SalMar ASA : Strategic analysis and valuation

Abstract

The objective of this thesis is to estimate the theoretical value of equity for SalMar ASA and thereby the value per share at 27.11.2017. Fundamental valuation through a two-stage discounted cash flow model is chosen as the main method, while a valuation using comparable firms is performed as a supplement. In the fundamental valuation I have estimated the enterprise value by discounting the expected future cash flows to present value. To find the value of equity, the net-interest bearing debt is subtracted from the enterprise value. The first part of the thesis provides a presentation and analysis of the fish farming industry and SalMar. It shows that the largest opportunities for the industry lies in technological development, which can among other things contribute to reduce salmon lice. The analysis of SalMar´s internal resources shows that SalMar do not possess many resources considered to give sustainable competitive advantages. In general, the resources can be imitated and SalMar has a temporary competitive advantage at best. In the second part of the thesis a financial statement analysis of SalMar and the industry is performed. It proves an industry that is currently enjoying good times, but also an industry with several risks involved. The thesis then moves on to estimate a weighted average cost of capital based on estimates of risk-free rate, beta, market risk premium and debt cost of capital. The weighted average cost of capital and thus the factor used to discount the future cash flows is calculated to be 5,14%. In the third part of the thesis, a forecast is performed based on historical numbers and insights from part one and two. The forecast builds the foundation for the last part where the valuation is completed with the discounted cash flow model. The uncertainty of my value estimate is then clarified through sensitivity analyses, a Monte Carlo simulation, and a scenario analysis. The value per share is assessed to be 234 NOK, which results in a hold-recommendation.