225
348
1 874
2 084
3 048
3 086
1 000
1 000
1 000
787 %
-47 %
-52 %
-67 %
16 729
17 277
15 116
10 468
18 274
13 740
7 000
14 000
22 000
-20 %
-54 %
34 %
20 %
8 932
6 169
5 726
6 368
6 459
7 052
9 000
8 200
9 000
14 %
57 %
29 %
39 %
0
5 886
14 136
17 741
16 425
16 736
16 000
15 000
16 000
184 %
13 %
-15 %
-3 %
1 407
1 644
1 345
476
1 296
2 419
1 500
1 200
3 000
47 %
12 %
152 % 131 %
85 520
107 125
92 244
114 176
107 332
100 500
98 400
118 000
Farming Chile/US
Farming Ireland
4QE 2014 1QE 2015
Total farm ing
83 185
26 %
-6 %
7%
Europe farming
74 253
73 465
87 263
68 135
91 292
83 544
75 500
75 200
93 000
14 %
-13 %
10 %
2%
8 932
12 055
19 862
24 109
22 884
23 788
25 000
23 200
25 000
97 %
26 %
-4 %
9%
Americas farming
3%
Source: Fondsfinans Research, MHG. Chile incl Aquinova
The table below sums up our annualised Marine Harvest estimates.
MHG growing by
around 8% in 2015E
including Acuinova
volumes.
The industry should
grow by around 3%
globally for 2015.
2016E MHG growth of
around 3%, compared
to industry growth of
around 4%
MHG - Volumes
2008
Norway
171 086
Faroe Islands
7 421
Scotland
32 341
Canada
36 050
Chile/US (sales volumes)
75 395
Ireland
4 329
Total farming (HOG t)
326 622
Farming growth YoY
MHG Pieters volume sales
54 957
MHG Pieters growth Y/Y
Morpol VAP volume sales (prod weight)
Morpol VAP growth Y/Y
MHG (EBIT NOK/kg)
2009
2010
2011
2012
2013
2014E
2015E
2016E
201 676
6 349
37 698
36 537
36 204
8 636
327 100
0%
58 159
6%
202 456
5 417
33 136
33 547
10 728
10 557
295 841
-10 %
62 986
8%
72 675
217 510
5 928
50 174
33 917
26 824
9 332
343 685
16 %
59 971
-5 %
61 852
-15 %
255 306
6 893
40 261
40 221
40 222
9 407
392 310
14 %
60 308
1%
68 267
10 %
222 494
5 665
48 390
33 059
28 281
5 852
343 741
-12 %
59 684
-1 %
86 463
27 %
254 080
9 218
49 482
28 879
66 902
5 691
414 252
21 %
59 677
0%
47 460
-45 %
263 000
2 000
63 000
37 200
74 000
10 200
449 400
8%
61 467
3%
49 500
4%
272 000
8 000
63 000
34 000
75 480
12 000
464 480
3%
60 667
-1 %
49 500
0%
2008
2009
2010
2011
2012
2013
2014E
2015E
2016E
Farming Norway
Farming Faroe
Farming Scotland
Farming Canada
Farming Chile/US
Farming Ireland
4.0
3.4
2.7
3.0
-7.8
7.2
5.4
4.8
7.3
6.3
-11.1
2.4
11.6
12.4
9.0
6.7
10.5
8.1
8.4
10.3
9.5
0.5
3.0
7.3
3.2
1.7
3.8
-3.6
-2.3
1.3
10.8
14.7
12.5
10.2
-2.2
-5.1
11.2
14.7
10.3
8.9
5.4
5.6
11.8
14.3
10.4
12.8
8.3
7.3
12.6
14.7
11.6
13.8
9.5
11.6
Farming EBIT/kg
1.0
3.8
10.4
7.2
1.9
9.5
9.7
11.0
11.8
Pieters EBIT (NOK/kg p.w.)
3.30
Morpol EBIT (NOK/kg p.w.) From 4Q13
4.81
2.58
1.24
1.81
4.31
0.10
2.49
-0.99
-1.05
-0.94
4.13
0.57
5.15
0.33
4.99
2008
678
25
87
107
-589
31
338
181
2009
1 090
30
274
232
-401
21
1 245
280
2010
2 346
67
299
225
113
86
3 135
162
90
2011
1 829
61
475
16
81
68
2 531
108
266
2012
825
12
153
-146
-91
12
765
6
170
27
-281
5
-567
-1
-81
9
71
10
-201
2013
2 410
83
603
337
-63
-30
3 340
-59
-91
0
6
13
2014E
2 857
136
511
258
361
32
4 155
-56
196
40
-51
-116
2015E
3 108
29
657
475
612
74
4 955
35
255
83
8
-160
2016E
3 428
118
730
469
720
139
5 604
20
247
87
8
-160
265
964
3 306
2 986
750
3 209
4 168
5 177
5 806
Marine Harvest ASA - EBIT
Norway
Faroe Islands
UK
Canada
Chile
Ireland
EBIT Total farming
EBIT Pieters (VAP Europe)
EBIT Morpol VAP
EBIT Feed
EBIT Othr species/S&P
HQ/overhead
MHG EBIT (ex. IFRS)
The table below sums up our quarterly Marine Harvest estimates.
Page 23
7 January 2015
Marine Harvest ASA - 4Q14 Preview
EBIT margin picking up
through 2015E
7 January 2015
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14E
1Q15E
2Q15E
47 302
1 218
9 568
12 232
8 259
1 456
80 035
-17 %
13 538
-4 %
19 389
53 545
2 225
13 329
8 932
0
1 407
79 438
-20 %
14 805
-1 %
17 902
53 066
348
13 777
6 169
5 886
1 644
80 890
-13 %
14 094
0%
21 434
42 %
68 581
1 874
11 716
5 726
14 136
1 345
103 378
0%
17 247
1%
27 738
17 %
55 107
2 084
10 468
6 368
17 741
476
92 244
15 %
14 049
4%
11 358
-41 %
68 674
3 048
18 274
6 459
16 425
1 296
114 176
44 %
15 210
3%
11 365
-37 %
64 299
3 086
13 740
7 052
16 736
2 419
107 332
33 %
14 418
2%
10 737
-50 %
66 000
1 000
7 000
9 000
16 000
1 500
100 500
-3 %
16 000
-7 %
14 000
-50 %
59 000
1 000
14 000
8 200
18 750
1 200
102 150
11 %
14 049
0%
12 000
6%
67 000
1 000
22 000
9 000
19 750
3 000
121 750
7%
15 000
-1 %
13 000
14 %
MHG (EBIT-margin (NOK/kg)
Norway
Faroe Islands
Scotland
Canada
Chile (sale volumes)
Ireland
MHG (EBIT/kg - NOK/kg)
Pieters EBIT (NOK/kg p.w.)
Morpol EBIT (NOK/kg p.w.)
1Q13
8.4
10.7
7.8
6.7
-5.9
12.4
6.7
-1.33
-4.11
2Q13
12.2
16.2
13.6
14.6
0.0
7.1
12.0
0.47
-5.15
3Q13
10.1
20.1
16.5
10.9
1.7
-13.4
10.2
-0.78
0.78
4Q13
12.0
14.4
10.2
10.1
2.5
-26.8
10.0
-2.15
2.31
1Q14
12.8
21.1
12.7
19.2
6.7
8.4
12.2
-1.78
-3.35
2Q14
11.9
11.8
12.1
11.0
5.5
10.0
10.9
-0.26
2.11
3Q14
9.7
13.6
10.0
4.7
6.0
2.5
8.8
-1.87
6.99
4Q14E
10.8
13.8
2.8
3.5
3.1
6.0
8.3
0.00
9.64
1Q15E
15.9
14.9
11.9
16.4
8.0
6.0
13.8
0.14
2.92
2Q15E
14.7
13.7
13.7
15.2
9.0
7.0
13.4
0.40
3.08
MHG - Segment EBIT
MHG (Harvesting/sales vol)
Norway
Faroe Islands
Scotland
Canada
Chile (sale volumes)
Ireland
Total farming
Farming growth Y/Y
MHG Pieters volume sales
MHG Pieters growth Y/Y
Morpol volume sales (p.w.)
Morpol VAP sales Y/Y
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14E
1Q15E
2Q15E
Farming Norway
Farming Faroe
Farming Scotland
Farming Canada
Farming Chile/US
Farming Ireland
Total farming EBIT
EBIT Pieters (VAP Europe)
EBIT Morpol VAP
EBIT Feed
EBIT Othr species/S&P
HQ/overhead
397
13
75
82
-49
18
536
-18
0
0
2
-40
653
36
181
130
-59
10
951
7
0
0
2
-58
535
7
227
67
10
-22
824
-11
0
0
1
-22
825
27
120
58
35
-36
1 029
-37
64
0
1
-23
706
44
133
122
119
4
1 128
-25
-38
0
-5
30
816
36
222
71
91
13
1 249
-4
24
0
4
-52
624
42
137
33
101
6
943
-27
75
20
-52
-47
711
14
19
32
50
9
835
0
135
20
2
-47
938
15
167
134
150
7
1 411
2
35
20
2
-40
985
14
301
137
178
21
1 636
6
40
20
2
-40
Group EBIT (bef IFRS and FX)
EBIT Y/Y
481
902
792
978 %
1 035
1537 %
1 090
127 %
1 221
35 %
912
15 %
945
-9 %
1 430
31 %
1 664
36 %
MHG SOTP VALUATION – Target NOK 106 (96) per share
We continue to value Marine Harvest on market outlook, cultivation conditions
and biological risks. We estimate individual target multiples to the different
farming countries based on 2015 upstream volumes and total MHG farming
capacity. Downstream we conclude EV/EBIT multiple of 10 (10). In total, we
maintain SOTP MHG values equal to NOK 106 (96) per share, equal to P/E 10
(2016).
Marine Harvest ASA (2015)
Some synergies in the
Acuinova transaction
Th. Cap.
EV/Cap
EBIT
Im pl EV/kg
EV/EBIT
EV (MNOK)
Norw ay (large smolt confirmed)
11.32
263 000
225
1 169
300 000
89
2 977
102
9.0
26 791
Faroe Islands
EBIT/kg
14.30
2015 HOG Licenses* HOG/sw lic
2 000
3
667
7 000
70
29
70
n.m.
10.43
63 000
38
1 658
60 000
88
657
83
8.0
5 259
Canada (increased biological risks)
12.78
37 200
37
1 005
49 000
78
475
102
8.0
3 802
2016 Chile (combined company)
9.53
75 480
202
374
145 000
45
720
86
9.0
6 476
Ireland (organic high end salmon)
7.28
10 200
10
1 020
11 000
61
74
n.m.
9.0
668
EV farm ing (ex. Sales & Dist.)
10.96
450 880
515
572 000
76
4 932
96
8.8
43 487
MHG MOWI/Fanad R&D genetics, incl new brands
18
Centre For Aquaculture Competence (R&D/fish feed) 100%
Total group EV (upstream )
SOTP MHG values of
106 (96) NOK/share,
high cycle upstream
values
450 880
50
517
4 932
98
100
8.9
44 112
61 467
35
10.0
350
Morpol VAP (Europe, US and Asia)
49 500
255
10.0
2 550
Morpol Edinburgh VAP plant (into 2015 production). Capex taken
Global S&D, Ducktrap, MOWI/Olav brands etc
0.50
300
263 000
EV dow nstream values
MHG feed factory, Bjugn
0.38
221 536
132
10.0
1 915
5 353
9.2
5 115
83
12.0
1 000
EV MHG Feed division
28.6
White halibut (incl standing biomass)
Finnøy Fisk AS (45%)
31.12.15 NIBD of 9.0bn
(8.1) – Increased
gearing
525
2
VAP Europe (Pieters)
SOTP NovaSea (48%)
VAP, S&D:
EV/EBIT 10 (10)
490
UK (West Coast)
1 000
400
3
8
n.m
300
11.32
42 930
37.3
486
9.0
1 811
11.32
2 800
Havfisk ASA (at market)
11.8%
84.6
12
16.0
192
Norw ay Seafoods AS (OTC, at market)
11.8 %
84.6
0.8
2
16.0
13
Remaining tax assets (fully used)
32
70
70
0
EV others/m inorities
2 386
Group EV values
52 613
31.12.15 NIBD
9 025
Asset values
43 587
Outst. shares
410m
2015 SOTP target value (per share)
106
Source: Fondsfinans Research, *) Licenses including fresh water and brood fish licenses
7 January 2015
Page 24
Risk assessment
BIOLOGICAL RISKS AND FISH HEALTH CONSIDERATIONS
The sensitivity of MHG estimates to key assumptions is very high. A change of
NOK 1 per kilo in salmon price should represent an annual EBIT and CF effect of
around NOK 445m for 2015E. MHG primarily sells fish in EUR and USD. MHG
has primarily EUR, CAD, GBP and USD bank debt. The bank debt (Nordea,
DNB, Rabo, ABN) should recently been refinanced in the quarter.
New fish diseases and sea lice issues may hit underlying earning and values in
fish farming. The large smolt strategy of MHG has reduced the sea water
exposure time, and for MHG it is among others important to fallow sites
according to plan in order to keep up the strong MAB-yield. Delayed harvesting
will also obviously increase sea lice exposure.
The Chilean fish health regime is now quite similar to the Norwegian fish health
system, and is expected to reduce ISA/HPR0 virus risks significantly. At 2Q MHG
reported on better and safer cultivation conditions in Chile. Harvesting weight is
up and mortality down. Feeding conditions are strong. CEO at 2Q: “We believe in
Chile”, whereas 3Q comments were more muted.
Delousing of standing biomass in Chile with “Salmosan” has obviously given
significant positive effects last year. In the long run, “Salmosan” is, however, not
a sustainable solution to the sea lice issues. Finally, less 2015 standing biomass
more regular fallowing of major sea waters should help long term conditions a lot.
Page 25
7 January 2015
Marine Harvest ASA (Acuinova 4Q14 consolidated)
Sector:
Aquaculture
Date:
Next result:
Target
07.01.2015
04.feb.15
106
Neutral
Recommendation:
Financial data (NOK mill)
Analysts: Bent Rølland
Philip M. Scrase
Price (NOK):
Book equity per share (NOK):
Equity ratio:
Avg daily vol (90d):
+23 11 30 27
+23 11 30 23
106.00
Shares outst.:
410.4m
35.4
44 %
2 468
Market cap (NOKm):
Net int.bearing debt (NOKm):
Entrprise value (NOKm):
43 500
8 660
52 160
12 months High / Low: 105.7 / 63.1
Weight OSEBX:
3.6554
2012
2013
2014E
2015E
2016E
4Q13
1Q14
2Q14
3Q14
4Q14E
1Q15E
2Q15E
15 527
-9 667
1 278
8%
19 247
-10 003
3 990
21 %
25 152
-13 136
5 113
20 %
29 262
-14 520
6 170
21 %
30 586
-14 533
6 799
22 %
6 743
-5 474
1 269
19 %
5 868
-4 552
1 316
22 %
6 565
-5 121
1 444
22 %
6 234
-5 074
1 160
19 %
6 484
-5 291
1 193
18 %
6 996
-5 318
1 678
24 %
7 934
-6 022
1 912
24 %
-677
-763
-947
-993
-993
-235
-226
-225
-248
-248
-248
-248
13
-18
2
0
0
0
0
2
0
0
0
0
EBIT ex IFRS
644
3 209
4 168
5 177
5 806
1 035
1 090
1 221
912
945
1 430
1 664
EBIT-margin (before IFRS)
4%
17 %
17 %
18 %
19 %
15 %
19 %
19 %
15 %
15 %
20 %
21 %
Net IFRS adj
350
1 825
-962
0
0
1 155
-208
-825
71
0
0
0
EBIT (operating profit)
995
5 034
3 206
5 177
5 806
2 189
882
396
983
945
1 430
1 664
EBIT-margin (after FVA biomass)
6%
26 %
13 %
18 %
19 %
32 %
15 %
6%
16 %
15 %
20 %
21 %
60
222
134
225
243
116
14
29
51
40
50
65
Write downs/net currency effects
343
-553
-128
0
0
-234
87
-213
-2
0
0
0
Net financial items
-608
-1 204
-1 309
-325
-316
-385
22
-596
-521
-215
-85
-82
789
1 647
Operating income
Costs of goods/other op. ex.
EBITDA
EBITDA-margin
Depreciation
Asset write-downs
Associates (NovaSea/Finnøy Fisk)
EBT (earnings before tax)
3 500
1 902
5 077
5 733
1 687
1 005
-385
511
770
1 395
Taxes on profits
-122
-658
-680
-1 218
-1 376
-457
-272
48
-272
-185
-335
Change in deferred taxes
-255
-380
0
0
0
0
0
0
0
0
0
0
Profit for the period, cont'd op
412
2 462
1 222
3 858
4 357
1 230
734
-336
239
585
1 060
1 251
Net profit in the period
412
2 462
1 238
3 858
4 357
1 230
763
-336
226
585
1 060
1 251
Minority share of profit
5
17
11
0
0
2
4
2
6
0
0
0
407
2 445
1 226
3 858
4 357
1 227
759
-338
220
585
1 060
1 251
-350
-1 825
962
0
0
-1 155
208
825
-71
0
0
0
75
18
409
0
0
0
0
429
-20
0
0
0
One off items
392
296
340
0
0
313
-56
-103
38
0
0
0
Tax effect on biomass
Net adjustment
Net result (adjusted)
240
357
764
526
-986
1 459
-122
1 590
2 816
0
0
3 858
0
0
4 357
-719
-719
508
228
228
987
1 258
1 258
920
104
104
324
0
0
585
0
0
1 060
0
0
1 251
Profit MHG shareholders
-395
Adjustments:
Biomass FV adjustment
Asset write downs
Out. Shares (year end)
EPS (NOK)
EPS (adj.)
