2017 Aquaculture Sector Preview PDF

Aquaculture Sector Preview Sector View: Positive
4Q16 Preview - 8 February 2017
Moderate supply growth drives high prices
 Salmon prices raised for 2017… Global Supply

WFE (1,000T) 2016E 2017E 2018E
 ..as biology challenges continue to limit supply growth Norway 1,171 1,176 1,200
UK 160 173 178
 Attractive valuation – BUY; MHG, LSG, SALM, GSF & NRS Faroe Islands 76 82 82
Chile 504 522 548
Canada 143 137 138
Biology curtails supply growth Other 110 117 118
The biological situation led to a ~7% drop in supply in 2016. We believe the supply Global supply 2,164 2,207 2,264
Growth y/y -6.7 % 2.0 % 2.6 %
growth will remain low also in 2017-18E, with only 2-3% annual growth as there is
no quick fix to improve biological conditions. We expect demand to remain solid FCA Oslo (NOK/kg)
absorbing more volumes at higher prices. In addition, “new markets” such as China 100
& Russia may reopen to Norwegian producers. We have therefore raised our spot 80
price to NOK 63/kg in 2017E (up from 60), but maintain NOK 62/kg for 2018E. 60
Sector valuation remains attractive 40
The Aquaculture sector has performed extremely well during the past two years. 20
Despite this, the sector is still only priced in line with its historical avg. based on 12- 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
2014 2015 2016 2017
month forward earnings multiples. With continued high spot prices and new
Monthly World-Wide Harvest (2017E: +2%)
contracts gradually rolling over to higher prices, we see significant earnings growth
230,000
that will continue to drive outperformance for the sector.
210,000
Top picks: MHG, LSG, SALM, GSF & NRS
190,000
Our top picks in the sector remains MHG, LSG, GSF & NRS. In addition, we have also
170,000
upgraded SALM to a BUY following recent lacklustre performance by the stock.
150,000
These companies are all well positioned to generate strong earnings growth and are
1 2 3 4 5 6 7 8 9 10 11 12
attractively valued. We remain more cautious on BAKKA & SSC and retain HOLD. 2014 2015 2016 2017E
Oslo Seafood Index vs. OSEBX

Rating Target Share
450
Company M. cap. EV Rating Change price price Upside
Marine Harvest 66,299 74,229 ▲ BUY Reiterate 175 147 19 %
Bakkafrost P/F 15,478 16,039 ► HOLD Reiterate 350 317 10 % 350
Norway Royal Salmon 7,930 7,879 ▲ BUY Reiterate 220 182 21 %
Leroey Seafood Group 27,656 30,372 ▲ BUY Reiterate 530 464 14 % 250
Grieg Seafood Asa 7,738 9,067 ▲ BUY Reiterate 90 69 30 %
Salmar Asa 26,580 28,531 ▲ BUY Upgrade 275 235 17 %
Scottish Salmon Co 1,809 2,192 ► HOLD Reiterate 8.8 9.4 -6 % 150
Feb-16 May-16 Aug-16 Nov-16 Feb-17
EV/kg EBIT/kg P/E EPS change Oslo Seafood Index OSEBX Index
17E 17E 16E 17E 18E 4Q16E 2016E 2017E
Marine Harvest 189 23 14.1 9.2 8.6 7.4 % 2.9 % 12.1 %
Bakkafrost P/F 301 36 14.8 11.2 10.6 2.8 % 0.8 % 6.0 % Knut Erik Løvstad
Norway Royal Salmon 232 30 13.9 10.7 9.4 5.0 % 0.7 % 10.4 % TEL: +47 23 11 30 40
Leroey Seafood Group 177 23 13.1 8.6 8.2 9.3 % 3.1 % 8.8 % knut.lovstad@beringerfinance.no
Grieg Seafood Asa 129 21 10.8 7.9 6.7 -3.5 % -1.4 % 11.8 %
Salmar Asa 206 28 12.9 10.2 9.8 0.0 % 0.0 % 5.0 % Magnus Granerød
Scottish Salmon Co 88 7 126.2 16.2 11.8 0.0 % 0.0 % 31.6 % TEL: +47 23 11 30 30
Average 189 24 29.4 10.6 9.3 magnus.granerod@beringerfinance.com
Source: Beringer Finance
BERINGER FINANCE IS OWNED BY FONDSFINANS, AS, HAAKON VII’S GATE 2, P.O. BOX 1782 VIKA, NO-0122 OSLO,
This report was prepared by an analyst engaged by Fondsfinans AS, the Norwegian affiliate of Fondsfinans Inc., who is not
registered as a research analyst with FINRA or subject to FINRA rules governing research. This report is not a product of
Fondsfinans Inc. See page 38-40 of this report for Important Disclosure Information.
Aquaculture Sector Preview - 4Q16 Preview - 8 February 2017
Table of contents
Market Outlook 3
Competitive Position 6
Volume Guidance 4Q16 6
Contract Share, EBIT & Cost/kg, Volume Growth 7
Pricing & Valuation 8
Company Pages 10
Marine Harvest 10
Bakkafrost 14
Norway Royal Salmon 18
Lerøy Seafood Group 22
Grieg Seafood 26
Salmar 30
Scottish Salmon Company 34
Page 2 8 February 2017 Beringer Finance

Market Outlook
Salmon Prices Raised We have already seen several biological issues leading to destruction or
We believe salmon prices will remain above historical levels in 2017 & forced harvest of fish at less than optimal weight which will lower the
2018, and have raised our forecast to NOK 63/kg in 2017 (from NOK expected harvest volumes in 2H17.
60/kg) while maintaining NOK 62/kg in 2018.
Chile with some growth
Record prices have continued so far in 2017 The biological issues in Chile has demonstrated the fragile state also in
The algal bloom in Chile and biological issues related to sea lice in Norway that market. The biomass is 20% lower y-o-y and smolt release is only 1%
led to a reduction in global supply of ~7% in 2016. The lack of supply led higher in 2016 vs 2015. We therefore expect the harvest quantity in Chile
to all time high prices for the year with an average price of NOK62/kg, to grow only 3-4% in 2017, but with continued investments and
more than 50% above that of 2015. In fact, the price was above in each improvements in the biology, we could see a 5% growth in 2018.
and every week of the year. The price is off to a good start also this year,
with the price so far also well above last year in each and every week. Product development could drive demand
We believe there is a significant potential for demand growth in the
Biology will continue limiting supply growth market, if only the supply was available. We have seen how the
We expect a continued tight supply situation going forward, as biological development of consumer friendly products can spur significant growth,
challenges will continue to limit the supply. We expect a maximum of 2- and product development & marketing is still at its infancy globally. In
3% annual supply growth for 2017 & 2018. addition, the opening of China for Norwegian salmon and the potential
opening of Russia may create incremental demand.
Norway will struggle to create growth
The biomass in Norway is at exactly the same level end-2016 vs end-2015. Continued tight supply/demand balance
The smolt release in total for 2016 is the lowest since 2013 and 3% lower We therefore expect a continued tight supply situation going forward, as
than in 2015. The only way to grow the supply then is through better biological challenges will continue to curtail supply growth, with a growing
biology leading to lower mortality and better growth generating improved underlying demand that cannot be satisfied, which will continue to drive
harvest weight. We believe that is unlikely, which means the harvest prices.
quantity from Norway can hardly be expected to grow in 2017.
Global Supply (1,000t) Global Supply (1,000t)

