Nordea complains pricing of salmon sector is too low

Kolbjørn Giskeødegård, equity analyst at the Nordic financial services group Nordea, believes his salmon forecasts have been too conservative. Now he sees Marine Harvest (buy/NOK 235) as “top pick of the sector.”

Giskeødegård has today ddistributed a new 56-page sector report. In it, he raised both the price path for salmon and stock valuation.

“For 2019, we now expect lower y/y supply growth and a further increase in salmon prices. Our new price forecast for 2019-21 is NOK 64 (up from NOK 62) per kilo. We also argue that the sector valuation is too low,” wrote the experienced equity analyst in the report.

Read also: Stock market dips, but salmon stocks performing better than rest of the market

In light of this, Giskeødegård proposed a new approach to valuing salmon shares on Oslo Stock Exchange.

“The average P/E for 2019E on our estimates is 11x, which is fine for a cyclical sector, but given the stable average prices over a five-year period including 2019-20 forward prices, we argue that the sector should be valued more in line with a Food and Beverage peer group,” he added.

“In our SOTP valuation, we hence increase our targeted EV/ EBIT from 9x to 10x for most of the companies under our coverage. As a result, we raise our target prices by an average of 15% and highlight Marine Harvest (Buy/NOK 235) as our new top pick in the sector,” Giskeødegård concluded.


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