“The auction price was lower than we expected”

SalMar dominance in Norwegian salmon growth auction.

SalMar CEO Gustav Witzøe paid out EUR 167 million in yesterday’s auction arranged by the Norwegian Ministry of Trade, Industry and Fisheries.

Sparebank1 Markets’ analyst Christopher Robin Vinter is not surprised of the SalMar dominance.

“As we have argued before, we believed Salmar would have the highest willingness to pay for new licenses. The results are out, and Salmar purchased a total of 8.06kt MAB (maximum allowed biomass) capacity. There was a total of 27.19 MAB available in the auction, which means that Salmar purchased 30% of all volume. NRS and NTS also purchased capacity in the auction, 1.05kt and 1.1kt respectively,” Vinter wrote in a note Wednesday morning.

“Combining the MAB purchased from the fixed and the auction round, and they achieve a license utilization on new capacity equal to estimated 2020e utilization, we estimate that Salmar could increase harvest volume by 8.4%, NRS by 4.4%, and NTS by 10%.”

Based on this Vinter argued that SalMar is trading on a discount at the Oslo Stock Exchange.

“We have previously argued that the market will could change the perception of Salmar if the auction shows a willingness to pay for further growth and the offshore farm development continues. The result from the auction strengthens our belief that Salmar should trade a premium to the sector and more in line with Bakkafrost. Based on 12m fwd P/E, Salmar now trades in line with the sector and at a 15% discount to Bakkafrost.”

“The auction price was lower than we expected. We find that the average price paid per t. paid was NOK 217m (EUR 20.6 million), or NOK 170m (EUR 16.1 million) for a standard 0.78kt license,” Vinter wrote.


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