A Strategic Analysis & Fundamental Valuation of SalMar ASA

Abstract

This master thesis, in the field of Management Accounting and Financial Economics, was written with the purpose of finding the intrinsic value of SalMar ASA’s equity at 31.12.2015. The price per share of SalMar was 155.00 NOK at 31.12.2015. We chose this date for our valuation as it coincided with the latest available annual report. The valuation was done through a fundamental approach using the discounted cash flow model and the economic value added model. The comparative valuation was added as a supplemental check and weighted against the fundamental value to form our recommendation. The thesis can be divided into 7 parts: 1. Introduction to the company, the industry, and peers 2. Strategic analysis 3. Financial analysis 4. Forecasting 5. Fundamental and comparative valuation 6. Incidents after the valuation date 7. Conclusion and trading recommendation The strategic analysis was conducted using PESTLE, Porter’s five forces, the VRIO framework, and a SWOT analysis. The financial analysis looked at the development of the salmon price, the cost of feed, and the connection between these and the stock price of SalMar. It also compared SalMar to its peers by looking at key figures, what drives these key figures, and through seeing how this changes by reformulating the key figures. The forecasting included the reformulation of the financial statements, and an estimation of the future development of the company. Important parts of this was to estimate the future price of salmon, the future harvest volume of SalMar, and future costs. The valuation estimated the weighted average cost of capital using the CAPM, and applied this together with the numbers from the forecasting to value the company, which gave a value of 168.99 NOK per share. The comparative valuation was also included, which gave a higher value of 197.572 NOK per share. Weighting these numbers together gave a value of 178.51 NOK per share. These numbers imply a premium of 9.03 %, 27.46 %, and 15.17 % respectively. We recommend buying this stock up to a price of 178.51 NOK per share because up to this point the we consider the stock to be undervalued.