Financial valuation of Norway Royal Salmon
Master thesis
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Date
2017Metadata
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- Master of Science [1684]
Abstract
Initiating coverage
Share price: NOK 131
Recommendation: Buy
Target price: 170
Key facts
Number of shares (millions) 43.57
Market cap NOK (millions) 5708
Share price NOK 131
Ticker NRS
Stock exchange Oslo Børs
Norway Royal Salmon
Attractive investment case
We see a 30% upside from current share
price to our target price. Until 2021, we
see revenues growing by 22%, whilst
operational costs growing by 28.5%. By
our estimates, we see group EBIT
peaking in 2018, before coming down due to lower prices and costs outpacing
revenue growth.
Our target price of 170 reflects a value per share of 167 NOK for the current
operations, and an additional 3 NOK per share for the development license
project.
NRS faces three main risks. Price risk, cost risk, and disease and escape risk.
Prices are likely to continue to remain strong due to restricted supply growth for
the foreseeable future. Costs have climbed at worrying levels for the past years.
We believe this will continue, but at a slower pace in the coming years. As for
disease and escapes, NRS is not immune, but this risk generally is not as bad as
the media makes it out to be. For instance only a total of 24 salmon (!) have
escaped so far in 2017 according to the Directorate of Fisheries.
We caution investors not to underestimate the effect of costs rising at a rapid rate
the same way oil and gas did recently. A drop in prices will leave a lot of farmers
vulnerable, including NRS.
Millions of NOK 2016 2017E 2018E 2019E 2020E 2021E
Operational revenue 4 224 4 632 4 876 4 966 5 068 5 172
Total operating expenses -3 584 -3 908 -4 119 -4 272 -4 447 -4 606
Operational EBIT 641 725 757 695 621 566
Income from associated companie s 72 80 83 76 68 62
Group EBIT 712 804 840 771 689 629
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2017