Eight investment banks have coverage on five land-based salmon farmers. Not one has negative recommendations

Aslak Berge

Cloudless skies for land-based?

The production problems of Atlantic Sapphire, collectively falling share prices and Proximar Seafood’s bond hunting point in one direction: land-based salmon farming is risky. Nevertheless, of the eight investment banks that have coverage on shares in this segment, there is not a single SELL recommendation.

In fact, there is only one neutral recommendation to make, SEB which has a HOLD on Atlantic Sapphire.

Otherwise, there are only BUY recommendations. On all five stocks. This is from transcripts SalmonBusiness has obtained from Bloomberg.

Most popular, of course, is the locomotive and pioneering company, Atlantic Sapphire. Here, the price targets vary between NOK 92 (SEB) and NOK 175 (Nordea Markets). Seven out of eight investment banks have a positive recommendation. When the stock exchange closed on Tuesday afternoon, Atlantic Sapphire was last traded at NOK 86.80.

Taking into account price developments over the past year, the investment banks’ equity advice has not exactly been accurate.

Proximar Seafood, which went public this winter without sufficient funding, has had to endure seeing its share price halve in just over two months. The company is now hunting for a EUR 60 million bond at an interest rate between nine and ten per-cent.

That doesn’t stop Pareto Securities and ABG Sundal Collier from having BUY recommendations. Both price targets indicate that Proximar is a doubling candidate.

High risk
“We cover three of the land-based ones that you probably see, and have as you say the BUY recommendation on all of them. There is obviously a high risk in these cases, but if they succeed there is also a very high upside. We, therefore, believe risk/reward is beneficial, which is why our recommendations are positive,” explained Pareto analyst Carl-Emil Kjølås-Johannessen.

“On the other hand, we are very clear that the risks of buying Lerøy, Mowi, SalMar or Bakkafrost are much lower, but it is also the potential upside (and downside),” he added.

Analyst Christoffer Robin Vinter, of Sparebank1 Markets, has a BUY recommendation on all four stocks he covers (he does not have coverage on Proximar Seafood).

They are the only bank covering Nordic Aqua Partners, which is building a land-based fish farm in China. The recommendation is BUY the price target is NOK 160. The stock has last traded at NOK 61, after a fall of NOK 33 since the beginning of January.

Winter has not returned a request for comment.

Former equity analyst and current asset manager at First Fondene Thomas Nielsen is concerned with integrity and the ability and willingness of analysts to give good advice. However, he does not wish to comment on the above issue, saying that there are only positive recommendations in a risky sector such as land-based salmon farming.

“No, those who follow them have to answer for themselves, I think,” Thomas Nielsen told SalmonBusiness. “I don’t base my decisions on analysts anyway, so what they think is not important to me,” he added.

“If investors in the sector, in this case, think the recommendations are “obviously corporate-driven” then?

“I’ve been an analyst myself (and so have you as far as I know), and I’ve been bearish on several corp cases when I worked at Pareto without ever having a problem. In any case, it is the investors who decide, regardless of what a single analyst thinks. Everyone has to make their own assessment,” said Nielsen.


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