OpCFPS
DPS
Multiples:
EV/ Sales
EV/ EBITDA
EV/EBIT
P/E adj
P/B
Farming volumes (HOG):
3 623
410
410
410
410
410
410
410
410
410
410
410
0.11
0.21
0.43
0.10
5.96
3.56
4.83
2.09
2.99
6.86
7.43
8.34
9.40
9.40
10.85
7.40
10.62
10.62
12.85
8.50
2.99
1.24
-0.12
1.85
2.40
2.95
-0.82
2.24
3.23
0.54
0.79
2.13
1.43
1.43
-0.88
2.58
2.58
3.27
3.05
3.05
2.48
2.1
10.2
12.5
15.4
3.0
1.8
8.5
10.1
11.3
2.6
1.7
7.7
9.0
10.0
2.3
222 494
5 665
48 390
33 059
28 281
5 852
343 741
254 080
9 218
49 482
28 879
66 902
5 691
414 252
263 000
2 000
63 000
37 200
74 000
10 200
449 400
272 000
8 000
63 000
34 000
75 480
12 000
464 480
68 581
1 874
11 716
5 726
14 136
1 345
103 378
55 107
2 084
10 468
6 368
17 741
476
92 244
68 674
3 048
18 274
6 459
16 425
1 296
114 176
64 299
3 086
13 740
7 052
16 736
2 419
107 332
66 000
1 000
7 000
9 000
16 000
1 500
100 500
59 000
1 000
14 000
8 200
18 750
1 200
102 150
67 000
1 000
22 000
9 000
19 750
3 000
121 750
12 894
4 343
1 357
16 226
4 767
4 409
19 688
4 897
4 640
21 047
4 833
4 666
4 165
1 359
1 357
3 876
1 135
1 034
4 442
1 226
1 040
4 018
1 142
1 014
3 890
1 264
1 322
4 730
1 124
1 134
5 494
1 209
1 222
59 684
86 463
59 677
47 460
61 467
49 500
60 667
49 500
17 247
27 738
14 049
11 358
15 210
11 365
14 418
10 737
16 000
14 000
14 049
12 000
15 000
13 000
6
170
0.10
2.49
-59
-91
-0.99
-1.05
-56
196
-0.94
4.13
35
255
0.57
5.15
20
247
0.33
4.99
-37
64
-2.15
2.31
-25
-38
-1.78
-3.35
-4
24
-0.26
2.11
-27
75
-1.87
6.99
0
135
0.00
9.64
2
35
0.14
2.92
6
40
0.40
3.08
3.2
1.7
3.8
-3.6
-2.3
1.3
1.9
4.52
10.8
14.7
12.5
10.2
-2.2
-5.1
9.5
5.05
11.2
14.7
10.3
8.9
5.4
5.6
9.7
8.87
11.8
14.3
10.4
12.8
8.3
7.3
11.0
10.75
12.6
14.7
11.6
13.8
9.5
11.6
11.8
11.73
12.0
14.4
10.2
10.1
2.5
-26.8
10.0
-0.49
12.8
21.1
12.7
19.2
6.7
8.4
12.2
13.13
11.9
11.8
12.1
11.0
5.5
10.0
10.9
11.60
9.7
13.6
10.0
4.7
6.0
2.5
8.8
8.15
10.8
13.8
2.8
3.5
3.1
6.0
8.3
-3.60
15.9
14.9
11.9
16.4
8.0
6.0
13.8
13.15
14.7
13.7
13.7
15.2
9.0
7.0
13.4
8.35
1 029
1 128
1 249
943
835
1 411
Norway
255 306
Faroe Islands
6 893
UK
40 261
Canada
40 221
Chile
40 222
Ireland
9 407
Total HOG volumes
392 310
Segment revenues:
Revenues farming
13 003
Revenues Pieters
3 995
Revenues Morpol VAP
0
Downstream volumes and margins
MHG Pieters (prod weight)
60 308
Morpol sales (prod weight)
68 267
EBIT Pieters
EBIT Morpol VAP
EBIT Pieters/kg (NOK/prod weight)
EBIT Morpol/kg (NOK/prod weight)
EBIT-margin/kg HOG, Farming EBIT
Farming Norway
Farming Faroe
Farming Scotland
Farming Canada
Farming Chile/US
Farming Ireland
Total EBIT/kg
Cash flow per kilo HOG fish
Farming EBIT (NOK m)
765
3 340
4 155
4 955
5 604
Balance Sheet (IFRS) MNOK
Total fixed assets
Total current assets
Total assets
Total equity
2012
13 580
9 687
23 267
11 689
2013
16 469
16 086
33 601
16 372
2014E
17 119
15 879
33 038
14 512
2015E
17 806
15 930
33 776
16 552
2016E
18 011
16 506
34 558
18 797
Largest shareholders
Geveran Trading Co L
Folketrygdfondet
Clearstream Banking
City Bank
Number of shares
105 267 531
40 249 965
15 007 283
12 444 783
15.des.14
25.7%
9.8%
3.7%
3.0%
Total debt
Total equity and liabilities
Equity ratio
NIBD
Dividends
Return on equity
11 596
23 285
50 %
5 399
362
4%
17 041
33 601
49 %
7 797
857
17 %
18 525
33 037
44 %
8 660
3 421
8%
17 223
33 776
49 %
9 025
3 037
25 %
15 761
34 558
54 %
8 512
3 488
25 %
1 553
1 483
70
-32
318
1 982
2 473
-490
587
561
3 049
482
2 567
-2 933
280
4 451
1 455
2 996
-3 445
-169
5 273
955
4 318
-3 891
-782
State Street Bank
Geveran Trading Co L
State Street Bank
DNB NOR, egenhandel
Euroclear Bank
DNB Norge (IV)
Statoil Pensjon
Northern Trust
Top 12
Others
Total
10 771 780
5 444 072
5 079 154
4 958 712
4 398 682
4 204 798
3 978 944
3 681 266
215 486 970
194 890 789
410 377 759
2.6%
1.3%
1.2%
1.2%
1.1%
1.0%
1.0%
0.9%
52.5%
47.5%
100 %
Cash flow from operations
Net investments
Free cash flow
Cash flow from financing (incl div)
Cash end period
1 636
Lerøy Seafood Group ASA
Neutral
4Q14 Preview
7 January 2015
Results date
24 February 2014
Share data (NOK m)
06.jan.15
Sector
Aquaculture
Reuters/ Bloomberg
LSG
Risk rating
Medium
Out shares (1.000)
54 577
Market cap
14 954
NIBD
2 180
EV
17 135
Free float %
30 %
40
High/ low 52w
261.0 / 166.0
Weight OSEBX
0.5200
19/ 25/ 32
16/ 25/ 42
Estim ate changes
Curr
Prev
Curr
Prev
Curr
Pre
%
%
%
2014E
2014E
2015E
2015E
2016E
2016E
2014E
2015E
2016E
EBIT (before IFRS adj)
1 742
1 616
2 135
1 770
2 363
2 102
8%
21 %
12 %
EPS
10.50
9.08
26.44
21.92
29.54
25.80
16 %
21 %
14 %
6%
21 %
14 %
Tons/MNOK
EPS adj.
24.53
23.11
26.44
21.92
29.54
25.80
LSG Midt
69 127
69 127
65 000
65 000
65 650
64 000
0%
0%
LSG Aurora (North )
26 737
26 737
31 000
31 000
33 000
33 000
0%
0%
62 406
65 000
65 000
65 650
64 000
0%
0%
3%
158 270 161 000 161 000 164 300 161 000
0%
0%
2%
14 000
0%
0%
0%
-11 %
LSG Sjøtroll (West)
Norw egian volumes (t)
62 406
158 270
UK volumes (t)
13 504
EBIT VAP
99
13 504
109
0%
-11 %
222
234
234
233
233
0%
0%
Curr
Curr
Curr
Curr
Curr
%
%
%
LSG Midt
673
661
839
740
945
815
2%
14 %
16 %
LSG Aurora (North )
307
263
432
277
488
341
16 %
56 %
43 %
107
14 000
222
EBIT Farm ing (MNOK)
95
15 000
Curr
EBIT S&D
99
15 000
97
3%
0%
0%
400
330
575
453
643
648
21 %
27 %
-1 %
Farming EBIT, Norw ay
1 379
1 254
1 846
1 470
2 077
1 805
10 %
26 %
15 %
EBIT/kg NOK
Curr
Curr
Curr
Curr
Curr
Curr
%
%
LSG Midt
%
9.7
9.6
12.9
11.4
14.4
12.7
2%
14 %
13 %
LSG Aurora (North )
11.5
9.9
13.9
8.9
14.8
10.3
16 %
56 %
43 %
6.4
5.3
8.9
7.0
9.8
10.1
21 %
27 %
-3 %
Farming EBIT/kg, Norw ay
8.7
7.9
11.5
9.1
12.6
11.2
10 %
26 %
13 %
Share Price: NOK 274 (07.01.2015)
Target: NOK 290
Attractive yield – Fair SOTP price – AUSS WC
climbing significantly from 2Q
LSG is primarily exposed to the Nordic and European market. With extensive
downstream operations acting as a stabilizer, LSG is less exposed towards
volatile HOG salmon prices than other more upstream-focused players. LSG’s
Nordic and European downstream entities continue to perform well. The
company has strong consumer brands in core markets. A new distribution sea
food plant in Oslo opened last summer, while expansion at Fossen was
completed in 3Q14. In Norway, the seafood delivery agreement with retailer
NorgesGruppen provides an attractive position.
LSG points at “significant steps taken to lower cost in 2015” (cleanerfish is a
key), though management comments that the uncertainty in Sjøtroll remains
higher than in the other regions. The involved companies are working on new
larger coordinated farming zones in region West that we anticipate will help
conditions longer term. Management also sees “strong potential in VAP and
S&D segments” in 2015 and onwards. For 4Q, we expect LSG to report EBIT
of NOK 388m based on Norwegian harvesting of 42,500 t HOG, a volume
growth of 3% Y/Y. We estimate EBIT/kg (“all inclusive”) of NOK 9.1 (high cost
for the quarter). For 4Q, downstream segments VAP and Sales & Distribution
should report decent earnings due to lower raw material prices and 4Q is high
VAP season, with EBIT estimates of NOK 35m and 63m respectively.
We estimate 2015 and 2016 EPS adj. of NOK 26.4 (21.9) and NOK 29.5
(25.8). Our SOTP target of NOK 290 (251) per share corresponds to
EV/capacity of NOK 79 and EV/kg (2015) of 93 and P/E of somewhat below
10x 2016E. The dividend capacity is high even though the company has
remaining extra smolt capex ahead, and we increase DPS to NOK 20 (18) for
payment in 2015E and 2016E.
Key figures (NOK m )
2012
2013
2014E
2015E
2016E
4Q13
1Q14
4Q14E
1Q15E
Revenues
9 103
10 818
12 673
13 071
13 629
3 230
3 180
3 354
3 201
EBITDA
812
1 938
2 035
2 515
2 743
506
638
483
706
EBIT (before IFRS adj)
487
1 626
1 742
2 135
2 363
425
550
388
611
IFRS biomass adj.
295
764
-906
0
0
783
-478
0
0
25
192
68
78
82
108
38
6
27
PTP
712
2 480
807
2 111
2 359
1 297
95
365
611
EPS
9.7
35.7
10.5
26.4
29.5
18.4
1.6
4.7
7.6
EPS (adj)
6.0
23.3
24.5
26.4
29.5
6.3
9.7
4.7
7.6
DPS
7.0
7.0
10.0
20.0
20.0
2 232
2 165
2 215
2 458
2 432
2 165
1 750
2 215
1 917
153 599 144 817 158 270 165 000 169 720
41 200
33 327
42 500
38 000
Associates (UK farming)
NIBD
Norw egian farm ing
Bent Rølland
Fondsfinans AS
TEL: +47 23 11 30 27
[email protected]
Philip M. Scrase
Fondsfinans AS
TEL: +47 23 11 30 23
[email protected]
Farming grow th
12 %
-6 %
9%
4%
3%
-1 %
0%
3%
14 %
Upstream EBIT (NOK/kg)
1.6
9.2
8.7
11.2
12.2
8.1
15.2
7.1
14.9
EBIT/kg (all inclusive)
3.2
11.2
11.0
12.9
13.9
10.3
16.5
9.1
16.1
1.3
1.4
1.3
1.3
6.3
EV/ Sales
EV/ EBITDA
7.3
8.4
6.9
EV/EBIT, before adj
8.7
9.9
8.2
7.4
P/E adj.
9.5
11.2
10.4
9.3
1.6
2.0
1.9
1.7
15
14
15
14
P/B
NIBD/kg
15
FONDSFINANS ASA, HAAKON VII’S GATE 2, P.O. BOX 1782 VIKA, NO-0122 OSLO, TEL: +47 23 11 30 00, FAX: +47 23 11 30 03, [email protected]
Lerøy Seafood Group ASA – 4Q14 Preview
7 January 2015
Lerøy Seafood Group and segment tables
Integrated company
LSG is a fully integrated Norwegian salmon and trout farmer with extensive
operations in three clusters along the Norwegian coast, a global distribution
network and a growing value added downstream operation with Nordic and
European VAP/Sales & Distribution exposure. The company will not any longer
be able to sell trout to the Russian market.
4Q estimates below – FF below BB (high cost in Hordaland)
Key figures (NOKm )
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14E
4Q14E
4Q BB
Revenues
2 690
3 230
3 180
3 177
2 962
3 354
3 138
3 505
EBITDA
451
506
638
590
323
483
357
557
EBIT (before IFRS adj)*
370
425
550
501
303
388
262
467
0
0
P&L gain (Villa Organic)
75
Op. EBIT (ex. Villa biom ass gain)
IFRS biomass adj.
228
-319
783
-478
-207
-222
467
Associates (UK farming)
34
108
38
13
12
6
7
PTP
55
1 297
95
284
64
365
241
531
-11
-10
-1
-23
-28
-12
5.72
Minority
EPS
EPS (adj)
5.91
18.41
1.60
3.39
0.77
6.26
9.74
6.17
3.88
4.7
3.3
10
11
12
12.0
DPS
OpCF
NIBD
Segm ents (t)
LSG Midt
264
154
593
397
-67
193
154
2 202
2 165
1 750
2 052
2 209
2 180
2 254
1 745
VOL
VOL
VOL
VOL
VOL
VOL
VOL
4Q guid
18 873
16 100
18 800
13 837
18 606
17 684
19 000
19 000
LSG Aurora
4 500
7 400
5 100
5 006
6 131
10 500
10 500
10 763
LSG Sjøtroll
16 100
15 000
14 390
17 332
17 684
13 000
13 000
13 594
43 230
Norw egian upstream (t)
Segm ents (EBIT)
LSG Midt
36 700
41 200
33 327
40 944
41 499
42 500
42 500
3QEBIT
4Q EBIT
1Q EBIT
2Q EBIT
3Q EBIT
4Q EBIT
4Q EBIT
148
109
154
228
184
101
160
LSG Aurora
66
116
98
77
48
83
40
LSG Sjøtroll
134
63
179
159
5
57
-13
EBIT Farm ing
174
310
333
505
420
154
300
EBIT S&D
52
70
39
64
56
63
63
EBIT VAP
16
27
15
21
28
35
35
370
425
550
501
303
388
262
-8
-5
-9
-4
65
-10
-10
EBIT/kg
EBIT/kg
EBIT/kg
EBIT/kg
EBIT/kg
EBIT/kg
EBIT/kg
6.8
8.2
16.5
9.9
5.7
8.4
7.8
LSG Aurora
14.7
15.7
19.3
15.5
7.8
7.9
3.8
LSG Sjøtroll
8.3
4.2
12.4
9.2
0.3
4.4
-1.0
10.1
10.3
16.5
12.2
7.3
9.1
6.2
7.2
3.7
17.8
9.7
-1.6
4.5
3.6
Group EBIT
EBIT elimination/HQ
Segm ents (EBIT/kg):
LSG Midt
EBIT/kg ("all inclusive")
OpCF/kg fish
EBIT/kg
10.8
Updated LSG estimates per segment
Page 28
7 January 2015
Lerøy Seafood Group ASA - 4Q14 Preview
7 January 2015
LSG farming volumes (t g.w.)
LSG Midt
LSG Aurora (North)
West and Sjøtroll
combined to LSG Vest.
Aurora will include Villa
from 2H14
Downstream:
Separate VAP and S&D
segments
We have postponed 4q
harvesting to 1Q due to
6% increase in MAB:
Estimating the LSG
volume profile as
following:
4Q vol -3% YY
1Q15 vol +14% YY
2Q15 vol -7% YY
2010
59 300
20 200
2011
62 400
18 100
2012
61 800
19 900
2013
58 800
24 217
2014E
69 127
26 737
2015E
69 000
31 000
2016E
71 070
33 000
37 300
116 800
7%
13 550
56 600
137 100
17 %
10 950
71 899
153 599
12 %
13 550
61 800
144 817
-6 %
13 400
62 406
158 270
9%
13 504
65 000
165 000
4%
15 000
65 650
169 720
3%
14 000
EBIT-margin (NOK/HOG)
LSG Midt
LSG Aurora (North)
LSG Sjøtroll (Vest)
EBIT-margin (HOG/NOK)
Scottish Sea Farms (50%)
2010
13.3
13.1
8.1
11.6
10.3
2011
8.3
8.6
5.7
7.1
5.3
2012
2.4
4.2
0.4
1.6
2.0
2013
8.6
14.8
7.4
9.2
8.2
2014E
9.7
11.5
6.4
8.7
8.5
2015E
12.2
13.9
8.9
11.2
8.5
2016E
13.3
14.8
9.8
12.2
9.5
Farming EBIT
LSG Midt
LSG Aurora (North)
Farming EBIT, Norway
EBIT S&D (+VAP until 2011)
EBIT VAP
EBIT VAP& S&D
LSG EBIT, all segments
EBIT-eliminations
Lerøy Group EBIT (bef adj)
Source: LSG, Fondsfinans Research
2010
470
265
278
1 012
255
4
2011
361
155
198
715
236
4
2012
167
83
16
267
190
34
2013
326
359
201
885
207
66
2014E
673
307
400
1 379
222
99
2015E
839
432
575
1 846
234
95
2016E
945
488
643
2 077
233
97
259
240
224
273
321
329
330
1 271
-31
1 586
955
-5
1 213
490
24
487
1 158
-28
1 626
1 700
41
1 742
2 175
-40
2 135
2 407
-40
2 363
Total Norwegian HOG volumes
Norwegian farming growth Y/Y
Farming volumes (HOG)
LSG Midt
LSG Aurora
2Q13
10 800
6 317
3Q13
16 100
4 500
4Q13
18 800
7 400
1Q14
13 837
5 100
2Q14
3Q14 4Q14E 1Q15E
18 606 17 684 19 000 15 500
5 006
6 131 10 500
8 000
2Q15E
14 500
6 500
LSG Norway (t)
Supply growth Q/Q
16 600
33 717
-12 %
2 550
16 100
36 700
-2 %
4 250
15 000
41 200
-1 %
3 350
14 390
33 327
0%
3 631
17 332 17 684 13 000 14 500
40 944 41 499 42 500 38 000
21 %
13 %
3%
14 %
3 319
4 054
2 500
3 500
16 500
37 500
-8 %
3 500
LSG Midt
LSG Aurora
EBIT-margin (HOG/NOK)
2Q13
10.5
15.2
11.5
11.9
7.8
3Q13
6.8
14.7
8.3
8.4
9.5
4Q13
8.2
15.7
4.2
8.1
9.1
1Q14
16.5
19.3
12.4
15.2
12.0
2Q14
9.9
15.5
9.2
10.3
10.2
3Q14
5.7
7.8
0.3
3.7
5.9
20
41
31
44
34
24
2Q13
113
96
191
400
56
14
-8
462
3Q13
109
66
134
310
52
16
-8
370
4Q13
154
116
63
333
70
27
-5
425
1Q14
228
98
179
505
39
15
-9
550
2Q14
184
77
159
420
64
21
-4
501
3Q14
101
48
5
154
56
28
65
303
EBIT Scottish Sea Farms (50%)
Farming EBIT (LSG)
LSG Midt
LSG Aurora
Farming EBIT, Norway
EBIT S&D (+VAP until 2011)
EBIT VAP/Others
Elim. to EBIT/HQ/gains
EBIT all segments (bef adj)
Source: LSG, Fondsfinans Research
4Q14E 1Q15E
8.4
15.9
7.9
17.4
4.4
12.4
7.1
14.9
5.4
12.1
14
2Q15E
14.7
16.2
11.2
13.4
10.8
42
38
4Q14E 1Q15E
160
246
83
139
57
180
300
565
63
42
35
14
-10
-10
388
611
2Q15E
213
105
185
503
67
20
-10
580
LSG SOTP valuation – NOK 290 – EV/kg of 93 and EV/capacity of 79
We value LSG based on assessments of risks and productivity in the different
geographic regions, as each is valued separately. 5 upstream segments are now
turning into 3 new segments. Downstream S&D and VAP are separate segments
(EV/EBIT of 8x and 10x). Trading LSG desk in Bergen earning money despite
FX volatility.
We conclude SOTP values of NOK 290 per share. We maintain our Neutral
recommendation.
