Financial adviser slashes Atlantic Sapphire’s price target

Aslak Berge

Extensive problems related to salmon maturation mean that Arctic Securities lowers the price target from NOK 175 to NOK 130.

The corporate-heavy investment bank said in an analysis Thursday that its price target is being lowered, but highly experienced equity analyst Thomas Lorck is still maintaining a BUY recommendation on Atlantic Sapphire.

Lorck wrote that Atlantic Sapphire’s harvest volumes in the first quarter of the year were “disappointing due to maturation challenges.” This means declassification of fish and lower selling prices. The company harvested only 421 tonnes of salmon in Miami in the quarter – far below Lorck’s expectation of 1,500 tonnes.

60 per-cent maturation
However, Lorck has confidence in the company’s management, writing that it has “addressed all challenges” that “will be implemented and fixed during Q2.”

“Both volume, realized price and costs were characterized by a high degree of maturation, which is expected to improve in the second batch where maturation is currently less than ten per-cent compared to 60 per-cent in Q1,” he said.

Arctic Securities has close ties to Atlantic Sapphire. The investment bank was a financial adviser in connection with the company’s IPO. Arctic has also worked as a market maker to strengthen equity liquidity. Furthermore, Arctic has received fees for banking services from the company, albeit not in the last 12 months.

Atlantic Sapphire is a popular stock with the bankers at Arctic Securities. The disclaimer in the analysis also stated that “Arctic may have positions in the company”.

Arctic Securities is known for very flexible internal rules with ownership. According to the newspaper Dagens Næringsliv, three Arctic investment bankers have bought shares in the company Vaccibody, worth EUR 19 million, while Arctic has helped the company raise over EUR 50 million.

After it became known, the Financial Supervisory Authority of Norway (the agency responsible for the supervision of financial companies) initiated investigations into Arctic Securities employees’ own trading.

USD 50-100 million share issue needed
Another investment bank with coverage on Atlantic Sapphire, Fearnely Securities, wrote in an update that the company “missed all parameters.” Fearnely pointed out that harvest volumes were low, in both the US and Denmark, due to high sexual maturation. “This also affected growth,” the analysis stated.

Furthermore, Fearnley added that the price attainment was weak, as a function of a high degree of sexual maturation.

“Overall, a very disappointing update from the company,” Fearnley wrote, adding a USD 50-100 million share issue was needed for completion of Stage 2 construction in Miami.

“The update gives us the impression that the learning curve will be flatter and longer than originally planned, which will affect the short-term profitability of Atlantic Sapphire’s facilities,” wrote the investment bank, which has set the price target of NOK 162 under reassessment.

Atlantic Sapphire’s share price ended Thursday’s trading at NOK 90 after falling 21.9 per-cent.


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