2,500 WFE 2013 2014 2015 2016E 2017E 2018E
22 % 25%
Norway 1,144 1,199 1,234 1,171 1,176 1,200

20%
UK 158 171 166 160 173 178
2,000 13 % 15%
Faroe Islands 73 83 77 76 82 82
9% Ireland 11 12 16 15 17 16
1,500 Iceland 3 4 4 8 12 13
4%
10%
2% 3% Other 11 15 14 11 9 9
2%
1,000 European supply 1,399 1,484 1,511 1,441 1,469 1,498
5%
-1 %
0% Chile 468 582 598 504 522 548
500 -7 % Canada 115 95 135 143 137 138
US 20 24 20 22 22 22
-5 %
0 -10%
Australia 39 42 55 54 57 58
Americas supply 643 743 809 723 737 766
2010 2011 2012 2013 2014 2015 2016E 2017E 2018E Global supply 2,042 2,227 2,319 2,164 2,207 2,264
Norway Chile Others Global chg [%] Growth Y/Y 2.1 % 9.1 % 4.1 % -6.7 % 2.0 % 2.6 %
FCA Oslo (NOK/kg) Fishpool Forward prices (NOK/kg)

100 80.00
80 70.00
60 60.00
40 50.00
20 40.00
1 3 5 7 9 111315171921232527293133353739414345474951 Jan Feb Mar Apr Mai Jun Jul Aug Sep Okt Nov Des
2017 2018 2019
2014 2015 2016 2017
World-wide: Harvest Quantity Monthly (2017: +2%) Norway: Harvest Quantity Monthly (2017: +0.4%)
230,000 130,000
220,000
120,000
210,000
200,000 110,000
190,000 100,000
180,000
90,000
170,000
80,000
160,000
150,000 70,000
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
2014 2015 2016 2017E 2014 2015 2016 2017E
Source: Company Data, Beringer Finance, Lusedata, Kontali, Norges Sjømatråd, Index Mundi, Akvafakta
Beringer Finance 8 February 2017 Page 3

Norway: Weekly export of fresh salmon Norway: Weekly export of fresh salmon (t) vs price (NOK)
25,000 25,000 90.00
20,000 20,000 70.00
15,000 15,000 50.00
10,000 10,000 30.00
5,000 5,000 10.00

1 3 5 7 9 111315171921232527293133353739414345474951 2013 2014 2015 2016 2017
2014 2015 2016 2017 Volume Price
Norway: Biomass (1000t WFE) Norway: Sea temperatures
750 15
700 13
650 11
600 9
550 7
500 5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Mai Jun Jul Aug Sep Okt Nov Des
2014 2015 2016E 2014 2015 2016
Norway: Monthly smolt release salmon (m) Norway: Monthly feed sales (tonnes)
80 250,000
60 200,000
150,000
40
100,000
20
50,000
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014G 2015G 2016G 2014 2015 2016E
Norway: Avg number of female lice per fish Norway: Female lice per fish in critical regions 2015 & ‘16
0.40 1.00
0.80
0.30
0.60
0.20
0.40
0.10 0.20
0.00 0.00
Jan Feb Mar Apr Mai Jun Jul Aug Sep Okt Nov Des Jan Mar Mai Jul Sep Nov Jan Mar Mai Jul Sep Nov
Nord-Trøndelag Sør-Trøndelag
2014 2015 2016 Møre og Romsdal Sogn og Fjordane

Salmon prices vs alternative protein sources Chile: Harvest Quantity Monthly (2017: +3%)
8.50 70,000
6.50 60,000
50,000
4.50
40,000
2.50
30,000
0.50
20,000
1 2 3 4 5 6 7 8 9 10 11 12
Poultry Beef Pork Atl. Salmon 2014 2015 2016 2017E
Chile: Biomass (1000t WFE) Chile: Smolt Release

350 20
15
300
10
250
5
200 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014 2015 2016E 2014G 2015G 2016G
Faroe: Harvest Quantity Monthly (2017: +8%) UK: Harvest Quantity Monthly (2017: +8%)
12,000 20,000
10,000
8,000 15,000
6,000
4,000 10,000
2,000
0 5,000
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
2014 2015 2016 2017E 2014 2015 2016 2017E
Global Demand (1,000t) Market Size (1,000t) & Consumption/capita (kg)
2,500 400
9.5
12.0
25%
10.0
20%
2,000 22 % 300
15%
6.2 8.0
1,500 10%
200 6.0
12 %
1,000
5%
2.5 1.9 2.3 4.0
6% 6% 100 1.2 0.9 0.5 1.4 0.5 1.1 1.0

0.04
0%
500 2%
2.0
-7 %
-1 %
-5 %
0 0.0
0 -10%
2010 2011 2012 2013 2014 2015 2016E

EU US Brazil
Russia Others Global chg [%] Total market Consumption per capita

Competitive Position – Volume Guidance 4Q16

Moderate volume guidance …
The volume guidance for most of the companies is rather moderate, in MHG (1,000t)
relation to recent quarters. NRS though, has a very low guidance for
4Q16. They have also said that most of the volume was harvested early in
120
the quarter, which means they missed out on the surge in the salmon 100
price the last few weeks of the quarter.
80
..although GSF stands out
60
GSF has guided 22,200T in 4Q16, which is 60% above 3Q16 & 45% above
4Q15. It is also 40% above the quarterly average during the past 3 years, 40
but only 14% above 3Q15, so perfectly achievable. Almost half the volume
is also expected to be harvested in Finnmark, which has had a stable 20
biological situation, so we do not expect any negative surprises related to 0
their expected harvest volume. 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
MHG & BAKKA provided trading update
MHG & BAKKA have already provided the 4Q16 harvest volume in their
4Q16 trading update and they were on target with their harvest volume,
which is encouraging ahead of the 4Q16 reporting season.
SALM(1,000t) LSG (1,000t)
50 50
40 40
30 30
20 20
10 10
0 0
1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
GSF (1,000t) NRS (1,000t)
25 10
20 8
15 6
10 4
5 2
0 0
BAKKA (1,000t) SSC (1,000t)
16 8
14 7
12 6
10 5
8 4
6 3
4 2
2 1
0 0
Source: Company Data, Beringer Finance

Competitive Position – Contract Share, EBIT & Cost/kg, Volume Growth etc.
Contract Share
Most of the companies had been relatively cautious regarding contracts Contract Share 2017 (at Dec-16)
for 2017 as of Dec. 2016. NRS had the lowest contract share with less than 35 %
10%, GSF with 15%, while the others mostly in the 20-30% range. We also
expect the contracts that have been negotiated for 2017 to be at a much 30 %
higher level (NOK 55-60/kg vs NOK 45-50 in 2016). 25 %
Volume Growth 20 %
NRS has the highest potential for growth in 2017/18 followed by GSF,
while we see more limited growth opportunities for the other farmers 15 %
NRS is also well positioned geographically with the bulk of the production 10 %
in Northern part of Norway, with less biological issues.
5%
Cost Development & EBIT/kg
Given a continued difficult biological situation, we expect continued high 0%
& somewhat increasing costs, although you may find cost saving SALM GSF NRS BAKKA MHG LSG SSC
opportunities in certain geographical regions for some of the companies.
Therefore, the improved EBIT/kg is more due to better price realisation
(combination of spot & contract prices). BAKKA generally generates the
best EBIT/kg, followed by NRS & SALM.
Geographical Distribution of Volume 2017 (1,000t) Geographical Distribution of Volume 2017 (%)
500 100 %
400 80 %
300 60 %
200 40 %
100 20 %
0 0%
MHG SALM LSG GSF NRS BAKKA SSC MHG SALM LSG GSF NRS BAKKA SSC
Nor-North Nor-Mid Nor-South Chile Faroe Other Nor-North Nor-Mid Nor-South Chile Faroe Other
Volume Growth 2016-18E EBIT/kg (NOK)