7 January 2015
Page 29
Lerøy Seafood Group ASA – 4Q14 Preview
Villa included in Aurora
Higher cultivation risk
and cost in Sjøtroll than
in other farming regions
Hardanger = Sea lice
area
Licenses
Volumes
LSG Midt (Hydrotech+Midnor)
55
69 000
LSG Aurora/Villa
26
31 000
LSG Sjøtroll (trout exposure)
60
65 000
EV LSG farming Norway
141
165 000
41
15 000
31.12.2015 NIBD SSF (50%)
LSG VAP
LSG S&D
Total EV
NIBD 31.12.15E (incl. Sjøtroll 100%)
Sjøtroll adj (20.7% of New Sjøtroll)
12.25
0.207
Sjøtroll & Rohde NIBD adj.
Equity values
Own shares
Outst. Shares
SOTP values - target
Source: Fondsfinans Research, *) Theoretical capacity
Capacity*
77 000
35 100
78 000
190 100
14 000
EBIT/kg
12.2
13.9
8.85
8.5
-0.5
1.416
EBIT2015
839
432
575
1 846
256
3
95
234
2 175
Values
6 715
3 452
5 179
15 346
1 023
-2
950
1 869
19 187
2 423
1072
150
15 842
90
54.6
290
7 January 2015
EV/EBIT mpl EV/kg
8.0
97
8.0
111
9.0
80
8.3
93
8
68
EV/cap
87
98
66
81
73
10
8
8.8
SOTP=290
Page 30
7 January 2015
Sector:
Date:
Next result:
Target
Recommendation:
Financial data (NOK mill)
+47 23113027
Philip M. Scrase +47 23113023
Aquaculture
274
Price (NOK):
06.jan.15
141
24.feb.15
Equity ratio:
55 %
290
40
Neutral
12 months High / Low:61.0 / 166.0
Shares outst.:
Market cap (NOKm):
OSEBX:
54.58m
14 954
2 180
17 135
0.5200
2012
2013
2014E
2015E
2016E
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14E
1Q15E
9 103
-6 442
812
9%
10 818
-6 781
1 938
18 %
12 673
-8 199
2 035
16 %
13 071
-8 117
2 515
19 %
13 629
-8 448
2 743
20 %
2 690
-1 693
451
17 %
3 230
-2 090
506
16 %
3 180
-1 974
638
20 %
3 177
-2 002
590
19 %
2 962
-1 985
323
11 %
3 354
-2 238
483
14 %
3 201
-1 927
706
22 %
-292
-33
487
5%
295
782
-307
-6
1 626
15 %
764
2 390
-368
75
1 742
14 %
-906
835
-380
0
2 135
16 %
0
2 135
-380
0
2 363
17 %
0
2 363
-81
0
370
14 %
-319
51
-76
-6
425
13 %
783
1 208
-89
0
550
17 %
-478
72
-89
0
501
16 %
-207
294
-95
75
303
10 %
-222
81
-95
0
388
12 %
0
388
-95
0
611
19 %
0
611
25
192
68
78
82
34
108
38
13
12
6
27
0
-95
712
-184
528
-1
527
0
-102
2 480
-435
2 045
-99
1 947
0
-96
807
-171
637
-64
573
0
-102
2 111
-549
1 562
-119
1 443
0
-86
2 359
-613
1 745
-133
1 612
0
-29
55
-6
49
-11
38
0
-19
1 297
-282
1 015
-10
1 005
0
-15
95
-7
88
-1
87
0
-23
284
-75
208
-23
185
0
-29
64
6
70
-28
42
0
-28
365
-95
270
-12
259
0
-27
611
-159
452
-37
415
-295
80
-764
190
906
-66
0
0
0
0
319
-35
-783
170
478
-33
207
-55
222
22
0
0
0
0
Net adjustment
-199
-677
328
1 269
EPS
9.7
35.7
Outstandig shares (mill)
54.6
54.6
EPS (adj)
6.0
23.3
Impl. CF per kilo fish
2.9
8.7
DPS
7.0
7.0
Multiples:
EV/ Sales
EV/ EBITDA
EV/EBIT, before adj
P/E adj.
P/B
Farming in Norway (HOG t) -new segment structure
LSG Midt (Midnor+Hydrotech)
61 800
58 800
LSG Aurora
19 900
24 217
LSG Sjøtroll (West and Sjøtroll)
71 899
61 800
Norwegian farming (upstream
153 599
144 817
Volumes Y/Y
12 %
-6 %
Farming income
4 377
5 716
EBIT farming
239
1 327
Price/volum
28.5
39.5
EBIT/kg
1.6
9.2
765
1 339
10.5
54.6
24.5
7.1
10.0
0
1 443
26.4
54.6
26.4
6.2
20.0
0
1 612
29.5
54.6
29.5
6.3
20.0
284
323
0.7
54.6
5.9
7.2
-663
342
18.4
54.6
6.3
3.7
444
532
1.6
54.6
9.7
17.8
152
337
3.4
54.6
6.2
9.7
169
212
0.8
54.6
3.9
-1.6
0
259
4.7
54.6
4.7
4.5
0
415
7.6
54.6
7.6
13.1
1.4
8.4
9.8
11.2
2.0
1.3
6.9
8.1
10.4
1.9
1.3
6.3
7.3
9.3
1.7
69 127
26 737
62 406
158 270
9%
6 567
1 379
41.5
8.7
69 000
31 000
65 000
165 000
4%
7 342
1 846
44.5
11.2
71 070
33 000
65 650
169 720
3%
7 727
2 077
45.5
12.2
16 100
4 500
16 100
36 700
-2 %
1 405
310
38.3
8.4
18 800
7 400
15 000
41 200
-1 %
1 703
333
41.3
8.1
13 837
5 100
14 390
33 327
0%
1 492
505
44.8
15.2
18 606
5 006
17 332
40 944
21 %
1 740
420
42.5
10.3
17 684
6 131
17 684
41 499
13 %
1 575
154
38.0
3.7
19 000
10 500
13 000
42 500
3%
1 760
300
41.4
7.1
15 500
8 000
14 500
38 000
14 %
1 829
565
48.1
14.9
3 086
Operating income
Costs of goods
EBITDA
EBITDA-margin
Depreciation
Write down of fixed assets
EBIT (ex IFRS)
EBIT-margin
IFRS fair value adj
EBIT (operating profit)
Associates (Norskott)
Write down financial assets
Net financials (incl agio/disagio)
EBT (earnings before tax)
Tax cost
Profit for the period
Minority share of profit
Profit to LSG shareholders
Adjustments:
Biomass FV adjustment
skattejustering av biomasse
Lerøy Sales & Distribution
S&D income
EBIT S&D
9 459
10 261
12 005
12 085
12 165
2 570
3 101
3 066
2 998
2 820
3 121
190
207
222
234
233
52
70
39
64
56
63
42
S&D -margin,%
Lerøy VAP/Other production
VAP income
EBIT VAP
VAP-margin,%
EBIT adj, HQ/overhead
UK farming (SSF-100% - tons)
Farming revenues
Price/volum
EBIT bef adj.
2.0 %
2.0 %
1.8 %
1.9 %
1.9 %
2.0 %
2.2 %
1.3 %
2.1 %
2.0 %
2.0 %
1.4 %
1 078
34
5%
24
27 100
937
34.6
55
1 236
66
5%
-28
26 800
1 189
44.4
221
1 622
99
6%
41
27 007
1 303
48.2
230
1 662
95
6%
-40
30 000
1 336
44.5
256
2 207
97
4%
-40
28 000
1 275
45.5
267
305
16
5%
-8
8 500
373
43.9
81
382
27
7%
-5
6 700
316
47.2
61
367
15
4%
-9
7 261
391
53.8
87
395
21
5%
-4
6 638
332
50.0
68
410
28
7%
65
8 108
373
46.0
48
450
35
7%
-10
5 000
207
41.4
27
377
14
7%
-10
7 000
337
48.1
85
Balance Sheet (IFRS)
Total non-current assets
Total assets
Total equity
Equity ratio (cov=30%)
Retur on equity
NIBD
2.0
2012
6 445
5 328
11 773
5 964
11 774
51 %
15 %
2 232
8.2
2013
7 143
6 762
13 905
7 549
13 904
54 %
35 %
2 165
8.5
2014E
7 389
6 434
13 822
7 553
13 824
55 %
15 %
2 180
8.5
2015E
7 887
6 026
13 913
8 023
13 914
58 %
33 %
2 423
9.5
2016E
8 269
5 918
14 186
8 677
14 188
61 %
32 %
2 397
9.5
9.1
12.0
10.2
Shares
Austevoll Seafood ASA
34 144 281
Folketrygdfondet
2 329 000
Pareto Aksje Norge ASA
1 795 500
Pareto Aktiv
749 233
State Street
647 000
Danske Invest
418 000
Pareto Verdi
379 000
Lerøy Seafood Group
329 776
5.9
5.4
12.1
10.nov.14
62.6%
4.3%
3.3%
1.4%
1.2%
0.8%
0.7%
0.6%
444
-599
-361
0
1 259
-698
-784
0
1 116
-436
-434
0
1 022
-800
-1 472
0
1 071
-680
-1 472
0
DNB Norge Selektiv
Forsvarets Personell
OTHER SHAREHOLDERS
TOTAL SHAREHOLDERS
Cash flow from investments
Cash flow from financing
New equity
307 000
289 000
13 189 578
54 577 368
0.6%
0.5%
24.2%
100.0%
SalMar ASA
4Q preview
Results date
Neutral
7 January 2015
26 February 2015
Share data (NOK m)
SALM
Sector
Aquaculture
Reuters/ Bloomberg
SALM
Risk rating
Medium
Outst shares (mill)
113.3
Market cap
14 729
NIBD
2 496
EV
17 225
Free float %
<55
Average volume
22 194
High/ low 52w
123.5 / 69.3
Weight OSEBX
0.7325
03/ 43/ 59
00/ 43/ 68
2015E
Estim ate changes
2016E
Tons/MNOK
Curr
Prev
Curr
Prev
2015E
Revenues
7 621
6 992
7 750
7 124
9%
9%
EBITDA
2 312
1 997
2 522
2 215
16 %
14 %
EBIT
2 056
1 742
2 266
1 960
18 %
16 %
Assosiates (UK/Villa)
80
80
86
2016E
86
0%
0%
PTP
2 003
1 688
2 234
1 927
19 %
16 %
EPS adj.
13.08
11.03
14.59
12.59
19 %
16 %
14.5
12.7
15.3
13.8
14 %
11 %
14.2
30 %
28 %
Margin, NOK/kilo (g.w .)
Central Norw ay
Northern Norw ay
17.2
Salmar Rauma
13.2
18.3
12.0
11.7
13.6
12.9
3%
5%
15.12
12.81
16.07
13.90
18 %
16 %
Central Norw ay
76 000
76 000
77 000
77 000
0%
0%
Northern Norw ay
44 000
44 000
48 000
48 000
0%
0%
Salmar Rauma
16 000
16 000
16 000
16 000
0%
0%
136 000 136 000 141 000
141 000
0%
0%
All incl m argin Norw ay
Farm ing volum e
Volum e, Norw ay
Segm ent and Group EBIT
EBIT Central N. (upstream)
1101
961
1178
1065
14 %
11 %
EBIT Northern N.
758
582
878
684
30 %
28 %
EBIT Salmar Rauma
192
186
217
206
3%
5%
2050
1730
2273
1954
19 %
16 %
124 000 124 000 125 000
125 000
0%
0%
EBIT SALM (upstream )
Innovamar VAP (HOG t)
Share Price: NOK 130 (07.01.2015)
Target: NOK 122 (108)
High speed = high risk
Last spring SalMar acquired eight green licenses in the governmental auction.
According to the CEO, Mr. Nordhammer, these are “included in the group MAB
and will enter production immediately. Mr Nordhammer has previously stated
that the majority of this effect will come already in 2H2015. The new licenses
will be used in both Region Mid and North. Further, SALM is currently
constructing a 20m cap smolt plant at Senja securing more local large smolt
capacity. This is a key step in developing Region North for the long run, which
has a strong track record over some time.
We expect SALM to report 4Q14 EBIT of NOK 388m based on 31,000 t HOG,
which is 4 000 t below the guidance. During 4Q biomass has been deloused
for sea lice and AGD. Hence, cost will be high in the quarter. Prices have also
climbed towards Christmas. Cultivation risks in Møre and Romsdal
(SalmarRauma) are particular, due to it being a core AGD area, high. At 3Q
SALM guided down on EBIT VAP for 4Q. We estimate 4Q EBIT VAP of NOK
24m. In Region North, Villa is now split between SALM and LSG, with 3Q
payments of NOK 104m from SALM to LSG. 4Q Villa harvesting will be very
limited.
Bottom line, we estimate 2014 and 2015 EPS adj. of NOK 13.1 and 14.6. We
forecast decent dividends of NOK 7 and 10 per share in 2015 and 2016 even
taking the active company’s capex programme into account. We calculate
SOTP values of NOK 122 per share, equal to P/E 8.5 (2016). Fair value is
close to the current stock price, and we maintain our Neutral recommendation.
Key figures
2012
2013
2014E
2015E
2016E
4Q13
1Q14
4Q14E
1Q15E
Group revenues
4 202
6 246
6 761
7 621
7 750
1 841
1 626
1 584
2 131
EBITDA
511
1 487
2 022
2 312
2 522
421
555
452
638
EBIT (before IFRS adj.)
340
1 261
1 760
2 056
2 266
349
486
388
574
IFRS adj.
281
528
-105
0
0
470
-184
0
0
94
158
73
80
86
33
36
8
15
554
46
39
33
33
18 %
0%
EBIT-elim/HQ
-40
-27
-40
-27
46 %
46 %
Assosiates (Farming UK)
Group EBIT
2 056
1 742
2 266
1 960
18 %
16 %
PTP
611
2 324
1 603
2 003
2 234
839
310
360
EPS
4.2
15.8
10.3
13.1
14.6
5.4
2.0
2.4
3.6
EPS adj.
2.6
9.3
11.1
13.1
14.6
2.5
3.2
2.4
3.6
EBIT VAP (Mid)
DPS
NIBD
Central Norw ay
0.0
0.0
8.0
7.0
10.0
2 764
1 772
2 496
2 514
2 284
1 772
1 505
2 496
2 308
65 200
70 100
72 300
76 000
77 000
14 000
9 900
20 000
18 000
Northern Norw ay
22 300
23 800
34 800
44 000
48 000
10 700
7 100
11 000
9 000
Salmar Rauma
15 000
14 900
13 500
16 000
16 000
4 400
4 100
2 000
4 000
3 050
5 887
0
0
0
0
102 500
111 850
126 487
136 000
141 000
34 100
27 800
33 000
31 000
10 %
9%
13 %
8%
4%
15 %
20 %
-3 %
12 %
3.3
11.3
13.9
15.1
16.1
10.2
17.5
11.8
18.5
2.6
2.5
2.3
1.9
Villa Organic (51%)
Norw egian volum es
Bent Rølland
Fondsfinans AS
TEL: +47 23 11 30 27
[email protected]
Philip M. Scrase
Fondsfinans AS
TEL: +47 23 11 30 23
[email protected]
Volume grow th
EBIT (NOK/kg). All inclusive
EV/ Sales
EV/ EBITDA
11.1
8.5
7.5
5.8
EV/EBIT, before adj.
13.1
9.8
8.4
6.5
P/ E adj
14.0
11.7
9.9
8.9
P/B
2.9
2.9
2.6
2.4
NIBD/kg
16
20
18
16
SalMar ASA – 4Q14 Preview
Record high 2015 SALM guidance – Fair
The table below sums up SalMar’s 2015 guidance (not yet distributed by
segments).
Annualise volume
estimates and guidance
SALM volum e guidance
2012
2013
2014E
2015E
2016E
13/12
14/13
15/14
16/15
Central Norw ay*)
Licenses HOG t/lic Guiding 15 Guiding 14
59
1 237
73 000
65 200
70 100
72 300
76 000
77 000
8%
3%
5%
1%
Northern Norw ay***)
41
854
35 000
22 300
23 800
34 800
44 000
48 000
7%
46 %
26 %
9%
Salmar Rauma**
16
1 063
17 000
15 000
14 900
13 500
16 000
16 000
-1 %
-9 %
19 %
0%
3 050
5 887
0
0
n.m.
n.m.
n.m.
n.m.
Villa Organic (2H13-1H14), 50%
SALM farm ing
5 887
116
1 128
137 000
130 887 102 500 111 850 126 487 136 000 141 000
9%
13 %
8%
4%
10 %
9%
13 %
8%
4%
13 550
13 400
13 519
15 000
14 000
-1 %
1%
11 %
-7 %
143 387 116 050 125 250 140 006 151 000 155 000
8%
12 %
8%
3%
SALM Y/Y - pf
UK farming (50%)
LSG and SALM split
Villa from 2H14
37
15 500
SALM farm ing incl UK (50%)
12 500
152 500
*) Incl 9 rented licenses in Central Norw ay (VESO, SINTEF, Frøya vg..). 4 new green licenses added
**) Rauma, incl Bringsvor, Eikremsvik and Villa Miljølaks (organic salmon), incl 2 brood fish licenses
***) Villa Organic, Villa de-merged from 2H14 (incl in segment Northern Norw ay, 8 licenses). 4 new green licenses added
Green licenses (8 new licenses): 8 000 t
Villa Laksefjorden in Finnmark: Approx. 10 000 t HOG i 2015
Simple SALM model
last quarters and 4Q
estimates
SalMar ASA
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
Group revenues
1 433
1 695
1 841
1 626
1 745
1 806
1 584
1 861
2 015
EBITDA
365
419
421
555
513
502
452
499
593
EBIT (before IFRS adj.)
317
361
349
486
448
438
388
435
507
Gain (BAKKA/Fish Pool)
170
507
EBIT ex gain
IFRS adj.
Assosiates (Farming UK)
Good farming
conditions in North
-36
487
361
408
486
448
368
388
435
89
-95
470
-184
-128
207
0
0
54
31
33
36
18
10
8
8
PTP
844
332
839
310
314
619
360
407
513
EPS adj.
2.28
3.01
2.51
3.21
2.89
2.63
2.35
2.66
3.18
476
-43
446
447
723
-27
329
371
2 131
2 410
1 772
1 505
2 297
2 639
2 496
2 454
DPS
OpCF
NIBD
Biological risks in
Region Mid continuing;
AGD and PD / sea lice.
4QBB
70
60
Non recurring
4Q14E 4Q14Old
8.0
2 436
Farm ing volum es
Central Norw ay
15 900
22 400
14 000
9 900
16 500
25 900
20 000
22 500
Northern Norw ay
2 800
8 000
10 700
7 100
8 500
8 200
11 000
11 000
Salmar Rauma
4 100
3 300
4 400
4 100
5 000
2 400
2 000
4 000
0
1 100
5 000
6 700
5 074
0
0
0
22 800
34 800
34 100
27 800
35 074
36 500
33 000
37 500
37 000
2Q EBIT
3Q EBIT
4Q EBIT
1Q EBIT
2Q EBIT
3Q EBIT
4Q EBIT
4Q EBIT
EBIT/kg
Villa Organic (100%)*
Norw egian volum es (t)
Segm ents
EBIT Central N. (upstream)
275
291
148
191
235
257
208
259
EBIT Northern N.
44
91
164
149
90
55
147
138
EBIT Salmar Rauma
64
17
44
65
78
29
16
32
0
-6
61
120
44
SALM upstream
383
393
417
525
448
341
371
428
EBIT VAP (InnovaMar)
-64
-29
-38
-28
12
104
24
14
EBIT segm ents
320
364
380
497
460
445
395
442
EBIT Villa*
EBIT-elim/HQ
-3
-3
-31
-11
-12
-7
-7
-7
Group EBIT
317
361
349
486
448
438
388
435
EBIT/kg Central N.
