Atlantic Sapphire shares priced too low, says bank
Investment bank DNB Markets has maintained a “buy” recommendation for shares in on-land salmon farmer Atlantic Sapphire.
The bank believes too much negativity has been priced into the company’s shares following a series of setbacks at its facilities in Florida and Denmark.
Atlantic Sapphire has experienced mass mortality events, cost overruns, delayed harvests and most recently a fire at the site in Denmark that has destroyed the facility.
Lost confidence
“The share price has fallen 70% so far this year, which in our view represents lost confidence in the company and its communication to the market,” wrote DNB marine analyst Alexander Aukner in Norwegian business website Finansvisen.no.
Aukner said the market scepticism is understandable following a negative operating result in the first half of the year and operational challenges with oxygen deficiency in the second half of the year.
However, the insurance pay-out after the fire in Denmark is expected to be US$33 million, and DNB Markets believes that the potential payment can help Atlantic Sapphire close the liquidity gap for its plans in Florida, where it intends to eventually produce 220,000 tonnes of salmon annually.
DNB’s price target is set at NOK 70 per share, to reflect reduced long-term earning potential as a result of the loss in Denmark, higher costs in the short term, and an expected capital raising. That corresponds to an increase of around double the current share price.