40.0
30 %
20 % 30.0
10 % 20.0
0% 10.0
MHG SALM LSG GSF NRS BAKKA SSC
-10 %
0.0
MHG SALM LSG GSF NRS BAKKA SSC
-20 %
2016E 2017E 2018E 2016E 2017E 2018E
Cost/kg (NOK) Norway: Cost Development (NOK/kg)

50 35.00 Depreciation
30.00
40 Other
25.00 costs/treatments
30 20.00 Welllboat/harvest
ing/packing
20 15.00
Salaries
10.00
10
5.00 Feed
0
MHG SALM LSG GSF NRS BAKKA SSC 0.00 Smolt
2016E 2017E 2018E 2010 2011 2012 2013 2014 2015 2016E

Pricing & Valuation

Sector attractively priced despite outperformance Top sector picks: GSF, LSG, MHG, NRS & SALM
The Aquaculture sector has performed extremely well during the past two With regards to the relative pricing, GSF is by far the company that sticks
years, and significantly outperformed the Oslo Stock Exchange. Despite out on most parameters as the least expensive. It has the best growth
this, the sector is still only priced in line with its historical average related opportunities after NRS & has shown good operational improvement.
to both P/E & EV/EBIT multiples based on 12-month forward estimates. MHG is well positioned with diversified production, an integrated value
chain, solid growth opportunities and is at the forefront of product
The sector is also priced below a peer group consisting of other development directed towards end-consumer. NRS has the best growth
international protein producers. opportunities through its green licenses for triploid salmon & more than
80% of harvest volume is in Northern Norway with less biological
Therefore, the sector is still attractively priced despite the challenges. LSG is also attractively priced relative to peers, it has good
outperformance due to the significant earnings growth, which we expect growth opportunities through existing licenses & significant potential to
will continue. capitalise on its white fish acquisitions. SALM has good operational
performance with a high EBIT/kg, and the pricing has become attractive
due to recent lacklustre share price performance. However, 60% of its
production is in areas with biological issues in Central Norway.
Oslo Seafood Index vs. OSEBX EBIT/kg vs EV/kg
400 40
350 35
SALM BAKKA
30 NRS
300
25 GSF LSG
250 EBIT/kg 20 MHG
200 15
10
150 5 SSC
100 0
Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 80 130 180 230 280
EV/kg
Oslo Seafood Index OSEBX Index
P/E – 12m forward EV/EBIT – 12m forward
20.0 14.0
12.0
15.0
10.0
8.0
10.0
6.0
5.0 4.0
Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17
Salmon Farmers Alt. Protein Sources Salmon Avg Salmon Farmers Alt. Protein Sources Salmon Avg
Peer Group Comparison (BF estimates)

Target Share BF Op. EBIT vs Cons. BF EPS vs Cons. Production
Rating Rating Change Upside
Company price price 16E 17E 18E 16E 17E 18E 2017E Capacity
Marine Harvest ▲ BUY Reiterate 175 147 19 % 0% 13 % 15 % -2 % 15 % 20 % 391,120 475,000
Bakkafrost P/F ► HOLD Reiterate 350 317 10 % -3 % 0% 2% 5% -1 % 4% 53,000 65,000
Norway Royal Salmon ▲ BUY Reiterate 220 182 21 % 4% 6% 0% -3 % 3% 3% 34,000 45,000
Leroey Seafood Group ▲ BUY Reiterate 530 464 14 % -2 % 5% 2% -1 % 6% 9% 171,493 195,000
Grieg Seafood Asa ▲ BUY Reiterate 90 69 30 % -11 % 3% 10 % -8 % -1 % 10 % 70,000 95,000
Salmar Asa ▲ BUY Upgrade 275 235 17 % -1 % 1% 1% 0% 1% 2% 138,000 160,000
Scottish Salmon Co ► HOLD Reiterate 8.8 9.4 -6 % -77 % -54 % -50 % -82 % -47 % -43 % 25,000 35,000
Average/total -12 % -3 % -2 % -12 % -3 % 1% 882,613 1,070,000
Median -2 % 2% 1% -3 % 0% 4%
EV/EBITDA EV/EBIT P/E Div. yield

Company M. cap. EV 16E 17E 18E 16E 17E 18E 16E 17E 18E 16E 17E 18E EV/Kilo EBIT/Kilo
Marine Harvest 66,299 74,229 9.8 6.6 6.1 11.8 7.5 6.9 14.1 9.2 8.6 5.7 % 7.2 % 8.6 % 189 23
Bakkafrost P/F 15,478 16,039 10.1 7.7 7.1 11.5 8.9 8.2 14.8 11.2 10.6 3.8 % 4.5 % 4.9 % 301 36
Norway Royal Salmon 7,930 7,879 11.3 7.6 6.6 11.1 7.4 6.4 13.9 10.7 9.4 4.3 % 5.6 % 6.4 % 232 30
Leroey Seafood Group 27,656 30,372 9.4 6.2 5.7 11.0 6.9 6.3 13.1 8.6 8.2 3.9 % 5.0 % 5.4 % 177 23
Grieg Seafood Asa 7,738 9,067 6.8 5.1 4.1 7.8 5.8 4.6 10.8 7.9 6.7 3.6 % 5.1 % 6.5 % 129 21
Salmar Asa 26,580 28,531 9.8 7.3 6.9 11.2 8.1 7.6 12.9 10.2 9.8 5.1 % 6.0 % 6.8 % 206 28
Scottish Salmon Co 1,809 2,192 19.1 8.5 6.6 72.6 12.7 9.1 126.2 16.2 11.8 0.0 % 0.0 % 2.2 % 88 7
Average 11.5 7.5 6.5 20.5 9.4 7.8 31.5 12.3 10.4 3.5 % 4.4 % 5.4 % 189 24
Median 10.0 7.4 6.6 11.3 7.8 7.2 14.0 10.4 9.6 3.8 % 5.0 % 5.9 % 189 23

Pricing & Valuation (BF estimates)
P/E – 2017 P/E 2018
SSC 16.2x SSC 11.8x

Protein peers 12.3x Protein peers 11.6x
BAKKA 11.2x BAKKA 10.6x
NRS 10.7x SALM 9.8x
SALM 10.2x NRS 9.4x
MHG 9.2x MHG 8.6x
LSG 8.6x LSG 8.2x
GSF 7.9x GSF 6.7x
EV/EBIT 2017 EV/EBIT –2018
SSC 12.7x SSC 9.1x