17.3
13.0
10.6
19.3
14.2
9.9
10.4
11.5
EBIT/kg Northern N.
15.9
11.4
15.3
21.0
10.6
6.7
13.4
12.5
EBIT/kg Salmar Rauma
15.7
12.0
7.9
8.0
11.4
EBIT/kg Villa*
5.0
10.1
15.9
15.6
-5.5
12.1
17.9
8.8
EBIT/kg (upstream )
16.8
11.3
12.2
18.9
12.8
9.3
11.2
EBIT/kg (dow nstream)
-4.0
-1.3
-2.7
-2.8
0.7
4.0
1.2
0.6
13.9
10.4
10.2
17.5
12.8
12.0
11.8
11.6
OpCF/kg fish
20.9
-1.2
13.1
16.1
20.6
-0.7
10.0
9.9
13.7
The table below sums up our annualised SalMar estimates.
Page 33
7 January 2015
SalMar Volum es
2008
2009
2010
2011
2012
2013
2014E
2015E
2016E
SalMar Central Norw ay
42
50
47
64
65
70
72
76
77
SalMar Northern Norw ay
11
16
14
19
22
24
35
44
48
4
11
15
15
14
16
16
3
6
65
93
103
112
126
136
141
79
100
128
122
124
125
SalMar Rauma
Villa Organic (51%)
Harvesting Norw ay (t')
54
66
InnovaMar volumes (HOG eq.)
Norskott Havbruk (UK) - 50% - t'
11.4
13.2
13.6
11.0
13.6
13.4
13.5
15.0
14.0
7.6
10.1
15.6
7.2
3.5
13.2
12.3
14.5
15.3
2.9
5.5
15.4
5.7
3.7
13.5
12.7
17.2
18.3
SalMar Rauma
0.0
0.0
16.3
6.6
0.3
10.9
13.9
12.0
13.6
Sales & Processing (VAP)
0.0
0.0
0.0
0.0
0.5
-1.3
0.9
0.4
0.3
EBIT/kg (all inclusive)
6.3
8.9
15.0
6.4
3.3
11.3
13.9
15.1
16.1
Norskott Havbruk (50%)
2.5
6.3
10.3
5.3
2.1
6.7
8.5
8.5
9.5
322
507
734
458
226
924
891
1 101
1 178
32
86
211
106
83
320
442
758
878
67
72
5
162
188
192
217
55
164
2
57
-161
112
46
33
638
372
1 300
1 797
2 096
2 306
SalMar EBIT (NOK/HOG)
SalMar EBIT (MNOK)
Salmar Rauma
Villa Organic (100%)
EBIT Norw ay (all segm ents)
355
593
1 012
EBIT eliminations
-15
-7
-37
-44
-31
-38
-37
-40
-40
Group EBIT
340
587
975
594
340
1 261
1 760
2 056
2 266
Note: All contracts, VikenCo and rental harvesting are booked in the S&P (VAP) segment.
The table below sums up our quarterly SalMar estimates.
SalMar volum es
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
4Q14E
1Q15E
2Q15E
15 900
22 400
14 000
9 900
16 500
25 900
20 000
18 000
20 000
Northern Norw ay
2 800
8 000
10 700
7 100
8 500
8 200
11 000
9 000
11 000
Salmar Rauma
4 100
3 300
4 400
4 100
5 000
2 400
2 000
4 000
4 000
1 100
5 000
6 700
5 074
22 800
34 800
34 100
27 800
35 074
36 500
33 000
31 000
35 000
13 %
-2 %
15 %
20 %
54 %
5%
-3 %
12 %
0%
-5 %
-2 %
-9 %
32 %
4%
-3 %
12 %
0%
30 124
35 800
29 800
24 000
29 100
38 500
30 000
30 000
32 000
Central Norw ay
17.3
13.0
10.6
19.3
14.2
9.9
10.4
17.9
16.7
Northern Norw ay
15.9
11.4
15.3
21.0
10.6
6.7
13.4
20.9
19.7
Salmar Rauma
15.7
5.0
10.1
15.9
15.6
12.0
7.9
15.4
14.2
-5.5
12.1
17.9
8.8
-2.1
-0.8
-1.3
-1.2
0.4
2.7
0.8
0.4
0.4
EBIT (all inclusive)
13.9
10.4
10.2
17.5
12.8
12.0
11.8
18.5
17.4
Central Norw ay
Villa Organic (100%)
Harvesting Norw ay (t')
Grow th Y/Y
SALM p.f. Y/Y
InnovaMar (HOG use)
SalMar EBIT-m argin NOK/kg
Villa Organic (51%)
SalMar Farm ing EBIT MNOK (bef adj)
Central Norw ay
275
291
148
191
235
257
208
322
334
Northern Norw ay
44
91
164
149
90
55
147
188
217
Salmar Rauma
64
17
44
65
78
29
16
62
57
-6
61
120
44
Villa Organic, discont.
-64
-29
-38
-28
12
104
24
12
13
EBIT Norw ay (all segm ents
320
364
380
497
460
445
395
584
621
EBIT el./HQ
Group EBIT
-3
-3
-31
-11
-12
-7
-7
-10
-10
317
361
349
486
448
438
388
574
611
Note: All contracts, VikenCo and rental harvesting are booked in the S&P (VAP) segment.
7 January 2015
Page 34
The illustration map
gives an overview of PD
cases in mid Norway;
PD in total per county
YTD:
Møre & Romsdal: 19
Sør-Trøndelag: 34
(equal to 57% of the
total sites in the county)
SALM obviously
involved in handling
these cases.
+
AGD......... not good for
cost/kg.
Longer term moving
biomass closer to the
HOG plant has to be
discussed seriously...
AGD road map from the Norwegian Veterinary Institute:
AGD sites in Norw ay
2012 2013 Jan
Feb
March April May June July
Troms
Troms
Nordland
Nord-Trøndelag
Sør-Trøndelag
Møre og Romsdal
5
2
1
Sogn og Fjordane
12
2
1
1
1
Hordaland
2
19
6
Rogaland
3
20
1
1
Agder
Total
5
56
11
1
3
1
0
0
0
Aug
Sept
Oct
Nov
1
2
4
2
5
1
3
1
3
1
9
1
3
3
11
8
14
'14TD
0
0
0
0
2
20
9
19
2
0
52
# sites 2014, % cap.
63
0%
53
0%
144
0%
50
0%
60
3%
70
29 %
56
16 %
151
13 %
56
4%
9
0%
712
7%
The table below sums up our updated SOTP valuation of SalMar: Target NOK
122 per share equal to 2016 P/E of 8.5 (high cultivation risks continuing)
Salm ar ASA - Sum of the Part
Licenses*
Capacity
2015 HOG HOG/license
59
82 600
76 000
1 288
SalMar Northern Norw ay (incl Villa)
41
53 300
44 000
1 073
SalMar Rauma (100%)
16
20 000
16 000
1 000
EV SALM Farm ing
116
155 900
136 000
1 172
Moltustranda Villa smolt, additional Rauma smolt, for new green licenses 2014 stocking
Rauma broodfish, w rasse fish, R&D value (genetics, long term use)
EBIT/HOG
14.5
17.2
12.0
15.1
EBIT
1 101
758
192
2 050
EV Farm ing (total upstream )
SOTP Vikenco (49%), real estate value (VAP production US/Norw ay)
VAP/Global Sales
EV Dow nstream
Value of new licenses in the UK
31.12.15 NIBD Scottish Seafarms (50%)
EV Minority assets
HQ SalMar/eliminations
NIBD Scottish Sea Farms 31.12.2015 (50%)
Total EV Group
NIBD 31.12.2015E
41
4
EV/EBIT
7.5
7.0
6.5
7.2
EV/cap Im pl/kg
100
109
99
121
62
78
95
110
7.3
140 000
121 600
28 000
30 000
732
0.37
14.86
8.5
46
2 096
256
10
7.4
8.0
-100
50 %
41
-6
166 000
8.0
2 056
7.9
Ow n shares (mill)
130
Equity values
Outs shares (mill)
SOTP values
Source: Fondsfinans Research *) 11 licenses rented, incl 8 new green licenses purchased, 8 Villa licenses (100%), 2 broodfish licenses
Page 35
15 007
50
106
115
68
40
0.5
166 000
-40
7 January 2015
EV
8 256
5 303
1 248
14 807
100
100
1.3
460
510
1 023
-50
973
-320
-3
16 167
2 514
169
13 822
113.3
122
+ 23113027
Philip M. Scrase + 23113023
SalMar ASA
Sector:
Date:
Next result:
Target
Recommendation:
Aquaculture
06.jan.15
26.feb.15
122
Neutral
130
Price (NOK):
45
Equity ratio:
50 %
178
12 months High/Low:123.5 / 69.3
P&L (NOKm)
2012
2013
Operating income
4 202
6 246
EBITDA
511
1487
EBITDA-margin
12 %
24 %
EBIT before adj biomass
340
1261
EBIT-margin
8%
20 %
Fair value adjustment of biomass
281
528
EBIT after adjustments
621
1 790
Associates (UK)
94
158
Other financial items
-35
215
Earnings before tax
611
2 324
Taxes
-125
-427
Result for the period
485
1 897
Minority share of result
14
105
Net adjustments
-181
-739
Net profit adjusted
290
1053
113
113
EPS
4.16
15.82
EPS adj.
2.56
9.30
DPS (payment following year)
0.0
8.0
CEPS
1.5
9.8
Impl. cash flow per kilo fish
1.5
8.6
Multiples
EV/ Sales
2.6
EV/ EBITDA
11.1
13.1
P/ E adj
14.0
P/B
2.9
Norwegian farming volumes (HOG)
Central (51 licenses)
65 200
70 100
North (23 licenses). Villa from 2H14
22 300
23 800
Rauma (16 licenses)
15 000
14 900
Villa Organic (51%)
3 050
Norwegian HOG volume
102 500 111 850
Central (51 licenses)
3%
8%
North (23 licenses). Villa from 2H14
19 %
7%
Rauma (16 licenses)
38 %
-1 %
Sale/HOG volume
Central
39.4
38.5
North
31.0
38.3
Rauma
37.2
40.0
Impl price, All incl.
41.0
55.8
Farming EBIT per segment (NOK m)
Central
226
924
North
83
320
Rauma
5
162
Farming EBIT Norway
315
1 406
Farming EBIT margin (NOK/kg HOG)
Central
3.5
13.2
North
3.7
13.5
Rauma
0.3
10.9
All incl. EBIT/kg Norway (incl S&P
3.3
11.3
Sales and processing (VAP, InnovaMar & Vikenco)
Own HOG volumes
65 200
70 100
LSG Hydrotech HOG
23 400
20 600
Other external volumes
11 700
22 065
InnovaMar HOG volume
100 300 127 665
Downstream volumes,Y/Y %
28 %
27 %
EBIT (InnovaMar/Vikenco/sales)
55
-161
Downstream EBIT/HOG kg-margin
0.55
-1.26
VAP share at InnovaMar,% (fillets)
15 %
12 %
UK farming (HOG) 50% ownership - Assosiates
Scottish Sea Farms (37 sites)
27 100
26 800
Sale/HOG volumes
34.6
41.2
Farming EBIT UK
56
179
EBIT-margin (NOK/kg)
2.1
6.7
EBIT Norskott (SALM Associate)
23
136
Elimination to EBIT bef. adj
-31
-38
Balance sheet (NOKm)
2012
2013
Total fixed assets
4 375
4 732
3 250
5 199
Total assets
7 625
9 931
Total equity
2 967
5 053
Total long-term liabilities
3 095
3 653
7 623
9 932
Equity share
39 %
51 %
NIBD
2 764
1 772
171
1 107
-428
331
Cash end period
56
1 072
2014E
6 761
2022
30 %
1760
26 %
-105
1 655
73
-125
1 603
-410
1 193
22
84
1255
113
10.34
11.08
7.0
13.0
11.0
2015E
7 621
2312
30 %
2056
27 %
0
2 056
80
-134
2 003
-521
1 482
0
0
1482
113
13.08
13.08
10.0
13.3
10.5
2016E
7 750
2522
33 %
2266
29 %
0
2 266
86
-118
2 234
-581
1 653
0
0
1653
113
14.59
14.59
8.0
16.6
13.3
2.5
8.5
9.8
11.7
2.9
2.3
7.5
8.4
9.9
2.6
1.9
5.8
6.5
8.9
2.4
72 300
34 800
13 500
5 887
126 487
3%
46 %
-9 %
76 000
44 000
16 000
77 000
48 000
16 000
136 000
5%
26 %
19 %
39.1
39.4
47.9
53.5
Shares outst.:
Market cap (NOKm):
NIBD (MNOK):
113.3m
14 729
2 496
17 225
3Q13
1 695
419
25 %
361
21 %
-95
266
31
36
332
-66
266
1
76
342
113
2.34
3.01
4Q13
1 841
421
23 %
349
19 %
470
819
33
22
839
-186
653
39
-331
284
113
5.43
2.51
1Q14
1 626
555
34 %
486
30 %
-184
301
36
-28
310
-73
237
15
141
363
113
1.96
3.21
2Q14
1 745
513
29 %
448
26 %
-128
320
18
-25
314
-79
235
3
96
327
113
2.04
2.89
3Q14
1 806
502
28 %
438
24 %
207
645
10
-37
619
-164
455
4
-152
298
113
3.97
2.63
4Q14E
1 584
452
29 %
388
25 %
0
388
8
-36
360
-94
267
0
0
267
113
2.35
2.35
1Q15E
2 131
638
30 %
574
27 %
0
574
15
-35
554
-144
410
0
0
410
113
3.62
3.62
-0.4
-1.1
3.9
11.9
3.9
14.2
6.4
20.6
-0.2
-0.7
2.9
10.0
3.7
13.6
14 000
10 700
4 400
5 000
34 100
-17 %
16 %
26 %
9 900
7 100
4 100
6 700
27 800
-44 %
209 %
32 %
16 500
8 500
5 000
5 074
35 074
4%
204 %
22 %
25 900
8 200
2 400
20 000
11 000
2 000
18 000
9 000
4 000
141 000
1%
9%
0%
22 400
8 000
3 300
1 100
34 800
-6 %
0%
-6 %
36 500
16 %
2%
-27 %
33 000
43 %
3%
-55 %
31 000
82 %
27 %
-2 %
44.5
45.2
44.0
56.0
45.3
46.3
44.8
55.0
37.9
36.2
37.6
48.7
39.1
40.1
42.5
54.0
45.3
46.8
50.2
58.5
40.2
37.1
47.9
49.7
35.1
32.6
50.4
49.5
40.4
41.4
39.9
48.0
47.9
48.9
47.4
68.7
891
442
188
1 520
1 101
758
192
2 050
1 178
878
217
2 273
291
91
17
399
148
164
44
357
191
149
65
405
235
90
78
403
257
55
29
341
208
147
16
371
322
188
62
572
12.3
12.7
13.9
13.9
14.5
17.2
12.0
15.1
15.3
18.3
13.6
16.1
13.0
11.4
5.0
10.4
10.6
15.3
10.1
10.2
19.3
21.0
15.9
17.5
14.2
10.6
15.6
12.8
9.9
6.7
12.0
12.0
10.4
13.4
7.9
11.8
17.9
20.9
15.4
18.5
72 300
22 600
14 400
121 600
-5 %
112
0.92
11 %
76 000
24 000
8 000
124 000
2%
46
0.37
11 %
77 000
24 000
8 000
125 000
1%
33
0.26
11 %
22 400
5 600
4 500
35 800
1%
-29
-0.81
11 %
14 000
5 400
6 000
29 800
-7 %
-38
-1.26
11 %
9 900
5 000
5 000
24 000
-25 %
-28
-1.17
14 %
16 500
5 600
2 000
29 100
-3 %
12
0.41
12 %
25 900
6 000
5 400
38 500
8%
104
2.70
9%
20 000
6 000
2 000
30 000
1%
24
0.80
11 %
18 000
6 000
2 000
30 000
25 %
12
0.40
11 %
27 038
48.2
230
8.5
75
-37
2014E
5 384
4 682
10 066
5 068
3 619
10 081
50 %
2 496
1 472
-1 053
344
30 000
44.5
256
8.5
80
-40
2015E
5 809
4 870
10 680
5 675
3 619
10 688
53 %
2 514
1 509
-600
326
28 000
45.5
267
9.5
86
-40
2016E
6 040
5 120
11 159
6 135
3 629
11 159
55 %
2 284
1 881
-400
566
8 500
34.0
39
4.6
30
-3
No
1
2
3
4
5
6
7
8
9
6 700
7 300
6 638
47.2
53.6
50.0
61
87
68
9.1
11.9
10.2
44
36
22
-31
-11
-12
Shareholders (20.08.2014)
Kverva AS
Folketrygdfondet
Pareto Aksje Norge
LIN AS/Leif Inge Nordhammer
Odin Norge
Pareto Aktiv
SalMar ASA
Pareto Aktiv
State Street
OTHER SHAREHOLDERS
TOTAL SHAREHOLDERS
8 100
46.0
48
5.9
10
-7
Shares
60 500
9 188
2 234
2 005
1 635
1 300
1 154
904
822
32 894
113 300
5 000
41.4
27
5.4
8
-7
7 000
48.1
85
12.1
15
-10
Per cent
53.4%
8.1%
2.0%
1.8%
1.4%
1.1%
1.0%
0.8%
0.7%
29.0%
100 %
Grieg Seafood ASA
4Q14 Preview
Results date
7 January 2014
19 February 2014
Share data (NOK m)
06.jan.15
Sector
Aquaculture
Reuters/ Bloomberg
GSF
Risk rating
Medium
111.7
Market cap (mill)
3 194
NIBD (mill)
1 622
Enterprise value (mill)
4 816
Free float %
20 %
17
High/ low 52w
29.8 / 17.5
Weight OSEAX %
0.1733
08/ 19/ 52
05/ 20/ 61
Estimate changes
Estim ate changes
Tonnes/MNOK
2015E
2016
Curr
Prev
Curr
Prev
2015
2016
4%
EBITDA
724
700
815
781
3%
EBIT
584
564
674
643
3%
5%
PTP
505
488
595
567
3%
5%
EPS adj.*
3.34
3.24
3.94
3.76
3%
5%
Farming Finnmark
12.00
9.52
12.70
10.73
26 %
18 %
Farming Rogaland
7.38
9.37
8.30
10.43
-21 %
-20 %
Farming Canada
9.52
4.86
12.30
8.13
96 %
51 %
Farming Shetland
6.50
8.46
7.30
9.63
-23 %
-24 %
8.97
8.39
10.47
EBIT/kg (HOG)
Average farm ing m argi
NEUTRAL
Share Price: NOK 28.6
Target: NOK 31 (29)
Focus on core activity – Green licenses approved
At 3Q the working chairman Mr Per Grieg jr. stated that the company will
increase focus on core activity; production of Atlantic salmon only
(discontinuing coho in Canada; Finnmark trout discontinued this summer) and
integrating its European sales organization, aiming to increase quality and
predictability of operational performance. In the UK the company will focus on
HOG Atlantic salmon (discontinuing VAP operations as we understand).
