Valuation of VOW ASA : a fundamental analysis of a company turning waste into value

Abstract

The aim of this thesis is to obtain an unbiased target price of Vow ASA by applying a three-stage weighted average cost of capital model, supported by a relative valuation approach. We conduct a thorough analysis of key aspects with the industries they deliver solutions to and significant company-specific factors. Necessary assumptions based of the analysis are made to forecast future performance of the company and to finally carry out the valuation. Based on the global environmental “mega-trend” in the cruise and aquaculture market, companies delivering solutions to environmental problems have experienced substantial growth in demand the recent years. Driven by governmental pressure, higher prices of carbon, and an increased focus on sustainability, these trends are expected to continue. Having experience, a solid customer base and well-developed technology Vow ASA is well positioned in these markets. With a record high backlog, containing cruise, aquaculture and land-based projects Vow is set to continue and possibly accelerate their growth going forward as they are entering new land-based industries. Taking these factors into account our fundamental valuation yields an estimated share price of NOK 19.6 for Vow ASA. Supported by a relative EV/EBITDA and Price/sales valuation, the analysis indicates a downside to the quoted stock price. Although the results contain a great amount of uncertainty which is revealed through a sensitivity analysis, we conclude that Vow is currently overvalued, and we would as of 31/12-2019 come with a sell recommendation. Due to the impact the Covid-19 virus had on the stock market and expected future revenue streams we have chosen to do the valuation based on the stock price and available data as of 31/12-2019. Events that took place in the winter/spring of 2020 will be addressed to further confirm or disconfirm our final price target.