BAKKA 8.9x Protein peers 8.4x
Protein peers 8.4x BAKKA 8.2x
SALM 8.1x SALM 7.6x
MHG 7.5x MHG 6.9x
NRS 7.4x NRS 6.4x
LSG 6.9x LSG 6.3x
GSF 5.8x GSF 4.6x
Dividend Yield – 2017 Dividend Yield – 2018
MHG 8.6 %
MHG 7.2 %
SALM 6.8 %
SALM 6.0 %
GSF 6.5 %
NRS 5.6 %
NRS 6.4 %
GSF 5.1 %
LSG 5.4 %
LSG 5.0 %
BAKKA 4.9 %
BAKKA 4.5 %
SSC 2.2 %
Protein peers 1.1 %
Protein peers 1.4 %
SSC 0.0 %
0% 2% 4% 6% 8% 10 %
EV/kg – 2017 EBIT/kg – 2018
BAKKA 301 BAKKA
NRS 232 NRS 30

SALMAR 206 SALMAR 28
MHG 189 LSG 23
LSG 177 MHG 23
GSF 129 GSF 21
SSC 88 SSC 7

Marine Harvest ASA Target Price NOK 175 (165)
4Q16 Preview - 8 February 2017 Share Price NOK 147
Supply constraints driving prices
 New potential markets opening up with China & Russia
 Biological challenges will limit world supply also in 2017 SELL HOLD BUY
 High prices for years to come –Target up to NOK 175 (165)
Exciting 4Q16 trading update Share data 08 Feb 2017

Sector: Aquaculture
Marine Harvest Group (MHG) in their trading update reported 4Q16 operational Reuters/Bloomberg MHG
EBIT of EUR 257m (EUR 90m in 4Q15), well above the EUR 180m in 3Q16 and Risk rating Medium
consensus. The solid performance indicates a phasing in of higher priced contracts, Outstanding shares 450
Market cap (EURm) 7,350
good performance within consumer products but most likely also an improved NIBD (EURm) 881
biological situation with improved cost control. The volume of 100,000T was also in Enterprise value 8,231
Free float % 82 %
line with their guidance.
Est. Changes Q416E 2016E 2017E
Solid improvement in all regions Revenues 0% 0% 2%
EBITDA 6% 2% 10 %
The biological issues have been quite severe in many regions, but the 4Q16
Operational EBIT 7% 3% 12 %
operational improvements in the various regions suggest a solid improvement. The Pre-tax profit 7% 2% 12 %
EBIT/kg is up some 35% from 3Q16 in Norway, +45% in Chile (adj. for sale of fixed EPS, rep. 7% 3% 12 %
DPS 0% 0% 0%
assets), +27% in Canada and more than +200% in Scotland (although from a poor
BF vs Consensus Q416E 2016E 2017E
level), which is encouraging. Revenues -4 % 0% -2 %
EBITDA 1% 0% 12 %
Estimates up on higher salmon prices – Target up to NOK 175 (165)
Operational EBIT 0% 0% 13 %
We raise our 2017 estimates on the back of a raised forecast for salmon price from Pre-tax profit 1% 2% 9%
NOK 60/kg to NOK 63/kg in 2017. Marine Harvest is well diversified in terms of EPS, adj. 2% -2 % 15 %
DPS 0% -7 % 4%
harvesting around the world, which lowers the risk, and it is at the forefront of
product-and market development. We therefore reiterate our BUY rating.
Share price (NOK) vs. OSEBX
Key figures (EURm) 2013 2014 2015 2016E 2017E 2018E Q415 Q416E 190
Operating revenues 2,456 3,053 3,112 3,419 3,678 4,132 861 933
EBITDA 509 624 487 840 1,202 1,277 124 293
140
Operational EBIT 411 509 347 698 1,054 1,125 90 257
EBIT af. adj. 596 435 345 907 1,062 1,135 196 260
PTP 442 178 250 732 1,020 1,098 150 248 90
EPS adj. 0.5 0.6 0.4 1.1 1.8 1.9 0.1 0.4
DPS 0.28 1.01 0.59 0.93 1.17 1.40
Revenue growth 0.0% 24.3% 1.9% 9.9% 7.6% 12.3% 7.4% 8.4% 40
EBIT-margin 14.9% 16.2% 10.8% 20.3% 28.9% 27.5% 22.8% 27.9% Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
MHG Share OSEBX (Rebased)
Dividend yield 0.0% 9.8% 5.0% 5.7% 7.2% 8.6%
EV/EBITDA 8.0 9.0 13.0 9.8 6.6 6.1 13.0 9.8
EV/EBIT 11.1 11.4 18.8 11.8 7.5 6.9 18.9 11.9
P/E adj. 16.9 17.6 27.4 15.5 9.2 8.6 27.4 15.5
Knut Erik Løvstad
EBIT/kg 1.3 1.2 0.7 1.7 2.5 2.5 0.6 2.4 TEL: +47 23 11 30 40
EV/Kilo 11.8 13.5 15.0 21.6 20.4 18.7 knut.lovstad@beringerfinance.no
NIBD/EBITDA (4q roll) 1.8 1.7 2.1 1.0 0.5 0.4 2.1 1.0
Magnus Granerød
ROE 33.0% 6.2% 8.9% 26.5% 36.4% 35.2%
TEL: +47 23 11 30 30
ROCE 25.5% 17.9% 12.0% 23.9% 36.2% 38.1%
magnus.granerod@beringerfinance.com
Marine Harvest ASA - 4Q16 Preview - 8 February 2017
Company Profile
Investment Case Business Overview
Lack of supply will keep prices high World leading salmon aquaculture company
The algal bloom in Chile, combined with a drop in supply from Norway MHG is the world’s leading company within salmon aquaculture with a
due to sea lice problems, led to a cut in supply of ~7% in 2016. We global market share of around 20% within farming.
expect a continued tight supply situation going forward, as biological The company’s goal is to be the leader in all key areas, from the
challenges will continue to limit the supply. We expect 2-3% annual production of fish feed to meeting the needs of the market. By
supply growth for 2017 & 2018. Therefore, with growing underlying integrating the entire value chain, MHG is able to better control the
demand that cannot be satisfied, prices will remain high. We expect quality of the product from feed to the final consumer product.
salmon prices of NOK 63/kilo in 2017E & NOK 62/kilo in 2018E.
MHG has a capacity of producing ~475,000 tonnes per year of farmed
At forefront in developing consumer demand
products (5m meals per day), 320,000 tonnes of salmon feed and it has
MHG aims to increase production from the ocean as well as being a
a processing capacity of 210,000 tonnes HOG.
world leading integrated producer of seafood proteins. The company is
at the forefront of product development and puts emphasis on The company is also at the forefront when it comes to R&D and
stimulating consumer demand through more easy-to-use products. building its own MHG based brands. The global upstream presence
reduces biological risks and potential bilateral trade barriers in the
Attractive valuation – BUY
world. The company is integrated in the value chain and works very
We recommend to BUY the stock, as our SOTP suggest a price of ~NOK
closely with many leading retailers, with some of its largest customers
195/share, and it is attractively priced vs its peer group considering its
being Carrefour, Sainsbury, Costco, Aldi & Lidl.
longer term growth potential & dominant market position.
SWOT Analysis
Strengths Weaknesses
 Global company – between 20% market share  Currently trade barriers towards Russia
 Integrated protein company in the value chain  Still risks related to production growth in Chile. It may take years
 Own feed production which covers 85% of Norwegian production to rebuild Chile in a safe way
today and build-up of feed production in UK  Exposure towards Region Mid Norway that currently has high
 Strong relationships with leading retailers in Europe and the US, costs due to significant sea lice problems
such as Carrefour, Sainsbury, Costco, Aldi & Lidl
Opportunities Threats
 Good demand in core European markets where MHG has high  Major biological incidences, including algal blooms, sea lice and
market share fish diseases
 Developing full assortment products in Europe, but still great  RS 9 – Underlying demand may slow when retail prices move
potential in improving the consumer product further higher
 Significant untapped potential in Europe, US & China  International trade barriers preventing export volumes
MHG Farming Volumes Peer Valuation - Consensus