GSF is one of few companies that maintain room for organic growth on
existing licenses. In addition, on December 22 2014 the company was
awarded four green licenses in Norway, which is clearly positive. At 3Q the
company guided on 2015 harvesting of 72’ t, up 11% compared to 2014
guidance. Management confirms the recovery of Canadian volumes with 2015
guidance of 13’ t, which we expect to grow to around 15’ t in 2015. According
to the company, current license capacity allows for production of around 94’ t +
the four green licenses.
We expect GSF to report 4Q14 EBIT of NOK 52m based on harvesting of
16 200 t, which is in line with guidance. We expect decent performance in
Finnmark to yield an EBIT/kg of around NOK 6.4, while we estimate Rogaland
earnings just short of NOK 3.5/kg.
For the full-year, we estimate 2015 and 2016 EPS adj. of NOK 3.34 and NOK
3.94 respectively. We increase our SOTP target to NOK 31 (29) per share,
implicitly corresponding to group EV farming/kg of NOK 70 (2015), incl. Ocean
Quality. We maintain our Neutral recommendation.
9.87
7%
6%
Farming Finnmark
21 000 22 000 23 200 24 200
-5 %
-4 %
Key figures (NOK m )
2010
2011
2012
2013
2014E
2015E
2016E
3Q13
4Q13
Farming Rogaland
19 500 20 500 16 000 16 000
-5 %
0%
Total revenues
2 456
2 064
2 078
2 425
2 630
3 161
3 156
585
696
656
779
Farming Canada
13 000 13 000 15 000 15 000
0%
0%
Farming Shetland
16 000 16 500 14 000 14 000
-3 %
0%
EBITDA
690
346
-30
484
386
724
815
109
122
86
214
EBIT bef. adj.
570
206
-191
348
252
584
674
76
87
52
179
Total farm ing volum es 69 500 72 000 68 200 69 200
-3 %
-1 %
IFRS biomass adj.
208
-395
98
267
-244
0
0
3
174
0
0
PTP
760
-193
-210
535
-64
505
595
68
244
32
160
EPS
4.78
-1.08
-1.32
3.86
-0.42
3.34
3.94
0.47
1.93
0.21
1.06
EPS adj
2.86
1.40
-0.91
2.15
2.30
3.34
3.94
0.47
0.73
0.21
1.06
Farm ing volum e (HOG)
Source: Fondsfinans Research *) ex 3Q14 write down of biomass
DPS
1.35
0.00
0.00
0.00
0.00
0.00
0.50
NIBD
1 015
1 447
1 524
1 441
1 622
1 445
1 259
1 286
1 441
1 622
1 573
Farming Finnmark
20 705
16 143
20 080
23 076
26 266
21 000
23 200
5 556
5 735
5 600
5 000
Farming Rogaland
12 839
15 986
19 247
15 088
12 603
19 500
16 000
3 099
2 617
3 000
4 000
Farming Canada
13 682
13 236
13 576
6 739
6 237
13 000
15 000
2 815
878
600
3 000
Farming Shetland
16 988
14 717
17 097
13 158
19 889
16 000
14 000
2 483
6 765
7 000
4 000
Total farm ing (tons) 64 214
68 200 13 953
Farming grow th Y/Y
EBIT/kg (segm ent)
60 082
70 000
58 061
64 995
69 500
28 %
-6 %
17 %
-17 %
12 %
7%
-2 %
-8 %
-21 %
1%
22 %
9.3
3.4
-1.2
6.6
5.9
9.0
10.5
6.1
6.2
3.8
11.8
1.7
1.8
1.5
1.4
EV/Sales
EV/EBITDA
Bent Rølland
Fondsfinans AS
TEL: +47 23 11 30 27
[email protected]
4Q14E 1Q15E
8.4
12.5
6.4
5.5
EV/EBIT
11.7
19.1
7.9
6.6
P/E adj.
10.9
12.4
8.6
7.3
P/B
1.3
1.6
1.2
1.0
NIBD/kg fish
25
25
21
18
15 995 16 200 16 000
Philip M. Scrase
Fondsfinans AS
TEL: +47 23 11 30 23
[email protected]
Grieg Seafood ASA - 4Q14 Preview
7 January 2014
Updated GSF estimates and valuation
The tables below sum up the GSF volume guidance of 65 000 t HOG for 2014,
growing to 72 000 in 2015, to a large extent driven by normalisation of the
Canadian operations.
BC growing in 2015:
Comeback after culling
smolt in 2012
(furunculosis at Golden
River smolt plant)
Volum e guidance
Grieg Seafood ASA
2012
2013
2014E
2015E
actual
actual
FF
FF
2016E
2015
Y/Y
Y/Y
Y/Y
FF Old guid Curr guid Guiding
2014
2014
13/12
14/13
15/14
-16 %
Farming Finnmark
20 080
23 076
26 266
21 000
23 200
26 500
26 300
22 000
15 %
14 %
Farming Rogaland
19 247
15 088
12 603
19 500
16 000
14 500
12 600
20 500
-22 %
-16 %
63 %
Farming Canada
13 576
6 739
6 237
13 000
15 000
6 500
6 200
13 000
-50 %
-7 %
110 %
Farming Shetland
17 097
13 158
19 889
16 000
14 000
20 000
19 900
16 500
-23 %
51 %
-17 %
Total GSF volum es
70 000
58 061
64 995
69 500
68 200
67 500
65 000
72 000
-17 %
12 %
11 %
GSF volum es
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14E
4Q14E
1Q15E
Farming Finnmark
6 730
5 556
5 735
5 775
7 958
6 100
6 600
6 000
14 %
18 %
10 %
15 %
4%
Farming Rogaland
5 133
3 099
2 617
2 138
5 397
2 000
4 000
4 000
-50 %
5%
-35 %
53 %
87 %
Farming Canada
1 107
2 815
878
1 053
1 685
3 300
500
3 500
-46 %
52 %
17 %
-43 %
232 %
Farming Shetland
1 427
2 483
6 765
4 129
3 910
4 200
7 500
4 000
66 %
174 %
69 %
11 %
-3 %
14 397
13 953
15 995
13 095
18 950
15 600
18 600
17 500
-5 %
32 %
12 %
16 %
34 %
Total GSF
1Q Y/Y 2Q Y/Y 3Q Y/Y 4Q Y/Y
1Q15 Y/Y
The table below sums up annual farming volumes and earnings estimates by
region.
GSF key estim ates
2009
2010
2011
2012
2013
2014E
2015E
2016E
Farming Finnmark
4.84
10.44
3.43
-0.88
9.39
8.86
12.00
12.70
Farming Rogaland
5.45
10.20
6.52
2.64
9.60
8.05
7.38
8.30
Farming Canada
3.62
5.05
2.87
-2.38
-1.15
-3.87
9.52
12.30
Farming Shetland
-0.31
10.51
0.40
-4.89
2.07
3.60
6.50
7.30
Average EBIT/kg
3.32
9.26
3.39
-1.18
6.56
5.87
8.97
10.47
Farm ing volum e
BC volumes recovering
from 2015 onwards
Farming Finnmark
14 218
20 705
16 143
20 080
23 076
26 266
21 000
23 200
Farming Rogaland
12 000
12 839
15 986
19 247
15 088
12 603
19 500
16 000
Farming Canada
10 134
13 682
13 236
13 576
6 739
6 237
13 000
15 000
Farming Shetland
13 818
16 988
14 717
17 097
13 158
19 889
16 000
14 000
Total volum e
50 170
64 214
60 082
70 000
58 061
64 995
69 500
68 200
Farming Finnmark
68 816 216 221
55 428
Farming Rogaland
65 393 130 930 104 265
Farming Canada
36 642
69 075
38 028
-32 243
-7 757
-24 109 123 700 184 500
Farming Shetland
-4 338 178 624
5 865
-83 667
27 251
71 583 104 000 102 200
EBIT
Farm ing EBIT*
166 513 594 850 203 586
-17 675 216 749 232 603 252 100 294 640
50 767 144 779 101 402 143 950 132 800
-82 818 381 022 381 479 623 750 714 140
Source: Fondsfinans Research *) before HQ cost
Page 38
7 January 2015
7 January 2014
The table below sums up quarterly farming numbers and estimates by region.
GSF key estim ates
Expecting good
performance in Norway
in the coming quarters
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14E
1Q15E
2Q15E
Farming Finnmark
13.1
9.6
8.8
15.9
9.7
4.0
6.4
15.3
14.1
Farming Rogaland
10.2
12.9
7.0
9.5
10.2
7.6
3.4
10.9
9.7
Farming Canada
6.0
-2.7
-13.4
-5.4
-5.1
-3.0
-2.1
9.9
10.7
Farming Shetland
-5.7
0.0
6.3
10.1
2.3
0.9
2.4
9.9
8.7
EBIT/kg m argin
9.7
6.1
6.2
11.3
7.0
2.3
3.8
11.8
11.1
Farm ing volum e
Significant cost
reduction in Canada in
2015 as volumes
normalise
Farming Finnmark
6 730
5 556
5 735
5 775
7 958
6 933
5 600
5 000
6 000
Farming Rogaland
5 133
3 099
2 617
2 138
5 397
2 068
3 000
4 000
5 500
Farming Canada
1 107
2 815
878
1 053
1 685
2 899
600
3 000
3 000
Farming Shetland
1 427
2 483
6 765
4 129
3 910
4 850
7 000
4 000
4 000
14 397
13 953
15 995
13 095
18 950
16 750
16 200
16 000
18 500
GSF volum es
Farm ing EBIT
Farming Finnmark
88
53
50
92
77
28
36
77
85
Farming Rogaland
52
40
18
20
55
16
10
44
53
Farming Canada
7
-8
-12
-6
-9
-9
-1
30
32
Farming Shetland
-8
0
43
42
9
4
17
40
35
139
86
99
148
132
39
62
189
205
Farm ing EBIT*
Source: Fondsfinans Research *) ex write downs at 3Q14 (NOK 93m) and HQ cost
Well within covenants,
but high gearing
Targeting NIBD/kg
gearing of around NOK
17 (15-20)
NOK 400m bond
maturity in December
2015
Bank syndicate –
Refinanced in 2Q14 for
five years
Grieg Seafood ASA
EBITDA
EBITDA 4Q rolling
Equity
NIBD
Gross bank and bond debt
NIBD/fish harvested (kg)
Cash end period
NIBD/4Q roll. EBITDA
NIBD/EBITDA covenant
NIBD/NWC <1.5 (not into force)
Equity ratio > 35%
4Q12
1Q13 2Q13 3Q13 4Q13
-98
85
168
109
122
-30
12
127
265
484
1 508 1 592 1 693 1 768 1 989
1 524 1 459 1 354 1 286 1 441
1 763 1 680 1 643 1 513 1 605
22
25
23
22
25
240
221
289
227
164
-51.1 121.8
10.7
4.9
3.0
waived waived waived waived waived
1.3
1.1
1.0
1.0
0.9
37 %
39 %
40 %
41 %
43 %
1Q14
173
572
2 024
1 374
1 648
20
273
2.4
4.5
0.8
44 %
2Q14
157
561
2 001
1 296
1 503
19
207
2.3
4.5
0.9
45 %
3Q14
-29
422
1 935
1 359
1 482
20
124
3.2
5.0
0.9
44 %
4Q14E
86
386
1 991
1 622
2 060
24
438
4.2
5.0
1.1
39 %
1Q15E
214
428
2 175
1 573
2 037
23
464
3.7
5.0
1.0
42 %
2Q15E
230
501
2 375
1 471
2 015
22
543
2.9
5.0
0.9
44 %
Source: Fondsfinans Research. *) Company refinanced during 2Q14, NIBD/EBITDA can b e max. 6 for 3 quarters in a row
Given equity ratio ab ove 40%, NIBD/EBITDA can b e at max. 5
Current gross b ank deb t (Nordea and Danske Bank): Term loan (NOK 900m), Repayment: (NOK 22.5m per quarter), Revolver: NOK 600m
Duration on new b ank syndikate: 5 years. 2014-2019.
Unsecured b ond: NOK 400m. Duration: 3 years. Decemb er 2012-decemb er 2015. 700 p ab ove NIBOR
Revolver credit: NOK 600m undrawn at 3Q14
7 January 2015
Page 39
7 January 2014
GSF SOTP valuation (2015) – SOTP = 31 (29)
SOTP target: NOK 31
(29) per share
Two new UK licenses
(Skye)
Four new green
licenses in Finnmark
Target implies EV/kg
NOK 70 (incl. Ocean
Quality sales)
Limited tax assets left
Neutral rec. reiterated
Page 40
Our SOTP valuation is based on a bottom-up approach where each production
and business unit is valued separately based on market outlooks and regional
cultivation risks.
SOTP
Smolt cap. EBITadj EBIT/kg Volume Capacity* EV/cap EV/EBIT Impl. EV/kg
Grieg Seafood ASA
mill.
2015
2015
2015
HOG/t
(impl.)
2015
2015
Norway (Finnmark - 28 licences)
7.0
252
12.0
21 000
28 000
64
7.0
84
Norway (Rogaland - 17 licences)
3.0
144
7.4
19 500
24 000
54
9.0
66
2016 Canada (21 licences)*
3.0
185
12.3
15 000
18 500
53
6.5
65
UK/Shetland (39 licences)
5.0
104
6.5
16 000
22 000
38
8.0
52
Total farming (105 lisenses)
18
685
9.0
69 500
92 500
53
7.1
70
SalmoBreed AS (27.5%) Breeding, Sold
Salten Stamfisk AS, R&D values
1
650
8
Bokn Sjøservice, 50%
Finnmark Brønnbåtrederi 49%
European sales (Ocean Quality AS, 60%)
included in upstream
New sea water licenses in the UK (2), Isle of Skye
2
1 500
To be developed
40
Green licenses Finnmark (4) - approved
4
50
3 780
To be developed
HQ overhead
-40
8.0
Total Group EV
645
97 780
NIBD 31.12.2015E
21
Own shares (1.25m)
Equity value
Outst. shares
SOTP target per share
Grieg Seafood ASA, *) Coho area to be discontinued in 2015, Gold River and HOG plant included
7 January 2015
EV
Target
1 765
1 296
975
832
4 867
0
8
6
8
80
200
-320
4 850
1 445
35.8
3 441
111.7
31
6 January 2014
Risk assessment – Biological risks and fish health considerations
The sensitivity of GSF estimates to key assumptions is very high. A change of
NOK 1 per kilo in salmon price should represent an annual EBIT and CF effect of
around NOK 72m. GSF has increased CAPEX guidance and will maintain as a
geared company.
Potential fish disease outbreaks could always hit underlying earning and
region/local values in fish farming. GSF is however, diversified through four major
farming clusters in totally different geographical regions, and the company is
therefore to a certain degree hedged with regard to potential local/regional fish
disease outbreaks. GSF has reported on significant biological improvements in
the UK, but cost per kilo is still high due to active sea lice treatments.
Further, the summer time is as always high risk season for fish diseases in the
UK and Norway. The main biological risks in these regions are AGD, PD and sea
lice during 2Q and 3Q. Feed factor has been high in 2Q and 3Q14 as sea water
temperatures have been record high. The company has faced downgrades in
Finnmark.
Following the 2012 furunculosis outbreak at the Golden River fresh water smolt
facility in Canada, a number of actions and improvements have been
implemented to minimize the risk of similar disease outbreaks in the future. At 3Q
the company reported on that the Canadian entities should recover from 2Q15
onwards. GSF indicates close to 13’ t harvesting in 2015 (down from 15’ t). 2016
volumes should be higher. GSF will discontinue Coho in Canada from 3Q15.
7 January 2015
Page 41
Grieg Seafood ASA
Sector:
Date:
Next result:
Target
Recommendation:
P&L (MNOK)
Operation income
Associates/joint ventures
EBITDA
EBITDA-margin
Depreciation and amortisation
EBIT bef. adj.
EBIT-margin
IFRS biomass adjustments
EBIT (operation profit)
Assosiates (Salten Stamfisk AS)
Net financial items
Net agio/Derivatives
PTP
Calc. Tax
Net profit
Minority share
Mother company
Adjustments:
Biomass adjustments
Asset write downs
Net adjustments
NIBD
No of outst shares (mill)
EPS
EPS adj
CEPS
DPS
Multiples
EV/Sales
EV/EBITDA
EV/EBIT
P/E adj.
P/B
Farming Finnmark
Farming Rogaland
Farming Canada
Farming Shetland
Total farming volume
EBIT per kilo
Farming Finnmark
Farming Rogaland
Farming Canada
Farming Shetland
EBIT (NOK/HOG)
Farming EBIT
Farming Finnmark
Farming Rogaland
Farming Canada
Farming Shetland
Farming EBIT (NOK m)
Cash flow/kg fish harvested
Balance sheet (NOKm)
Total assets
Total equity
Total non-current liabilities
Total current liabilities
Equity ratio (covenant 35%)
Return on equity
NIBD
Aquaculture
06.jan.15
12.feb.15
31
Neutral
+ 23113027
Philip M. Scrase + 23113023
Shares outst.: 111.7m
Market cap (NOKm):
3 194
1 622
Enterprise value (NOKm):
4 816
OSEAX:
0.173
28.6
Price (NOK):
17.8
Equity ratio:
39 %
17
12 months High/Low: 29.8 / 17.5
2012
2 078
13
-30
-1 %
161
-191
-9 %
98
-93
-1
-116
7
-210
55
-147
0
-147
2013
2 425
6
484
20 %
136
348
14 %
267
616
2
-83
10
535
-114
431
0
431
2014
2 630
13
386
15 %
134
252
10 %
-244
8
3
-74
-1
-64
17
-47
0
-47
2015E
3 161
19
724
23 %
140
584
18 %
0
584
0
-79
0
505
-131
373
0
373
2016E
3 156
19
815
26 %
141
674
85 %
0
674
0
-79
0
595
-155
440
0
440
3Q13
585
0
109
19 %
33
76
13 %
3
80
1
-13
0
68
-15
52
0
52
4Q13
696
0
122
18 %
35
87
13 %
174
261
0
-17
0
244
-29
215
0
215
1Q14
624
2
173
28 %
32
140
22 %
-47
93
2
-22
-1
72
-15
57
0
57
2Q14
751
2
157
21 %
33
124
17 %
-196
-72
1
-12
0
-83
21
-62
0
-62
3Q14E
599
5
-29
-5 %
34
-63
-11 %
-2
-65
0
-20
0
-85
20
-65
0
-65
4Q14E
656
5
86
13 %
35
52
8%
0
52
0
-20
0
32
-8
23
0
23
1Q15E
779
5
214
28 %
35
179
23 %
0
179
0
-20
0
160
-41
118
0
118
98
-124
-46
-101
1 524
111.7
-1.32
-0.91
1.84
0.00
267
-31
191
240
1 441
111.7
3.86
2.15
2.84
0.00
-244
-119
-304
257
1 622
111.7
-0.42
2.30
2.18
0.00
0
0
0
373
1 445
111.7
3.34
3.34
4.45
0.00
0
0
0
440
1 259
111.7
3.94
3.94
5.03
0.50
3
-3
0
52
1 286
111.7
0.47
0.47
1.16
174
-20
133
82
1 441
111.7
1.93
0.73
-0.68
-47
-26
-63
119
1 374
111.7
0.51
1.07
1.16
-196
0
-147
84
1 296
111.7
-0.56
0.76
1.08
-2
-93
-94
30
1 359
111.7
-0.58
0.26
0.23
0
0
0
23
1 622
111.7
0.21
0.21
-0.29
0
0
0
118
1 573
111.7
1.06
1.06
1.42
1.7
8.4
11.7
10.9
1.3
1.8
12.5
19.1
12.4
1.6
1.5
6.4
7.9
8.6
1.2
1.4
5.5
6.6
7.3
1.0
20 080
19 247
13 576
17 097
70 000
23 076
15 088
6 739
13 158
58 061
26 266
12 603
6 237
19 889
64 995
21 000
19 500
13 000
16 000
69 500
23 200
16 000
15 000
14 000
68 200
5 556
3 099
2 815
2 483
13 953
5 735
2 617
878
6 765
15 995
5 775
2 138
1 053
4 129
13 095
7 958
5 397
1 685
3 910
18 950
6 933
2 068
2 899
4 850
16 750
5 600
3 000
600
7 000
16 200
5 000
4 000
3 000
4 000
16 000
-0.9
2.6
-2.4
-4.9
-1.2
9.4
9.6
-1.2
2.1
6.6
8.9
8.0
-3.9
3.6
5.9
12.0
7.4
9.5
6.5
9.0
12.7
8.3
12.3
7.3
10.5
9.6
12.9
-2.7
0.0
6.1
8.8
7.0
-13.4
6.3
6.2
15.9
9.5
-5.4
10.1
11.3
9.7
10.2
-5.1
2.3
7.0
4.0
7.6
-3.0
0.9
2.3
6.4
3.4
-2.1
2.4
3.8
15.3
10.9
9.9
9.9
11.8
-18
51
-32
-84
217
145
-8
27
233
101
-24
72
252
144
124
104
295
133
185
102
53
40
-8
0
50
18
-12
43
92
20
-6
42
77
55
-9
9
28
16
-9
4
36
10
-1
17
77
44
30
40
-83
2.9
2012
2 279
4 070
1 508
1 575
988
4 070
38 %
-6 %
1 524
205
-190
74
381
5.5
2013
2 354
4 591
1 989
1 614
988
4 591
44 %
14 %
1 441
317
-146
-249
381
3.7
2014
2 631
5 065
1 991
2 485
589
5 065
40 %
13 %
1 622
244
-373
399
624
7.2
2015E
2 849
5 490
2 594
2 307
589
5 490
48 %
16 %
1 445
497
-320
-90
132
39
6.3
1.5
Number of shares
55 801 409
22 188 238
6 605 998
6 542 802
2 928 197
2 610 000
1 305 901
1 250 000
1 000 000
850 742
10 578 713
62
-2.0
189
9.9
15.12.2014
50.0%
19.9%
5.9%
5.9%
2.6%
2.3%
1.2%
1.1%
0.9%
0.8%
9.5%
100%
714
86
99
8.2
9.2
-4.7
2016E Largest shareholders
3 066 Grieg Holdings AS
5 883 DNB Markets
3 231 Nordea Bank
2 063 Kontrari AS
589 Ystholmen AS
5 883 OM Holding AS
55 % State Street Bank
15 % Grieg Seafood ASA
1 259 Kvasshøgdi AS
562 SEB
-320 OTHER SHAREHOLDERS
-146 TOTAL SHAREHOLDERS
148
9.9
111 662 000
P/F
F Bakkkafrostt
4Q preview
p
Nextt results da
ate
Share data (NOK m)
Sectorr
Sell (Neutrral)
7 January 2015
24 February 2015
2
BAKKA
Aqu
uaculture
Reuterrs/ Bloomberg
BAKKA
Risk ra
ating
Medium
Outsta
anding shares (m
mill)
Market cap (NOK)
(
NIBD (NOK)
Enterp
prise value (NOK
K)
48.9
8 452
311
8 763
Free float %
81 %
Averag
ge volume (thou
us)
34.05
High/ low
l
52w
Weigh
ht OSEAX %
166.5 / 81.3
0.4855
Rel. Perf % (3/6/12 m
mts)
42
2/ 76/ 89
P
% (3/6/12 m
mts)
Abs. Perf.
38
8/ 77/ 98
New la
arge closed we
ell boat (450 t biomass)
b
into 3Q
Q2015 operations - This new
n
well
boat is
s also capable of delousing standing
s
biomas
ss
Prepa
ared by analystts:
Bent Rølland
sfinans AS
Fonds
TEL: +47
+ 23 11 30 27
7
br@fo
ondsfinans.no
Philip
p M. Scrase
Fonds
sfinans AS
TEL: +47
+ 23 11 30 23
3
ps@fo
ondsfinans.no
Share
S
Pricee: NOK 173
3 (07.01.20
015)
Target: NOK
N
144 (1
163)
Sea lice also at Faroe
F
Islands slo
owing grrowth and
d
increasing feed factor
f
– DKKNOK
K 1.24 (1.12)
Standing se
ea water biom
mass at Faroe Islands hhas never be
een higher th
han in
these days. Further, BA
AKKA reach
hed all time high smolt stocking in 2014,
mbination mo
ost likely has
s led to increeased sea lic
ce pressure at the
which in com
Faroe. In A
August BAKK
KA CEO ind
dicated morre sea lice at Faroe Isslands.
According to
o Norwegian
n aqua news
spapers the sea lice cou
uld be worrisome.
Our base ca
ase, we assu
ume that the economic fe
feed factor will
w increase ahead
a
and should also slow down the fa
arming grow
wth and put pressure on
o the
ght. BAKKA has large fissh strategy. Given
G
our up
pdated
average harrvesting weig
view, we asssume that the
t
2015 gu
uidance of 550 000 t HO
OG will be hard to
reach. We s tipulate 46 000
0 t HOG (8
8% below thee guidance).
AKKA should
d maintain itts attractive position in th
he US
On the posittive side, BA
and core Assian high end
d markets. BA
AKKA also hhas market access
a
to hig
gh end
Russian ma rkets, when the Norwegian companiees are locked
d out. BAKKA
A is in
cts securing stability.
possession o
of long term VAP contrac
As BAKKA is a DKK co
ompany, it will
w not gain due to wea
aker NOK likke the
S, measuredd in NOK, will
w all other factors
f
Norwegian ccompetitors. BAKKA EPS
equal, be do
own by 10%
% lately and around 20%
% last 3-4 months. Finallly, the
previous attrractive cost advantage of
o Havsbrún (the feed company) com
mpared
to other feed
d players ha
as started to diminish. H igher feed market
m
comp
petition
affects valua
ation of all fe
eed companies. The raw
w material prices will also
o climb
for Havsbrun
n. Bottom lin
ne, we estima
ate 2015 andd 2016 EPS adj. equal to
o NOK
15.5 and N
NOK 17.8. Given
G
highe
er biological risks at Faroe Islandss and
DKKNOK rratio, we conclude SO
OTP valuess of NOK 144, which
h also
correspondss to P/E (2016) of 8. We downgrade tthe BAKKA share
s
from Neutral
N
to Sell.
Key figures (DKK m)
Total revenues
EBITDA
EBIT bef. adj.
IFRS biomass adj.
PTP
EPS adj (DKK)
EPS adj (NOK)
DPS (NOK), 50%
NIBD (DKK)
Farming North
West/Viking
BAKKA farming (t)
Farming growth Y/Y
Havsbrun feed (t)
Internal feed Y/Y
VAP volumes
EBIT/kg (all incl DKK)
EV/Sales
EV/EBITDA
EV/EBIT
P/E adj.
P/B
NIBD (DKK)/kg
2011
1 321
402
335
-47
245
5.7
6.0
4.2
817
20 160
7 052
31 774
28 %
87 293
2012
2
1 856
6
403
3
323
3
91
1
323
3
5.3
3
5.3
3
1.0
0
807
7
23 533
3
19 075
5
44 341
1
40 %
91 398
8
2013
2 491
674
587
115
730
10.6
10.6
2.1
603
29 203
12 065
41 268
-7 %
85 333
2014E
2 589
864
769
-63
748
11.0
12.2
4.8
309
27 543
16 819
44 362
7%
84 584
2015E
2 417
895
798
0
808
12.6
15.5
6.0
539
3 000
30
1 000
16
4 000
46
4%
9 414
90
-7 %
4%
3%
10 %
12 824
-1 %
8.9
16 054
4
25 %
6.2
2
18 333
14 %
13.6
2.3
8.0
9.6
9.3
3.1
20 276
11 %
17.3
3.4
9.2
9.4
14.1
3.7
2 276
20
0%
17.3
3.8
8.3
9.3
11.2
2.7
15
7
12
2016E
4Q
Q13
2 544
6
667
1 023
1 49
923
1 26
94
0
932
1 74
2
2.3
14.5
17.8
2
2.6
6.8
382
6
603
30 000
8 1 05
18 000
2 992
9
48 000 11 097
0
4%
-15
5%
91 858 20 270
2
2%
-9
9%
20 276
5 033
0
0%
12
2%
19.2
11
1.3
3.5
7.1
7.9
9.7
2.2
1Q14
631
208
186
-114
118
2.4
2.6
476
321
8 948
9 269
12 %
13 956
-4 %
5 052
19 %
20.0
4Q14E 4Q15E
663
649
187
268
163
244
0
0
163
248
2.5
3.9
3.0
4.7
309
9 500
3 500
13 000
17 %
21 993
14 %
5 033
0%
12.6
237
8 500
4 000
12 500
35 %
14 788
9%
5 052
0%
19.5
8
FONDSFINANS AS, HAAKON VII’S GATE 2, P.O.B
BOX 1782 VIKA, N
+47 23 11 30
0 00, FAX: +47 233 11 30 03, mail@
@fondsfinans.no
NO-0122 OSLO, TEL:
T
This report was prepare
ed by an analyst employe
ed by Fondsfinans AS, th
he Norwegian affiliate of F
Fondsfinans Inc., who is not registered as a resea
arch analyst with FINRA or subject to FINRA rule
es governing research.
See page 56-.57 ofreport
this r for Important Disclosure Information.
Sea lice also at Faroe Islands – Hard to avoid when cultivating at full
capacity utilization
At 3Q14 BAKKA 2014 smolt stocking guidance was lowered to 10.7m
Further, BAKKA guides on stocking of 10.6m (11.6m) smolt for 2015 as the same
sites as in 2012 will be stocked again after fallowing. The reduction from the
previous guidance is due to postponement of some stocking to early 2015.
BAKKA has high end
suchi customers:
However, price
premium reduced from
+3 NOK/kg previously to
+1.5 NOK/kg in updated
reference model
Sea lice could affect the
high end quality and
average harvesting
weight
A new DKK 55m 2m capacity (100g) smolt plant was completed this summer,
implying some stocking of larger smolt next year. According to BAKKA, the new
plant increases the company’s internal smolt capacity, longer term, by around
30%. The smolt yield is better at Faroe than in Norway because of the absence
of MAB at The Faroe Islands. The sea water sites are also on average larger.
When having sea lice pressure, total biological risks should therefore be up.
Smolt transfer ('000)
Farming North (8)
Farming West (0), trout
Farming West, Salmon (7)
Viking Farming (2)
Faroe Farming (3)
Bakkafrost p.f.
Smolt Y/Y pf.
BAKKA (ex Faroe F)
Smolt Y/Y adj.
Adj Dec11/Jan12 delay (West)
Y/Y smolt releases
2007
3 500
800
1 200
0
0
5 500
2008
3 200
700
1 400
0
0
5 300
5 500
5 300
-4 %
2009
4 000
300
2 100
850
850
8 100
53 %
7 250
37 %
7 250
2010
4 100
2011
5 000
2012
6 500
2013
7 100
2014G
4 900
4 100
1 400
1 400
11 000
36 %
9 600
32 %
9 600
32 %
2 600
500
500
8 600
-22 %
8 100
-16 %
8 700
-9 %
4 200
2 400
5 800
10 700
24 %
10 700
32 %
10 100
16 %
9 500
-11 %
9 500
-11 %
10 100
0%
10 700
13 %
10 700
13 %
10 700
6%
2015G
10 600
-1 %
10 600
-1 %
10 600
-1 %
2015 BAKKA volume guidance at 50 000 t HOG – Could be hard to reach
when having sea lice pressure and large fish strategy
Guidance (pro forma)
HOG volumes
Farming North
Farming West
Viking Seafood p.f.
Bakkafrost pf
Volume growth Y/Y
Faroe Farming (49%)
Growth Y/Y (Faroe)
2011
20 160
7 052
4 562
31 774
28 %
4 595
28 %
2012
2013
2014E
2015E
2016E 2014G
2015
Guid
Guid
23 533 29 203 27 543 30 000 30 000
19 075 12 065 16 819 16 000 18 000
1 733
44 341 41 268 44 362 46 000 48 000 46 500 50 000
40 %
-7 %
7%
4%
4%
13 %
8%
4 300 5 800 5 000 5 000 5 000
-6 %
35 % -14 %
0%
0%
BAKKA volumes and estimates
The tables below summarise our Bakkafrost farming segment estimates.
Page 44
7 January 2015
P/F Bakkafrost – 4Q14 Preview
Farming volume (HOG t)
Sites
Farming North
9
West/Viking
7
Faroe Farming
Viking Seafood (incl in West)
Total volume
16
Volume growth Y/Y
EBIT/kg DKK
Farming North
West/Viking
Faroe Farming
Average EBIT/kg
BAKKA EBIT (DKK)
Farming North
Farming West/Viking
BAKKA upstream
Havsbrún
VAP
EBIT (all segments)
Elimination to EBIT/HQ
Op EBIT (ex IFRS)
2009
18 680
11 970
3 824
3 694
38 168
0%
2009
9.3
2010
13 834
7 792
3 600
3 148
28 374
-26 %
2010
20.8
2012
23 533
19 075
2013
29 203
12 065
2014E
27 543
16 819
2015E
30 000
16 000
2016E
30 000
18 000
13.7
14.8
15.5
2011
20 160
7 052
4 595
4 562
36 369
28 %
2011
11.2
2.1
4.2
3.1
8.6
1 733
44 341
22 %
2012
6.8
5.8
41 268
-7 %
2013
15.8
15.0
44 362
7%
2014E
13.4
16.7
46 000
4%
2015E
15.1
14.9
48 000
4%
2016E
17.1
17.1
3.4
3.9
5.9
2.1
6.2
15.6
14.7
15.1
17.1
2009
173
0
173
51
31
255
-51
204
2010
287
0
287
139
-40
386
-140
247
2011
226
14
240
-11
70
299
36
335
2012
159
111
270
60
37
367
-44
323
2013
461
181
642
102
-90
654
-67
587
2014E
370
280
650
142
58
850
-81
769
2015E
453
239
692
121
64
878
-81
798
2016E
514
309
823
103
78
1003
-81
923
As VAP customers are paying up from 1.1. 2014, we expect positive EBIT VAP
contribution in both 2014 and 2015.
Value added products
VAP revenues
VAP price/HOG kg
VAP volumes (HOG t)
VAP volume growth
VAP EBIT margin %
VAP EBIT/kg HOG (NOK)
EBIT VAP bef. elim (DKKm)
2009
359
32
11 297
34 %
9%
3.2
31
2010
473
37
12 908
14 %
-10 %
-3.8
-40
2011
507
40
12 824
-1 %
14 %
5.7
70
2012
526
33
16 054
25 %
-2 %
2.3
37
2013
666
36
18 333
14 %
-17 %
-5.4
-90
2014E
838
41
20 276
11 %
15 %
3.2
58
2015E
748
37
20 276
0%
9%
5.1
64
2016E
750
37
20 276
0%
10 %
4.7
78
Havsbrún
Feed volumes t
Feed volume growth Y/Y
Internal feed sales %
Feed EBIT margin %
EBIT/kg feed (DKK)
EBIT Havsbrún (DKK m)
2009
68 107
0%
n.r.
10 %
0.74
51
2010
60 250
-12 %
n.r.
24 %
2.31
139
2011
87 293
45 %
75 %
-2 %
-0.13
-11
2012
91 398
5%
67 %
7%
0.66
60
2013
85 333
-7 %
75 %
9%
1.19
102
2014E
84 584
-1 %
78 %
14 %
1.68
142
2015E
90 414
7%
80 %
10 %
1.34
121
2016E
91 858
2%
80 %
9%
1.12
103
7 January 2015
Page 45
BAKKA has three
smaller well boats
today: Only 50 to 80 t
capacity without
onboard delousing
capacity
New 450 t BAKKA well
boat into 2015
harvesting and
delousing capacity.
No use of local waiting
cages at HOG plant
Three BAKKA HOG
plants: Klaksvik,
Kollafjordur and
Strendur, where BAKKA
also harvests MHG fish
to be restructured
VAP plant at Glyvar to
be enlarged
Faroe Farming (49 %)
HOG plant at Vagur
UPDATED CAPEX PROGRAM
At 2Q BAKKA announced that its capex-program will be expanded from the initial
plans. Total 2014 and 2015 capex is now set at DKK 250m and DKK 550m (and
DKK 340m in 2016). The capex-program now include 2 new recirkulation
hatcheries of DKK 420m replacing several smaller ones. The new hatcheries will
produce large smolt (200-300 gram) reducing sea water exposure time and
biological risks. Longer term, BAKKA expects 10-15% increased farming capacity
as a result. Purchasing external smolt from Iceland will probably be discontinued.
We consider investments in smolt to be value creating.
According to the company the capex program will be revised on an annual basis.
At 2Q BAKKA confirmed that the new well boat is on scheduled to be delivered at
2Q15.
BAKKA SOTP below:
P/f Bakkafrost (DKK)
Farming North
Farming West/Viking
2015 EBIT 2015EBIT/kg
Volume Sites
Capacity* HOG/site EV/EBIT EV/kg cap (NOK) EV target (DKK)
453
239
15.1
14.9
30 000
16 000
9
7
37 000
28 000
3 333
2 286
7.5
7.5
113
79
3 400
1 793
Total farming (DKK)
692
Total VAP (2 factories)
64
Havsbrún Feed
121
FF Skagen incl Hanstholm (17%)
Pelagos pelagic offal plant (30%)
Faroe Farming (49%)
15.05
4.39
1.34
46 000
20 276
90 414
16
65 000
30 000
100 000
2 875
7.5
8.0
7.0
98
5 000
3
0.335
173
5 193
514
850
20
66
159
Own shares
220
6 000
65
Eliminations/HQ
-81
-1.82
7.5
Total Group EV (DKK)
798
13.24
7.8
NIBD 4Q15E
Equity value
Outst. shares
SOTP per share (DKK)
DKK/NOK
Target per share (NOK)
Source: Fondsfinans Research, *) No MAB-regime at Faroe (higher capacity than in Norway). Incl large smolt strategy
Page 46
7 January 2015
58
-604
6 256
539
5 717
48.9
117
123
144
P/F Bakkafrost – 4Q14 Preview
Risk assessment
The sensitivity of key assumptions is very high, with salmon prices being the key
factor. Fish diseases could always hit long term underlying values in fish farming.
In the Northern hemisphere, 2Q and 3Q is normally high season for potential fish
diseases (whereas the risk profile through the year is more or less reverse in
Chile).
Taxes at Faroe around
23% ahead (21%)
DKK NOK 124 (112 at
3Q) and 105 last
summer
Salmon prices around the world will differ from market to market. In Europe, fish
sales are primarily settled in EUR, while US sales are settled in USD. The larger
companies in the sector have EUR and USD debt in order to hedge FX risks. The
smaller companies in the sector are financed by NOK/DKK debt. Increased
DKKNOK ratio lately is clearly negative for BAKKA.
The biological risk at Faroe Island increases in summer and in 3Q/4Q when the
sea water temperatures and the density in the cages normally are at peak. At
Faroe Island there are no MAB-rules as in Norway, and the producers are on
average able to grow this fish larger as a consequence. Longer production time
in sea water as a consequence of sea lice could increase cultivation risks.