FUNDAMENTALS EV/EBITDA P/E adj. Div. yield
500
Company M. cap. MC/EV 17E 18E 17E 18E 17E 18E
400 MHG (BF est) 67,428 89 % 6.6 6.1 9.2 8.6 7% 9%
MHG (@ target) 78,750 91 % 8.0 7.5 11.0 10.2 6% 7%
300 MHG (BB) 67,428 89 % 7.8 7.5 10.9 10.6 7% 7%
200 Austevoll Seafood Asa 15,863 54 % 3.4 3.1 7.8 7.8 6% 6%
Bakkafrost P/F 15,664 97 % 7.7 7.5 11.3 11.2 4% 5%
100
Norway Royal Salmon 7,952 100 % 8.1 7.1 11.0 9.7 5% 6%
0 Scottish Salmon Co 1,836 82 % 6.5 4.8 10.3 7.4 2% 3%
Grieg Seafood Asa 7,783 82 % 5.3 4.7 7.9 7.4 6% 7%
Salmar Asa 27,022 93 % 7.7 7.4 10.4 10.2 6% 6%
Leroey Seafood Group 28,180 86 % 6.2 5.9 9.2 9.2 5% 5%
Farming Norway Farming Chile Farming Faroe Median 86 % 6.5 5.9 10.3 9.2 5% 6%
Farming Scotland Farming Canada Farming Ireland
10 Largest Shareholders No. Shares (m) % Management & Board of Directors

Geveran Trading Co Ltd 73.4 16.3 % Executive Management:
Folketrygdfondet 35.1 7.8 % CEO Alf-Helge Aarskog
Clearstream Banking S.A. 21.8 4.9 % CFO Ivan Vindheim
State Street Bank And Trust Comp 10.5 2.3 %
J.P. Morgan Bank Luxembourg S.A. 8.9 2.0 % Board of Directors (external repr):
State Street Bank And Trust Comp 8.8 2.0 % Chairman Ole-Eirik Lerøy
Citibank, N.A. 8.7 1.9 % Board Member Lisbet K. Nærø
State Street Bank And Trust Comp 7.0 1.6 % Board Member Cecilie Fredriksen
State Street Bank And Trust Comp 6.4 1.4 % Board Member Ørjan Svanevik
Euroclear Bank S.A./N.V. 5.7 1.3 % Board Member Paul Mulligan
Total 10 largest 186.3 41.4 % Board Member Jean-Pierre Bienfait
Others 263.7 58.6 % Board Member Birgitte Ringstad Vartdal
Total 450.0 100.0 %


Average/total -12 % -3 % -2 % -12 % -3 % 1% 882,613 1,070,000
Median -2 % 2% 1% -3 % 0% 4%

Marine Harvest 66,299 74,229 9.8 6.6 6.1 11.8 7.5 6.9 14.1 9.2 8.6 5.7 % 7.2 % 8.6 % 189 23
Bakkafrost P/F 15,478 16,039 10.1 7.7 7.1 11.5 8.9 8.2 14.8 11.2 10.6 3.8 % 4.5 % 4.9 % 301 36
Salmar Asa 26,580 28,531 9.8 7.3 6.9 11.2 8.1 7.6 12.9 10.2 9.8 5.1 % 6.0 % 6.8 % 206 28
Average 11.5 7.5 6.5 20.5 9.4 7.8 31.5 12.3 10.4 3.5 % 4.4 % 5.4 % 189 24
Median 10.0 7.4 6.6 11.3 7.8 7.2 14.0 10.4 9.6 3.8 % 5.0 % 5.9 % 189 23
Valuation
P/E 12m fwd. vs. Historical Avg. EV/EBIT 12m fwd. vs. Historical Avg.
20 30
25
15
20
10 15
10
5
5
0 0
Feb-07 Feb-09 Feb-11 Feb-13 Feb-15 Feb-17 Feb-07 Feb-09 Feb-11 Feb-13 Feb-15 Feb-17
12m forward Average 12m forward Average
SOTP Valuation
Marine Harvest ASA (EURm) Licenses Capacity Vol 2017 Vol. per EBIT/kg EBIT EV/EBIT EV/kilo EV
license 2017E 2017E 2017E implied
Norway 225 275 243 1,080 2.77 674 10.0 27.7 6,738
Faroe 3 5 6 2,083 3.26 20 9.0 29.3 183
Scotland 41 60 49 1,186 1.85 90 9.0 16.6 808
Canada 37 50 42 1,135 2.96 124 9.0 26.6 1,117
Chile 202 65 44 218 1.28 56 8.0 10.2 449
Ireland 13 20 7 558 1.92 14 9.0 17.3 125
EV farming (incl Sales & Dist.) 521 475 391 751 2.50 978 9.6 24.1 9,420
MHG Consumer Products 122 26 10.0 264
MHG others 8 9.0 72
EV MHG Consumer products 122 34 9.8 336
MHG feed factory, Bjugn 17 11.0 187
MHG UK feed factory committed, Cost: 80GBPm 102
EV MHG Feed division 17 17.0 289
NovaSea (48%) 37.0 38 3.00 114 10.0 547
Finnøy Fisk AS (45%) 2 3 3.00 8 10.0 40
EV others/minorities (EURm) 588
Group EV values (EURm) 10,633
NIBD -881
Equity Value (EURm) 9,752
Outst. shares 450
SOTP per share (EUR) 21.67
EURNOK ratio 9
SOTP per share (NOK) 195

Marine Harvest
Income Statement (EURm) 2013 2014 2015 2016E 2017E 2018E Q415 Q116 Q216 Q316 Q416E
Operating revenues 2,456 3,053 3,112 3,419 3,678 4,132 861 805 832 849 933
Total OPEX -1,948 -2,429 -2,626 -2,579 -2,476 -2,855 -737 -657 -647 -635 -640
EBITDA 509 624 487 840 1,202 1,277 124 148 184 215 293
Depreciation and Amortization -98 -116 -140 -142 -148 -152 -35 -36 -35 -35 -36
Operational EBIT 411 509 347 698 1,054 1,125 90 112 149 180 257
Income from associates 28 18 23 58 60 62 11 10 16 15 16
Fair value adj. of biomass 230 -61 10 214 0 0 116 88 34 92 0
EBIT 596 435 345 907 1,062 1,135 196 193 181 274 260
Net financials -154 -257 -95 -175 -42 -37 -46 -28 -90 -45 -12
PTP before fair value adj. 213 239 240 518 1,020 1,098 35 76 56 138 248
PTP 442 178 250 732 1,020 1,098 150 164 90 229 248
Income tax expense -131 -90 -92 -210 -224 -241 -59 -36 -48 -71 -55
Net profit 322 112 158 522 796 856 92 128 43 158 194
Segments 2013 2014 2015 2016E 2017E 2018E Q415 Q116 Q216 Q316 Q416E
EBIT per kilo

Farming Norway 1.40 1.36 1.17 1.98 2.77 2.69 1.10 1.87 1.91 1.61 2.50
Farming Faroe 1.94 1.27 1.37 2.98 3.26 3.20 1.47 2.34 2.40 3.20 3.47
Farming Scotland 1.57 1.12 0.52 0.72 1.85 1.98 0.36 0.67 0.54 0.32 1.27
Farming Canada 1.33 1.12 0.33 2.42 2.96 2.84 0.35 1.97 2.26 2.43 3.16
Farming Chile -0.28 0.54 -0.82 -0.20 1.28 1.47 -1.34 -1.55 -0.79 1.00 2.02
Farming Ireland -0.85 0.62 0.87 0.85 1.92 2.20 -0.14 -1.84 0.96 1.59 1.30
Group EBIT per kilo 1.25 1.17 0.71 1.67 2.50 2.48 0.60 1.13 1.56 1.56 2.38
Volumes
Farming Norway 222 258 255 236 243 257 67 54 54 65 64
Farming Faroe 6 12 3 10 6 10 3 2 2 3 4
Farming Scotland 48 49 50 45 49 52 14 13 11 10 12
Farming Canada 33 27 40 43 42 44 9 12 12 10 10
Farming Chile 28 68 62 37 44 48 15 15 7 7 8
Farming Ireland 6 6 10 9 7 9 3 1 1 3 3
Total Farming 344 419 420 381 391 419 111 97 87 97 100
Balance Sheet 2013 2014 2015 2016E 2017E 2018E Q415 Q116 Q216 Q316 Q416E
Cash and cash equivalents 72 157 72 77 324 475 72 95 90 66 77

Other current assets 1,983 1,884 1,989 2,195 2,219 2,223 1,989 2,036 1,969 2,176 2,195
Property, plant and equipment 796 920 964 988 1,042 1,118 964 952 950 973 988
Licenses & other non-curr. intangibles 22 19 28 29 29 29 28 28 28 29 29
Other non-current assets 1,149 1,141 1,144 1,200 1,200 1,200 1,144 1,143 1,161 1,200 1,200
Total assets 4,023 4,120 4,196 4,489 4,814 5,045 4,196 4,253 4,199 4,443 4,489
Total Equity 1,950 1,640 1,896 2,049 2,318 2,544 1,896 1,953 1,922 1,968 2,049
Long-term interest bearing debt 920 1,189 1,071 947 947 947 1,071 1,055 923 947 947
Other long term liabilities 518 658 613 818 818 818 613 654 731 818 818
Other short term liabilities 636 633 616 674 730 735 616 592 623 709 674
Total liabilities 2,073 2,480 2,301 2,440 2,496 2,500 2,301 2,301 2,277 2,475 2,440
Equity and liabilities 4,023 4,120 4,196 4,489 4,814 5,045 4,196 4,253 4,199 4,443 4,489
Cash Flow 2013 2014 2015 2016E 2017E 2018E Q415 Q116 Q216 Q316 Q416E
PTP 442 178 250 732 1,020 1,098 150 164 90 229 248
CF from operations 264 474 243 705 975 1,009 25 150 213 167 175
CF from investments -319 -144 -186 -127 -202 -227 -77 -42 16 -50 -51
CF after capex -55 330 56 578 773 782 -52 108 230 117 123
Dividends -104 -412 -261 -417 -527 -630 -67 -67 -82 -155 -113
Net cash flow -182 -641 -81 6 247 152 -4 22 -2 -25 11
Key Figures 2013 2014 2015 2016E 2017E 2018E Q415 Q116 Q216 Q316 Q416E
Number of shares (m) 386.1 406.7 450.9 450.1 450.1 450.1 450.9 450.1 450.1 450.1 450.1
Share price (NOK) 57.4 88.2 110.3 147.0 147.0 147.0 110.3 117.7 133.2 147.0 147.0
Market capitalization (EURm) 3,130 4,614 5,310 7,350 7,350 7,350 5,321 5,566 6,433 7,351 7,351
NIBD (EURm) 929 1,033 1,000 870 624 472 1,000 960 833 881 870
Enterprise value (m) 4,059 5,646 6,310 8,220 7,974 7,822 6,320 6,526 7,266 8,232 8,222
EPS adj. 0.5 0.6 0.4 1.1 1.8 1.9 0.1 0.2 0.2 0.3 0.4
Dividend per share, paid 0.28 1.01 0.59 0.93 1.17 1.40 0.15 0.15 0.18 0.34 0.25
Key Ratios 2013 2014 2015 2016E 2017E 2018E Q415 Q116 Q216 Q316 Q416E
Profitability & return

Revenue growth 0.0 % 24.3 % 1.9 % 9.9 % 7.6 % 12.3 % 7.4 % 9.3 % 8.4 % 13.5 % 8.4 %
EBITDA-margin 20.7 % 20.4 % 15.6 % 24.6 % 32.7 % 30.9 % 14.5 % 18.4 % 22.2 % 25.3 % 31.4 %
EBIT-margin 14.9 % 16.2 % 10.8 % 20.3 % 28.9 % 27.5 % 22.8 % 23.9 % 21.7 % 32.2 % 27.9 %
ROE 33.0 % 6.2 % 8.9 % 26.5 % 36.4 % 35.2 %
ROCE 25.5 % 17.9 % 12.0 % 23.9 % 36.2 % 38.1 %
Multiples Multiples - 12m trailing
P/E adj. 16.9 17.6 27.4 15.5 9.2 8.6 27.4 32.5 28.6 23.0 15.5
P/B 1.6 2.8 2.8 3.6 3.2 2.9 2.8 2.9 3.3 3.7 3.6
EV/EBITDA 8.0 9.0 13.0 9.8 6.6 6.1 13.0 12.9 12.8 12.3 9.8
EV/EBIT 11.1 11.4 18.8 11.8 7.5 6.9 18.9 19.3 17.6 16.0 11.9
EV/Sales 1.7 1.8 2.0 2.4 2.2 1.9 2.0 2.1 2.2 2.5 2.4
Solidity/Credit
EBIT/Kg 1.3 1.2 0.7 1.7 2.5 2.5 0.6 1.1 1.6 1.6 2.4
NIBD/Kilo (4q roll) 2.7 2.5 2.4 2.3 1.6 1.1 2.4 2.3 2.1 2.3 2.3
NIBD/EBITDA (4q roll) 1.8 1.7 2.1 1.0 0.5 0.4 2.1 1.9 1.5 1.3 1.0
EBITDA/Interest 12.8 13.4 -115.8 -64.6 0.0 0.0 -25.6 147.7 922.0 -15.1 0.0
OCF/TIBD (4q roll) 0.3 0.4 0.2 0.7 1.0 1.1 0.2 0.3 0.5 0.6 0.7
TIBD/Equity 0.5 0.7 0.6 0.5 0.4 0.4 0.6 0.5 0.5 0.5 0.5
Equity/Total Assets 48 % 40 % 45 % 46 % 48 % 50 % 45 % 46 % 46 % 44 % 46 %