The main biological risks at the Faroe Islands are sea lice and AGD and ISA
outbreaks as a potential secondary consequence, ref recent 4Q13 AGD and
1Q14 ISA incidents. Increased activities within pelagic sector on Faroe Islands
next years (already started) could increase biological risks in aquaculture.
Pelagic fish could carry virus diseases. Finally, increased local boat traffic from
pelagic sector and others will probably also increase a lot next years.
7 January 2015
Page 47
P/F Bakkafrost
+23 11 30 27
Philip M. Scrase
Sector:
Date:
Next result:
Target (NOK)
Recommendation:
Aquaculture
173
Price (NOK):
07.jan.15 Book equity per share (NOK):
61
24.feb.15
Equity ratio:
59 %
144
34
Sell
12 months High / Low: 166.5 / 81.3
P&L (DKKm)
Operating income
Op EBITDA
Op EBITDA-margin
Depreciation and amortisation
Onerous contracts
Op EBIT (Ex IFRS)
EBIT-margin
IFRS biomass adjustments
EBIT (post IFRS)
Associates (Faroe Farming)
Net financial items
Net agio
PTP (EBT)
Taxes
Net profit
Minority share
Mother company (DKK)
Adjustments:
IFRS adj (onr. contracts and biomass
Asset write downs
Net adjustments
Net result (adjusted) (DKK)
EPS (DKK)
EPS adj (DKK)
EPS adj (NOK)
OpCEPS (DKK)
Capex/share (DKK)
DPS (DKK)
Multiples (NOK)
EV/Sales
EV/EBITDA
EV/EBIT
P/E adj.
P/B
Farming North
West/Viking
Total farming
Farming volume growth
EBIT per segment
Segment Farming EBIT (DKK)
Farming North
Farming West/Viking
Farming EBIT (DKK - upstream)
VAP EBIT op.
Havsbrún EBIT (feed, oil, meal)
Segment EBIT
Eliminations to EBIT
Group EBIT
Upstream Farming EBIT/kg (DKK)
Farming North
Farming West/Viking
Av. EBIT/kg DKK
Havsbrún (Feed, oil, meal)
Hafsbrun volumes, t
Feed volume growth
Feed EBIT margin
Value Added Products (VAP)
VAP volumes, HOG tons
VAP volume growth
VAP revenues
VAP EBIT margin (ex. eliminations)
All inclusive DKK/kg-margin
Cash flow per kilo fish
Balance Sheet, mill NOK
Total assets
Total equity
Total non-current liabilities
Equity ratio
NIBD (DKK)
Return on equity
+23 11 30 23
Shares outst.:
Market cap (NOKm):
OSEAX:
48.86m
8 452
365
8 817
0.486
2012
1 856
403
22 %
80
-46
323
17 %
91
368
-25
-18
-2
323
-56
267
0
280
2013
2 491
674
27 %
86
-25
587
24 %
115
678
27
-7
32
730
-138
591
0
591
2014E
2 589
864
33 %
94
71
769
30 %
-63
777
10
-39
0
748
-200
549
0
549
2015E
2 417
895
37 %
98
0
798
33 %
0
798
39
-28
0
808
-194
614
0
614
2016E
2 544
1 023
40 %
101
0
923
145 %
0
923
36
-27
0
932
-224
708
0
708
3Q13
741
208
28 %
22
67
187
25 %
-13
241
4
-6
9
248
-44
203
0
203
4Q13
667
149
22 %
23
-65
126
19 %
94
155
11
7
0
174
-36
138
0
138
1Q14
631
208
33 %
23
71
186
29 %
-114
143
-7
-9
-8
118
-31
87
0
87
2Q14
711
235
33 %
23
0
212
30 %
-10
202
10
-9
8
212
-86
126
0
126
3Q14E
584
233
40 %
24
0
209
36 %
60
269
0
-14
0
255
-44
211
0
211
4Q14E
663
187
28 %
24
0
163
25 %
0
163
7
-7
0
163
-39
124
0
124
1Q15E
649
268
41 %
24
0
244
38 %
0
244
11
-7
0
248
-60
189
0
189
44
-21
20
260
48.9
5.7
5.3
5.3
4.8
-1.4
1.0
91
0
73
518
48.9
12.1
10.6
10.6
10.6
-4.2
2.0
8
0
12
536
48.9
11.2
11.0
12.2
16.6
-5.2
4.5
0
0
0
614
48.9
13.3
12.6
15.5
12.9
-11.3
5.5
0
0
0
708
48.9
14.5
14.5
17.8
17.3
-7.0
6.3
54
0
44
159
48.9
4.2
3.2
3.5
2.7
-0.8
30
0
23
114
48.9
2.8
2.3
2.6
3.8
-2.0
-43
0
-32
119
48.9
1.8
2.4
2.6
2.2
-0.7
-10
0
-6
132
48.9
2.6
2.7
2.9
6.3
-1.5
60
0
50
161
48.9
4.3
3.3
3.7
5.7
-1.0
0
0
0
124
48.9
2.5
2.5
3.0
2.4
-2.0
0
0
0
189
48.9
3.9
3.9
4.7
4.5
-2.8
2.3
8.0
9.6
9.3
3.1
3.4
9.2
9.4
14.1
3.7
3.8
8.3
9.3
11.2
2.7
3.5
7.1
7.9
9.7
2.2
23 533
19 075
1 733
44 341
22 %
29 203
12 065
27 543
16 819
30 000
18 000
6 995
4 340
8 105
2 992
321
8 948
7 874
3 338
9 848
1 033
9 500
3 500
8 500
4 000
41 268
-7 %
44 362
7%
30 000
16 000
0
46 000
4%
48 000
4%
11 335
16 %
11 097
-15 %
9 269
12 %
11 212
6%
10 881
-4 %
13 000
17 %
12 500
35 %
159
111
4
274
37
60
371
-50
277
461
181
370
280
514
309
116
72
96
35
6
180
112
47
151
16
101
37
151
71
642
-90
102
654
-67
562
650
58
142
850
-81
769
453
239
0
692
64
121
878
-81
798
823
78
103
844
-81
923
188
-20
43
211
-24
187
131
-6
16
141
-15
126
186
-9
16
193
-7
186
160
20
51
231
-18
212
167
27
55
249
-40
209
138
20
20
178
-15
163
222
18
12
251
-7
244
6.8
5.8
2.1
6.2
15.8
15.0
13.4
16.7
15.1
14.9
17.1
17.1
16.5
16.5
11.8
11.8
20.1
20.1
14.2
14.2
15.3
15.3
10.6
10.6
17.8
17.8
15.6
14.7
15.1
17.1
16.5
11.8
20.1
14.2
15.3
10.6
17.8
91 398
5%
7%
85 333
-7 %
9%
84 584
-1 %
14 %
90 414
7%
10 %
91 858
2%
9%
31 961
20 270
13 956
18 827
29 808
21 993
14 788
10 %
6%
9%
18 %
19 %
7%
6%
16 054
25 %
526
7%
18 333
14 %
666
-14 %
20 276
11 %
838
7%
20 276
0%
748
9%
20 276
0%
750
10 %
4 196
15 %
148
-13 %
5 033
12 %
203
-3 %
5 052
19 %
232
-4 %
5 941
22 %
267
8%
4 250
1%
155
17 %
5 033
0%
184
11 %
5 052
0%
184
10 %
6.2
5.3
2012
1 198
1 373
2 571
1 263
990
2 571
49 %
807
21 %
234
-67
-159
13.6
12.5
2013
1 328
1 784
3 112
1 665
1 071
3 112
54 %
603
31 %
517
-204
-156
17.3
18.3
2014E
1 490
1 959
3 449
2 046
1 058
3 449
59 %
309
26 %
813
-253
-367
17.3
13.7
2015E
1 944
1 839
3 783
2 535
902
3 783
67 %
539
24 %
630
-552
-308
19.2
17.6
2016E
2 184
1 996
4 180
3 111
723
4 180
74 %
382
23 %
844
-340
-347
18.9
19.2
27.5
25.8
Number of shares
4 594 437
4 491 217
3 044 312
2 204 940
2 047 176
1 559 703
1 207 995
1 136 042
1 025 355
957 084
953 603
917 347
12.6
8.9
19.5
17.6
30.06.2014
9.4%
9.2%
5.0%
3.7%
2.3%
2.1%
2.0%
2.0%
1.9%
1.4%
1.4%
1.9%
16.5
11.3
11.5
16.9
Largest shareholders
Oddvør Jacobsen
Johan Regin Jacobsen
Spar Nord Bank
Danske Bank
SEB
JPMorgan, Luxembourg
JPMorgan
Morgan Stanley
Morgan Stanley
JPMorgan
State Street
JPMorgan
20.0
11.7
No
orway R
Royal Salmo
on ASA
A
Upda
ate
Nextt result:
7 Januaryy 2015
25 Februa
ary 2014
Share data (NOK m)
06.jan.15
Sectorr
uaculture
Aqu
NRS
Reuterrs/ Bloomberg
Medium
Risk ra
ating
43 572
Outst shares
s
(mill)
Market cap (mill)
1 743
(
NIBD (mill)
571
Enterp
prise value (mill))
2 314
Free float %
55 %
Averag
ge volume (thou
us)
87
High/ low
l
52w
66.0 / 30.5
Weigh
ht OSEAX %
0.1199
Rel. Perf % (3/6/12 m
mts)
31
1/ 42/ 24
P
% (3/6/12 m
mts)
Abs. Perf.
28
8/ 33/ 28
Estim ate ch
hg
2014E 2014 Old
2015E 2015old 20
014 % 2015 %
Revenues
2 681
2
2698
2 809
2 902
-1 %
-3 %
EBITDA
257
261
356
369
-1 %
-4 %
EBIT
219
223
313
326
-2 %
-4 %
PTP
166
170
332
345
-2 %
-4 %
5.36
-1 %
-4 %
4.79
EPS adj
Out. shares (m)
Farming Nortth (HOG t)
Farming Sou
uth (HOG t)
4
4.84
5.17
43.6
4
43.6
43.6
43.6
0%
0%
21 482
21 982
21 975
21 982
-2 %
0%
5 535
5 535
5 500
5 500
0%
Total volume
es
27 017
27 517
27 475
27 482
-2 %
0%
EBIT/kg North
10.07
0.01
10
11.71
12.25
1%
-4 %
EBIT/kg Soutth
Trading volu
ume
EBIT/kg sales
NIBD
Neutral
0%
3.11
3
3.11
9.00
9.18
0%
-2 %
63 490
63 490
64 125
64 125
0%
0%
-0.16
0.16
-0
0.10
0.10
0%
0%
467
464
448
431
1%
4%
NRS Målfrid
M
site boat in action
Prepa
ared by analystts:
Bent Rølland
sfinans AS
Fonds
TEL: +47
+ 23 11 30 27
7
br@fo
ondsfinans.no
Philip
p M. Scrase
Fonds
sfinans AS
TEL: +47
+ 23 11 30 23
3
ps@fo
ondsfinans.no
Share Pricce: NOK 65
5 (07.01.20
015)
Targett: NOK 60 (50)
Attractiv
ve longerr-term grrowth po
osition
On Decemb
ber 22 2014 the
t 20 region
nal (northernn Norway) grreen licensess were
oved, with NRS being aw
warded the 9 regional lic
censes for which
w
it
finally appro
was initially nominated. In total, NRS
S is thus awaarded 10 gre
een licenses in all.
ents an attra
active and significant lonnger-term gro
owth position
n, and
This represe
could also p otentially trig
gger interest from larger pplayers.
The nine ne
ew green lice
enses in reg
gion North arre part of a super green
n NRS
concept wh
here the com
mpany will start to prooduce sterile
e (triploid) salmon
al farming in region North
N
currenntly), reducing environm
mental
(conventiona
consequencces in the ev
vent of any fish escapes.. Despite imp
proved techn
nology
in recent ye
ears, the bio
ological risk related
r
to prroducing ste
erile salmon is still
likely to be somewhat higher
h
than for conventiional farming. NRS maintains
enges related to farmingg of sterile salmon are solved.
s
that the biollogical challe
ence in 1H 22015 the com
mpany reportts. We
Stocking of ssterile smolt is to comme
would not be
e surprised iff stocking is somewhat deelayed.
In total, we calculate NRS harvesting slightly uup for 2015 and 2016 (1 new
proved earlie
er), before th
he final nine licenses should take eff
ffect in
licenses app
2017-2018 h
harvesting. Following
F
the
e recent refinnancing, NRS
S has the ca
apacity
to lift necesssary capex and longer term workinng capital bu
uild-up. Cash flow
from operati ons will be good.
g
We expect NRS to repo
ort 4Q14 EB
BIT of NOK 41m. Follow
wing extraorrdinary
d high cost in
n both farmin
ng regions duuring 3Q, the
e overall biollogical
mortality and
status in No
orth has bee
en good, while, accordingg to the com
mpany, challenges
remain in So
outh. We es
stimate EPS adj. of arouund NOK 5.3
3 and NOK 6.3
6 for
2015 and 20
016. We conc
clude SOTP values of NO
OK 60 (50) per
p share.
Key figures (MN
NOK)
Total revenues
EBITDA
RS)
EBIT (before IFR
IFRS biomass ad
dj
PTP
Reported EPS
EPS adj.
40%)
DPS (60%; eq>4
NIBD
Farming North
Farming South
Total volumes
Volumes Y/Y
EV/ Sales
EV/ EBITDA
P/E adj
P/B
NIBD/kg
2011
2012
2013 2014E
2
2015E 2016E
1 734 1 744 2 604 2 559 3 236 3 396
71
180
368
434
61
290
45
140
322
388
30
256
28
-15
0
0
49
95
81
195
345
417
41
396
3.23
4.12
5.27
6.28
1.78
5.25
3.23
4.12
5.27
6.28
1.78
5.25
0.00
2.20
2.00
2.00
0.00
1.00
532
571
861
785
566
454
17 425 23 300 24 000
12 871 13 945 20 491 1
5 910 7 218 4 700 4 209 6 500 6 000
2 634 29 800 30 000
18 781 21 163 25 191 21
13 %
19 % -14 %
38 %
76 %
1%
1.3
1.1
1.1
18.9
10.0
8.3
24.3
11.5
9.3
15.8
12.3
10.3
3.0
2.4
1.9
26
29
26
4Q13
851
100
91
4
121
2.52
1.99
1Q14 4Q14E 1Q15E
695
741
731
96
52
92
87
41
81
-61
92
12
52
1.29
0.06
0.71
1.29
1.72
0.71
454
6 204
2 179
8 383
14 %
367
5 007
428
5 435
1%
571
4 700
0
4 700
-44 %
Source: Norway Royyal Salmon ASA, Fon
ndsfinans Research
FONDSFINANS AS, HAAKON VIII’S GATE 2, P.O. BOX 1782 VIKA, NO-0122 OSLO, TEL: +47 23 11 30 00, FAX: +47 233 11 30 03, mail@
@fondsfinans.no
This report was prepare
ed by an analyst employe
ed by Fondsfinans AS, th
he Norwegian affiliate of F
Fondsfinans Inc., who is not registered as a resea
arch analyst with FINRA or subject to FINRA rule
es governing research.
See page 56-57 of report
this r for Important Disclosure Information.
690
4 700
1 000
5 700
5%
Norrway Royal Saalmon ASA – 4Q14
4
Preview
w
Updated
d Norway
y Royal Salmon
S
e
estimate
es and va
aluation
Attractive fa
arming
distribution in Finnmark
ed biologicall
now (reduce
ving out of
risk as movi
ord)
the Alta - fjo
The table
es below sum
m up NRS fa
arming margins and volu mes and our estimates.
s ambitions o
of increasing the internal share of smoolt productio
on in Region
NRS has
ompany conffirmed plans
s of buildingg a new state-of-the-art
North. Att 2Q the co
ant in Finnma
ark together with a regional partner. Initial capac
city will be 5
smolt pla
mill smoltt, and the prroject will be set up as a 50/50 joint vventure with stand-alone
y to the new
OK 25 equity
w company according
a
to
financing. NRS will ccontribute NO
ogether with Wilsgård, staarted building increased
the CFO.. In addition, NRS has, to
capacity at the Skarrdalen Settefisk smolt plant in Trom
ms (egg deliveries from
Iceland).
Further, the new sea
s come into
ster in Snefj
fjorden in Fiinnmark has
a water clus
productio
g. Finally, a
on (S113G) and will con
ntribute to atttractive 201 5 harvesting
14G), which
new farm
at Sørøya in Finnmark was
ming cluster a
w stocked iin 2H14 (S01
onditions at
will contrribute to 20
016 volumes
s to the market. Winterr weather co
Sørøya are
a normally tough.
the
NRS has
he CEQ harv
s renewed th
vesting agre
eement at Haammerfest securing
s
late value
ger term, is seems
s
e chain. Long
that GSF,
G
CEQ aand NRS these days are
ogether (offlooking into building a new larg
ge processin
ng plant in F
Finnmark to
s
balance sheet
e).
in case
y
2015 harvessting slightly
up Y/Y
EBIT farm
ming (NOK/kg)
2010
Farming North (EBIT/kg)
9.82
Farming S outh (EBIT/kg)
10.91
Farming North (HOG t)
6 001
Farming S outh (HOG t)
4 677
NRS harve
esting
10 678
(NOK' 00
Farming EBIT
E
00)
Farming North
85 323
Farming S outh
51 007
EBIT (upsttream)
109 937
Norway Royal Salmon ASA* MAB
HOG volumes
s
MAB-cap. pe
er license
Region South (5)
7 500
842
Region North (29)
23 000
917
NRS volumes (35)
30 500
NRS volumes Y/Y
Region South Y/Y
Region North Y/Y
Group sales
Sale volumes Y/Y
NRS smolt sttocking (mill)
2011
3.58
-0.84
12 871
5 910
18 781
2012
1.6
65
0.8
80
13 94
45
7 218
21 16
63
-8 366
-4 957
41 170
750 343 200
22 174 251 574 188 087 293 7
14 115
54 0
000
70 800
5 74
46
42 429
750 414 000
81 294 003 202 202 347 7
28 78
2009
2 333
4 495
6 828
47 200
4%
Region South (mill smolt)
Region North (mill smolt)
NRS smolt sto
ocking
2013
12.28
9.03
20 491
4 700
25 191
2014E
10.79
3.35
17 425
4 209
21 634
2010
4 677
6 001
10 678
56 %
100 %
34 %
49 584
5%
2011
5 910
12 871
18 781
76 %
26 %
114 %
50 428
2%
2012
7 218
13 945
21 163
13 %
22 %
8%
57 673
14 %
2013
4 700
20 491
25 191
19 %
-35 %
47 %
62 141
8%
2014E
4 209
17 425
21 634
-14 %
-10 %
-15 %
61 788
-1 %
1 400
4 300
5 700
1 800
5 900
7 700
1 700
5 800
7 500
1 900
5 700
7 600
1 800
6 900
8 700
201
15E
12
2.61
8
8.31
23 3
300
65
500
29 8
800
2015E
6 500
23 300
29 800
38 %
54 %
34 %
62 406
1%
2016E
14.30
11.80
24 000
6 000
30 000
2016E
6 000
24 000
30 000
1%
-8 %
3%
63 654
2%
*) MAB capaccity on licenses in prod. around 30 50
00 t (Troms: ~1400
0 t/lic (5 in total), Fiinnmark : ~1100 t/liic - 14 in total)
Quarterly EB
EBIT
distribution per segmentt
e
(ex 3Q14 biiomass write
downs)
Page 50
EBIT farm
ming (NOK/kg)
3Q13
4Q
Q13
Farming North
12.05 12.78
Farming South
6.50
9.86
Harvesting
g volumes (t)
Farming North
4 254 6 204
2
Farming South
320 2 179
1
esting
NRS harve
4 574 8 383
3
NRS Volum
mes Y/Y
4%
8%
14
Farming EBIT
E
(NOK' 00
00)
Farming North
2
51 261 79 287
Farming South
2 080 21 4
485
ming
53 341 100 7
EBIT farm
772
7 January 2015
1Q14
18.71
15.40
2Q14
7.69
4.35
3Q14
4
5.00
0.84
4
4Q14E
10.00
4.90
1Q
Q15E
15.90
12.40
2Q15E
14.70
11.20
5 007
428
5 435
1%
3 275
2 107
5 382
-21 %
4 443
4
1 674
6 117
34 %
4 700
0
4 700
-44 %
4 700
1 000
5 700
5%
5 000
1 500
6 500
21 %
93 676
5 987
99 663
25 194
6 714
31 908
22 217
1 414
4
23 631
47 000
0
47 000
4 730
74
2 400
12
87
7 130
73 500
16 800
90 300
Fondsfina
ans Research
h
Norway Royal Salmon ASA – 4Q14 preview
10 new green licenses
from the government –
The last nine finally
confirmed in December
2014
Wilsgård awarded two
regional green licenses
in December 2014
Subsidiaries
Segment
NRS Finnmark AS
North
Nord-Senja Laks AS
North
Nord Seafood AS
North
NRS Feøy AS (prev 6 lic) South
Nord-Senja (green)
North
NRS Finnmark AS (green) North
Nord Seafood AS (green) North
Nord Senja Laks (green)
North
Sum licenses (subisdiaries)
Minority NRS licenses
NRS group licenses
County
Finnmark
Troms
Troms
Rog/Hord
Troms
Finnmark
Troms
Troms
Licenses Ownership
14
100 %
3
67 %
2
83 %
5
100 %
2
100 %
5
100 %
2
67 %
2
83 %
35
1.35
33.7
Minority holdings
County
Licenses Ownership
Wilsgård Fiskeoppdrett AS
Troms
6
38 %
Måsøval Fishfarm AS
Sør-Trøndelag
2
36 %
Hellesund Fiskeoppdrett AS
Aust-Agder
3
34 %
NRS minorities
11
Source: Norway Royal Salmon ASA, Fondsfinans Research
Superior HOG salmon
from NRS packed on
ice
Valuation approach
We value Norway Royal Salmon ASA based on a bottom-up approach where the
individual farming clusters and business units are valued separately. NRS reports
upstream segments included sales. As a consequence, we estimate negative
SOTP value on the sale office.