Bakkafrost Target Price NOK 350
ISA fear back in focus
 Volumes & high prices driving an excellent 4Q16
 Some uncertainty related to potential ISA outbreak SELL HOLD BUY

 Demanding valuation – HOLD reiterated
All time high 4Q16 expected Share data 08 Feb 2017

Sector: Aquaculture
We expect BAKKA to deliver a record 4Q16 with Operational EBIT of DKK 364m
Reuters/Bloomberg BAKKA
(256m in 4Q15), which is also well above the NOK 255m in 3Q16. The main drivers Risk rating Medium
are both higher volumes and higher price in 4Q16 combined with continued good Outstanding shares 49
Market cap (DKKm) 12,836
cost control. We have raised our 4Q16 estimates slightly following the trading Net interest bearing debt 467
update due to much better feed sales than expected. Enterprise value 13,303
Free float % 80 %
ISA fear back on the map Est. Changes Q416E 2016E 2017E
BAKKA reported 20th January 2017 that suspicion of ISA concerning two cages was Revenues 10 % 2% 1%
again confirmed and BAKKA decided to harvest two cages containing 190,000 fish, EBITDA 2% 1% 5%
Operational EBIT 3% 1% 6%
leading to reduced harvest volume of 600T in 2017. If the entire site is harvested, it Pre-tax profit 3% 1% 6%
means another 2,400T reduced harvest volume. We have reduced our harvest EPS, rep. 3% 1% 6%
DPS n.a. 0% 0%
volume to 53,000T, well below the 56,000T guidance.
BF vs Cons Q416E 2016E 2017E
Priced well above peers – HOLD Revenues -3 % -1 % -7 %
EBITDA -3 % -2 % -1 %
We have raised our 2017E due to higher salmon prices, but we have also lowered
Operational EBIT -2 % -3 % 0%
volumes. Due to its success and high EBIT/kg for some time, the stock is priced well Pre-tax profit -4 % 2% -4 %
above other salmon farmers. We therefore believe there are better opportunities EPS, adj. -1 % 5% -1 %
DPS n.a. 5% 2%
among other aquaculture companies, especially given the uncertainty related to
ISA. We therefore reiterate our HOLD rating.
Key figures (DKKm) 2013 2014 2015 2016E 2017E 2018E Q415 Q416E 400
Operating revenues 2,491 2,683 2,850 3,180 3,381 3,598 760 846 350
EBITDA 674 931 1,109 1,298 1,685 1,769 285 393 300
Operational EBIT 587 834 1,001 1,179 1,562 1,641 256 364
250
EBIT 695 885 929 1,343 1,449 1,522 309 338
PTP 719 892 926 1,287 1,427 1,507 311 331 200
EPS adj. 10.6 12.3 17.9 17.9 23.5 24.8 6.1 5.5 150
DPS - 5.95 8.25 10.00 12.00 13.00 100
Revenue growth 34.3% 7.7% 6.2% 11.6% 6.3% 6.4% 0.3% 11.4% Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
EBIT-margin 23.3% 33.4% 33.6% 35.9% 42.9% 42.3% 40.7% 40.0%
BAKKA Share OSEBX (Rebased)
Dividend yield 0.0% 4.5% 4.3% 3.8% 4.5% 4.9%
EV/EBITDA 5.8 7.0 8.8 10.1 7.7 7.1 8.8 10.1
EV/EBIT 6.7 7.3 10.2 11.5 8.9 8.2 10.2 11.5 Knut Erik Løvstad
P/E adj. 6.5 10.8 10.8 14.8 11.2 10.6 10.8 14.8 TEL: +47 23 11 30 40
EBIT/kg 14.2 18.9 19.8 24.8 29.5 29.3 18.8 28.2 knut.lovstad@beringerfinance.no
EV/kilo 94 149 193 276 244 224
NIBD/EBITDA (4q roll) 0.7 0.1 0.3 0.2 0.0 -0.2 0.3 0.2 Magnus Granerød
ROE 39.7% 34.3% 34.9% 35.9% 31.8% 28.5% TEL: +47 23 11 30 30
ROCE 28.0% 41.4% 37.6% 35.3% 38.4% 36.9% magnus.granerod@beringerfinance.com
Bakkafrost - 4Q16 Preview - 8 February 2017
Company Profile
Lack of supply will keep prices high
Niche-oriented player in high end markets
The algal bloom in Chile, combined with a drop in supply from Norway
Bakkafrost is the largest salmon farming company in the Faroe Island,
due to sea lice problems, led to a cut in supply of ~7% in 2016. We
and the stock is listed on the Oslo Stock Exchange. It pursues a strategy
expect a continued tight supply situation going forward, as biological
of vertical integration, controlling the entire value chain from hatching,
challenges will continue to limit the supply. We expect 2-3% annual
fish farming, value added processing, sales and marketing as well as
supply growth for 2017 & 2018. Therefore, with growing underlying
feed production in which the marine raw material is 45% vs 20% in
demand that cannot be satisfied, prices will remain high. We expect
Norway.
The Rolls Royce of the Salmon Farming Industry The company has guided a production of 47,500 tonnes in 2016 and
BAKKA sees control of the entire value chain as essential for ensuring 56,000 tonnes in 2017 as some volumes have been pushed out from
biological security, cost efficiency and consistent, high quality products. 2016 to 2017. It also has its own hatcheries for smolt production, and
The company provides high-grade fresh salmon and frozen value- is in the process of making significant investments (DKK 1.1bn) in order
added salmon portions that are vacuum-packed and available in bulk to increase the size of the land produced smolt from today’s ~150g to
or in catering boxes. ~4-500g by 2019/20.
Due to its success and high EBIT/kg, the stock is priced well above The license regime in the Faroe Island is different than in Norway, in
peers. We therefore believe there are better opportunities in that there is no maximum limit for the biomass allowed per license,
aquaculture at this time. We therefore rate the stock a HOLD. but rather a license right to utilise a given area of a fjord for farming
purposes without a biomass ceiling.
SWOT Analysis
 Integrated value chain reducing risks  Concentrated farming exposure at Faroe Islands
 High end strategy with high omega 3 content  Average biological risks should be somewhat higher than for
 The smolt yield is better at Faroe than in Norway because of the diversified companies
absence of MAB at The Faroe Islands  Rather long way to the market – dependent on boat to reach the
mainland
 Faroe Islands have less strict sea lice rules than Norway requiring  The main biological risks at the Faroe Islands are sea lice, with
less delousing of the cages AGD and ISA outbreaks as well
 The sea water sites are on average larger than in Norway  Increased activities within pelagic sector on Faroe Islands could
 The BAKKA goal is, within 4 years, to increase smolt size to 4-500g, increase biological risks in aquaculture
reducing the sea water time by 6 months  Increased taxes through revenue tax
BAKKA Farming Volumes Peer Valuation - Consensus

60
50 BAKKA (BF est) 15,595 97 % 7.7 7.1 11.2 10.6 5% 5%
BAKKA (@ target) 17,007 97 % 8.7 8.3 12.4 11.8 4% 4%
40 BAKKA (BB) 15,595 97 % 7.7 7.5 11.2 11.2 4% 5%
Austevoll Seafood Asa 15,863 54 % 3.4 3.1 7.8 7.8 6% 6%