Based on our estimates, the table below sums up our 2015 SOTP valuation of
NRS.
SOTP of NOK 60 (50)
per share
SOTP - Norway Royal Salmon ASA
Licenses Ownership Volumes Capacity* EBIT/kg
EBIT
EV/EBIT
Farming Northern Norway
20
100 %
24 000
35 500
11.61
278 575
8.0
Farming South of Norway (5 licenses)
5
100 %
6 500
6 500
7.31
47 500
9.0
NRS farming (25 licenses)
25
100 %
30 500
42 000
10.69
326 075
8.1
NRS Sales (Kristiansand - 45 countries)
100 %
62 406
0.42
26 210
9.0
New recirk smolt plant in Finnmark - capex not yet committed
Total farming (upstream incl sales)
353 991
8.2
Wilsgård Fiskeoppdrett AS (Senja) incl 2 green lic
6
37.5%
4 914
7 200
Måsøval Fishfarm AS (Frøya)
2
36.1%
2 106
2 500
Hellesund Fiskeoppdrett AS ("Høvåg MAB")
3
34 %
2 340
3 300
included in upstream volumes
Hardanger Fiskeforedling AS (processing plant)
31 %
Ranfjord Fiskeprodukter AS (6m smolt flow through)
37.75 % For sale
5.5
Skardalen Settefisk AS (30% NRS/70% Wilsgård)
30 %
2.5
Espevær Laks AS (Bømlo processing plant)
38 %
Total associates
11
8 mill smolt 9 360
55 000
42 691
Tax losses carried forward, UB 2013=223m
184 224
New green licenses, to be developed (2017 vol)*
10
12 000
50
Total NRS EV (incl 10 new licenses)
35
352 286
EBIT adj (HQ, overhead)
-32 000
8.0
Minority holdings (Senja cluster)
1.35
Nor Seafood AS (82.5%), Nord Senja Laks AS (66.7%)
2015 dividend , not paid, incl in NIBD
31.12.2015 NIBD
Minority NIBD adj.
Own shares (TRS financed in DNB)
5%
Equity values
33.65
320 286
Outst NRS shares
100 %
Equity value per share (SOTP values)
Source: Fondsfinans, *) Long term capacity incl 10 new green licenses, rental harvesting in Region North
7 January 2015
EV
Impl EV/Kg
2 228 601
93
427 500
66
2 656 101
87
235 894
8
0
2 891 995
95
119 753
65
49 414
65
55 275
50
6 690
9 815
7 495
500
248 941
n.m.
60 210
500 000
3 701 146
-256 000
-150 431
87 144
860 586
-75 215
0
2 596 489
43 572
60
Page 51
Norway Royal Salmon ASA – 4Q14 Preview
Ten green licenses
awarded
Overview of the
enlarged NRS Group
(incl. associated
partners):
NRS subsidiaries
organised in two
clusters with 25 current
licenses: North (21) and
South (5)
Three minority
companies with 8
licenses
Head office in
Trondheim
NRS sales office in
Kristiansand for the
whole enlarged group
Sales for NRS and
associated partner
farmers with a total of
+90 licenses (NRS
should be a proxy for
the whole industry on
average)
Page 52
7 January 2015
Norway Roya
al Salmon ASA
A – 4Q14 prev
view
Region North
N
– NRS Troms (Senjja area)
Region North
N
– NRS Finnmark (S
Sørøya, Stjernøya, Årøyaa and Snefjorrden)
Region South
S
– NRS Rogaland/H
Hordaland (Haugesund/Esspevær area
a)
7 January 2015
Page 5 3
Norrway Royal Saalmon ASA – 4Q14
4
Preview
w
Page 54
7 January 2015
Fondsfina
ans Research
h
Norway Royal Salmon ASA
Sector:
Date:
Next result:
Target
Recommendation:
Aquaculture
06.jan.15
05.nov.14
60
Neutral
TNOK
Operation income
EBITDA
EBITDA-margin
EBIT pre fair value
EBIT-margin
IFRS adj
EBIT
Income assosiates (NRS share)
Share profit associates/other adj.
Other financial items
Result before tax
Income tax
Net profit
Minority share (Senja)
Mother company
EPS adj.
CEPS
Cash flow/kg fish
DPS
Multiples:
EV/Sales
EV/EBITDA
EV/EBIT
P/E adj
P/B
Farming North
Sales revenues
EBIT ex IFRS
Volume harvested (HOG)-fish
Price/kg
Op EBIT/kg
Farming South
Sales revenues
EBIT ex IFRS
Volume harvested (HOG)-fish
EBIT/kg
NRS sales (incl external vol)
Sales revenues
EBIT ex IFRS (allocated to upstream)
Volume sold-trading
Trading volumes, Y/Y
EBIT/kg (sales volumes)
NRS Group
Total harvesting
Group EBIT/kg
Group EBIT/kg (incl sales)
Impl cash flow/kilo fish
Balance sheet (TNOK)
Total assets
CF operations
Op.CF (NOK/kg fish)
CF Investments
CF financing
Cash (closing balance)
NIBD
Equity ratio (35% cov.)
Return on equity
Philip M. Scrase
65.0
Price (NOK):
21.5
Equity ratio:
43 %
87
12 months High / Low: 66.0 / 30.5
2012
2013
2014
2015
2016
1 744 266 2 603 712 2 559 416 3 236 307 3 395 608
60 783 289 729 179 919 367 731 434 105
3%
11 %
7%
11 %
13 %
30 334 256 000 140 114 321 991 388 365
2%
10 %
5%
10 %
11 %
49 428
94 725
-14 597
0
0
79 762 350 725 125 517 321 991 388 365
10 464
28 834
37 434
42 691
47 004
-9 919
37 827
51 928
0
0
-39 559
-21 096
-20 365
-19 700
-18 200
40 748 396 290 194 514 344 981 417 169
-9 129
-80 487
-32 128
-89 695 -108 464
31 619 315 803 162 386 255 286 308 705
3 428
13 371
17 745
45 531
53 196
28 191 302 432 144 641 209 755 255 509
43 572
43 572
43 572
43 572
43 572
1.78
5.25
4.12
5.27
6.28
-0.1
4.9
3.8
3.3
6.0
-0.1
8.4
7.7
4.8
8.7
0.0
1.0
2.2
2.0
2.0
2012
350 815
23 035
13 945
25.2
1.65
2012
190 336
5 746
7 218
0.80
2012
1 649 097
23 414
57 673
14 %
0.41
Shares outst.:
Market cap (NOKm):
NIBD (NOKm):
Enterprise value (NOKm):
Weigh OSEAX:
43 572m
1 743
571
2 314
0.1199
4Q13
851 450
100 324
12 %
91 367
11 %
4 228
95 595
13 566
18 795
-7 173
120 783
-8 155
112 628
2 805
109 823
43 572
1.99
1.1
10.1
1Q14
695 371
96 305
14 %
87 057
13 %
-61 254
25 803
2 522
-11 200
-4 817
12 308
-5 666
6 642
3 947
2 695
43 572
1.72
0.9
4.5
2Q14
595 727
36 232
6%
26 545
4%
-13 022
13 523
7 889
57 470
-5 087
73 795
-2 278
71 517
3 984
67 533
43 572
0.53
2.3
18.8
3Q14
527 311
-4 138
-1 %
-14 573
-3 %
59 679
45 106
11 263
5 658
-5 461
56 566
-10 704
45 862
2 529
43 333
43 572
-0.51
1.1
9.0
4Q14E
741 007
51 520
7%
41 085
6%
0
41 085
15 760
0
-5 000
51 845
-13 480
38 365
7 285
31 080
43 572
0.71
-0.3
-2.5
1Q15E
730 894
91 977
13 %
80 542
11 %
0
80 542
16 044
0
-5 000
91 586
-23 812
67 773
11 583
56 190
43 572
1.29
0.7
6.5
4Q13
235 380
79 287
6 204
37.9
12.78
4Q13
86 899
21 485
2 179
9.86
4Q13
845 972
-657
19 858
10 %
-0.03
1Q14
219 903
93 676
5 007
43.9
18.71
1Q14
20 818
5 987
428
15.40
1Q14
692 845
-7 635
13 978
3%
-0.55
2Q14
117 848
25 194
3 275
36.0
7.69
2Q14
75 283
6 714
2 107
4.35
2Q14
592 539
-6 252
14 253
-7 %
-0.44
3Q14
149 921
22 217
4 443
33.7
5.00
3Q14
60 402
1 414
1 674
0.84
3Q14
512 617
5 585
12 706
-5 %
0.44
4Q14E
194 580
47 000
4 700
41.4
10.00
4Q14E
0
0
0
4.90
4Q14E
863 227
2 085
20 851
5%
0.10
1Q15E
229 830
74 730
4 700
48.9
15.90
1Q15E
48 900
12 400
1 000
12.40
1Q15E
690 359
1 412
14 118
1%
0.10
21 634
29 800
30 000
8 383
5 435
5 382
9.3
11.7
13.8
12.0
18.3
5.9
6.5
10.8
12.9
10.9
16.0
4.9
7.7
4.8
8.7
4.5
18.8
9.0
2014E
2015E
2016E Shareholders
1 010 202 1 343 993 1 431 449 Gåsø Næringsutvikling AS
1 150 255 950 630 1 037 731 Glastad Invest AS
2 160 457 2 294 623 2 469 180 Egil Kristoffersen og sønner
2 160 458 2 294 624 2 469 181 Havbruksinvest AS
166 230 142 504 260 445 Måsøval Eiendom AS
7.7
4.8
8.7 SpareBank 1 Markets
-165 893 -334 000
-80 000 DNB, egenhandel (TRS)
-23 138
-98 130 -105 344 Nyhamn AS
30 932 -258 693 -183 592 Hellesund Fiskeoppdrett AS
570 961 860 586 785 485 DNB SMB
43 %
51 %
60 % Lovundlaks AS
16 %
20 %
19 % Wilsgård Fiskeoppdrett AS
Total outst. shares
6 117
3.9
-2.4
-2.5
4 700
10.0
8.7
6.5
06.jan.15
6 475 494
5 632 014
4 568 379
3 618 940
3 540 476
3 063 448
2 585 184
2 184 541
1 581 941
1 210 358
1 026 268
481 001
43 572 191
5 700
15.3
14.1
2.0
%
15 %
13 %
10 %
8%
8%
7%
6%
5%
4%
3%
2%
1%
100 %
0.8
1.3
1.1
1.1
7.6
18.9
10.0
8.3
8.6
24.3
11.5
9.3
7.6
15.8
12.3
10.3
2.0
3.0
2.4
1.9
2013
2014E
2015E
2016E
758 583 682 252 1 049 050 1 111 200
251 574 188 087 293 750 343 200
20 491
17 425
23 300
24 000
37.0
39.2
45.0
46.3
12.28
10.79
12.61
14.30
2013
2014E
2015E
2016E
177 391 156 503 291 250 277 800
42 429
14 115
54 000
70 800
4 700
4 209
6 500
6 000
9.03
3.35
8.31
11.80
2013
2014E
2015E
2016E
2 446 240 2 661 228 2 836 574 2 947 175
-19 087
-6 217
6 241
6 365
62 141
61 788
62 406
63 654
8%
-1 %
1%
2%
-0.31
-0.10
0.10
0.10
21 163
25 191
1.4
11.7
1.4
10.2
-0.1
8.4
2012
2013
800 653 850 721
874 873 1 200 892
1 675 526 2 051 613
1 675 526 2 051 584
-2 592 211 835
-0.1
8.4
-36 970
-24 347
43 211 -143 609
9 854
53 733
566 075 453 881
36 %
42 %
5%
41 %
+23 11 30 27
+23 11 30 23
Definitions of ratings
Buy
Low risk: with a potential of min 5%. Medium risk: with a potential of min 10%. High risk: with a potential
of min 20%.
Neutral
Low risk: -5% to +5%. Medium risk: -10% to +10%. High risk: -20% to + 20%.
Sell
Low risk: min 5%. Medium risk: min 10%. High risk: min 20%.
Risk ratings are based on price volatility, fundamental criteria and perceived risk. Ratings are: Low (L), Medium (M) and High (H).
Target: Our valuation as of today.
Time frame of target: Target is what we value the share as of today.
Recommendation distribution as of 16.12.14:
Companies in each recommendation category that have been
investment banking clients over the past 12 months:
Recommendation
Buy
Neutral
Sell
Total
Recommendation
Buy
Neutral
Sell
Total
No
46
18
4
68
Percent
68 %
26 %
6%
100 %
No
4
0
0
4
Percent
9%
0%
0%
Our intention is to issue preview and update research on a quarterly basis.
Our investment recommendation is elaborated in accordance with “The Norwegian Securities Dealers Associations” standards.
This report has not been sent to the companies for correction of any factual errors.
Fondsfinans is organized with Chinese walls between the Corporate Department and the Research/Broking Department. In addition,
Fondsfinans has internal instructions and guidelines for handling sensitive information.
The analysts receive compensation that is impacted by overall firm profitability, including investment banking activities.
Fondsfinans is under supervision of The Financial Supervisory Authority of Norway.
Ownership per 04.01.15 in Marine Harvest ASA:
Analyst (including his/her closely related persons or companies):
0, corresponding to 0% of the company share capital
Employees (including their respective closely related persons or companies):
0, corresponding to 0 % of the company share capital
Group Fondsfinans (including the holdings of its Chairman, his spouse and their closely related companies, Erik Must AS and its 100%
controlled subsidiaries):
17.000, corresponding to 0% of the company share capital
Fondsfinans do not act as market maker in Marine Harvest ASA.
Fondsfinans has not acted as corporate adviser, lead manager in IPO etc. during the past 12 months.
The recommendation has not been changed from NEUTRAL. The previous recommendation was issued 23.10.14
Ownership per 04.01.15 in Grieg Seafood ASA:
Fondsfinans is acingt as market maker in Grieg Seafood ASA.
Ownership per 04.01.15 in Lerøy Seafood Group ASA:
Fondsfinans do not act as market maker in Lerøy Seafood Group ASA.
7 January 2015
Page 56
Ownership per 04.01.15 in SalMar ASA:
Fondsfinans do not act as market maker in SalMar ASA.
Ownership per 04.01.15 in Bakkafrost:
Fondsfinans do not act as market maker in Bakkafrost.
The recommendation has been changed from NEUTRAL to SELL. The previous recommendation was issued 29.10.14
Ownership per 04.01.15 in Norway Royal Salmon ASA:
Fondsfinans do not act as market maker in Norway Royal Salmon ASA.
Fondsfinans may hold shares in the companies as a result of daily trading/market making. Information on such holdings is not given
when of non-significant value.
This report was issued and distributed 07.01.2015.
DISCLAIMER
This report is provided for information purposes only. It should not be used or considered as an offer to sell or a solicitation of an offer to buy any securities. Any opinions expressed
are subject to change without prior notice. This report is based on information from various sources believed to be reliable. Although all reasonable care has been taken to ensure
that the information herein is not misleading, Fondsfinans AS makes no representation or warranty expressed or implied as to its accuracy or completeness. Neither Fondsfinans
AS, its partners and employees, nor any other person connected with it, accepts any liability whatsoever for any direct or consequential loss of any kind arising out of the use or
reliance on the information in this report. This report is prepared for general circulation and general information. It does not take into account the specific investment objectives and
financial situation of any recipient. Investors seeking to buy or sell any securities discussed or recommended in this report, should seek independent financial advice relating thereto.
This report may not be distributed, quoted from or reproduced for any purpose without written approval by Fondsfinans AS.
DISCLOSURE OF INTERESTS
Fondsfinans AS is constantly seeking investment-banking mandates, and may at any time perform investment banking or other services or solicit investment banking or other
mandates from the company or companies covered in this report. Fondsfinans AS may from time to time as part of its investment services hold positions in securities covered in this
report. Under our internal regulations, our analysts are not permitted to purchase new securities in the companies they cover. Holdings are specified as part of shareholder
information in each report.
DISTRIBUTION IN THE US
Research reports are prepared by Fondsfinans AS for information purposes only. Fondsfinans AS and its employees are not subject to the Rules of the Financial Industry
Regulatory Authority (FINRA) governing research analyst conflicts. The research reports are intended for distribution in the United States solely to “major U.S. institutional investors”
as defined in Rule 15a-6 under the United States Securities Exchange Act of 1934, as amended and may not be furnished to any other person in the United States. Each major U.S.
institutional investor that receives a copy of a Fondsfinans AS research report by its acceptance thereof represents and agrees that it shall not distribute or provide copies to any
other person. Reports are prepared by Fondsfinans AS and distributed to major U.S. institutional investors under Rule 15a-6(a)(2). These research reports are prepared by
Fondsfinans ASA and distributed in the United States by Fondsfinans Inc. under Rule 15a-6(a)(2). Any U.S. Person receiving these reports that desires to effect transactions in any
securities discussed within the report should call or write Fondsfinans Inc., a member of FINRA.
Page 57
7 January 2015

Salmon farming – Fondsfinans Aquaculture Sector Report

Transcription

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