30
55 Grieg Seafood Asa 7,794 82 % 5.3 4.7 7.9 7.4 6% 7%
51 48 48
20 45 41 44 Norway Royal Salmon 7,908 100 % 8.1 7.1 11.0 9.7 5% 6%
36 Scottish Salmon Co 1,826 82 % 6.5 4.8 10.2 7.4 2% 3%
10 22 Marine Harvest 67,202 89 % 7.8 7.5 10.8 10.5 7% 7%
9 Salmar Asa 26,875 93 % 7.7 7.4 10.3 10.1 6% 6%
0 0 Leroey Seafood Group 28,109 86 % 6.1 5.9 9.2 9.1 5% 5%
Average 6.4 5.8 9.6 8.9 5% 6%
Median 86 % 6.5 5.9 10.2 9.1 6% 6%
Jacobsen Oddvør 4.6 9.5 % Executive Management:

Jacobsen Johan Regin 4.5 9.2 % CEO Regin Jacobsen
Nordea Bank Danmark S/A 3.4 7.0 % CFO Gunnar Nielsen
Folketrygdfondet 2.3 4.8 %
Clearstream Banking 1.2 2.5 % Board of Directors:
Swedbank Robur Smabo Norden 1.1 2.3 % Chairman Runi M Hansen
Skandinaviska Enskilda 1.0 2.0 % Deputy Chairman Johannes Jensen
State Street Bank 0.9 1.9 % Board Member Øystein Sandvik
Jp Morgan Chase 0.9 1.9 % Board Member VIrgar Dahl
Dnb 0.8 1.7 % Board Member Annika Frederiksberg
Total 10 largest 20.8 42.9 % Board Member Teitur Samuelsen
Others 27.8 57.1 %
Total 48.6 100.0 %


Average/total -12 % -3 % -2 % -12 % -3 % 1% 882,613 1,070,000
Median -2 % 2% 1% -3 % 0% 4%

Marine Harvest 66,299 74,229 9.8 6.6 6.1 11.8 7.5 6.9 14.1 9.2 8.6 5.7 % 7.2 % 8.6 % 189 23
Bakkafrost P/F 15,478 16,039 10.1 7.7 7.1 11.5 8.9 8.2 14.8 11.2 10.6 3.8 % 4.5 % 4.9 % 301 36
Salmar Asa 26,580 28,531 9.8 7.3 6.9 11.2 8.1 7.6 12.9 10.2 9.8 5.1 % 6.0 % 6.8 % 206 28
Average 11.5 7.5 6.5 20.5 9.4 7.8 31.5 12.3 10.4 3.5 % 4.4 % 5.4 % 189 24
Median 10.0 7.4 6.6 11.3 7.8 7.2 14.0 10.4 9.6 3.8 % 5.0 % 5.9 % 189 23
Valuation
20 20
15 15
10 10
5 5
0 0
Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17
SOTP Valuation
Bakkafrost Sites Volume Capacity EBIT/kg EBIT EV/EBIT EV/kilo EV

2017 2017 2017 2017 implied
Upstream Farming 16 53.0 55.0 30.2 1,602 10.0 302.3 16,023
Total farming 16 53.0 55.0 30.2 1,602 10.0 302.3 16,023
Value Added Products (VAP) 13.8 35.0 -4.07 -56 10.0 -562
Fishmeal, Oil & Feed (FOF) 81.0 100.0 2.42 196 9.0 1,764
Eliminations/HQ -180 10.0 -1,800
Associates 36 8.0 288
Total BAKKA EV 15,713
NIBD -467
Equity Value 15,246
Outst. shares 49
SOTP per share (DKK) 314
DKK/NOK 1.20
SOTP per share (NOK) 377

Bakkafrost
Income Statement (DKKm) 2013 2014 2015 2016E 2017E 2018E Q415 Q116 Q216 Q316 Q416E
Operating revenues 2,491 2,683 2,850 3,180 3,381 3,598 760 905 790 640 846
Total OPEX -1,817 -1,752 -1,742 -1,882 -1,696 -1,829 -474 -623 -454 -353 -453
EBITDA 674 931 1,109 1,298 1,685 1,769 285 282 336 287 393
Operational EBIT 587 834 1,001 1,179 1,562 1,641 256 254 307 255 364
Fair value adj. Of biological assets 115 -12 -28 200 0 0 83 108 -29 122 0
EBIT 695 885 929 1,343 1,449 1,522 309 282 278 445 338
Net financials 25 7 -3 -56 -22 -15 2 -21 -6 -21 -7
PTP before fair value adj. Of bio. Assets 604 903 953 1,087 1,427 1,507 228 153 301 302 331
PTP 719 892 926 1,287 1,427 1,507 311 260 272 424 331
Income tax expense -138 -252 -114 -239 -285 -301 9 -47 -48 -78 -66
Net profit before minorities 581 640 811 1,048 1,142 1,206 320 213 224 346 265
Minority interest 0 0 0 0 0 0 0 0 0 0 0
Net profit 581 640 811 1,048 1,142 1,206 320 213 224 346 265
EBIT
Upstream Farming 642 694 841 1,295 1,602 1,628 215 261 358 294 382
VAP - Value Added Products -90 70 86 -167 -56 -23 24 -25 -68 -47 -27
FOF - Fishmeal, Fish Oil and Fish Feed 102 156 173 208 196 216 37 61 38 54 54
EBIT per kilo
Upstream Farming 15.6 15.8 16.6 27.3 30.2 29.1 15.7 23.9 27.5 27.6 29.6
VAP - Value Added Products -4.9 3.5 4.7 -10.7 -4.1 -1.6 4.9 -7.9 -14.7 -11.3 -7.3
Volumes
Upstream Farming 41 44 51 48 53 56 14 11 13 11 13
VAP - Value Added Products 18 20 18 16 14 14 5 3 5 4 4
Cash and cash equivalents 182 405 102 425 625 1,006 102 321 174 241 425
Property, plant and equipment 917 1,041 1,531 2,090 2,546 2,787 1,531 1,622 1,793 1,971 2,090
Other non-current assets 117 127 131 49 49 49 131 131 136 49 49
Total assets 3,112 3,463 3,920 5,103 5,759 6,380 3,920 4,224 4,343 4,741 5,103
Total Equity 1,665 2,064 2,580 3,262 3,918 4,541 2,580 2,802 2,634 2,997 3,262
Long-term interest bearing debt 760 622 576 802 802 802 576 612 851 802 802
Other short term liabilities 376 363 414 470 471 469 414 412 413 373 470
EBIT after fair value adj. 701 892 929 1,343 1,449 1,522 309 282 278 445 338
CF from operations 517 870 768 1,110 1,265 1,333 -6 244 248 285 332
CF from investments -204 -232 -602 -695 -579 -369 -219 -119 -198 -229 -148
CF after capex 313 637 166 415 686 964 -225 125 50 56 184
Dividends -98 -218 -291 -401 -486 -583 0 0 -401 0 0
Net cash flow 157 223 -303 323 200 381 -148 219 -147 67 184
Share price (NOK) 76.7 153.3 242.6 317.0 317.0 317.0 242.6 283.0 309.7 317.0 317.0
Market capitalization (DKKm) 3,372 6,442 9,413 12,836 12,836 12,836 9,410 10,777 12,003 12,836 12,836
NIBD (DKKm) 503 100 346 283 83 -298 346 172 563 467 283
EPS adj. 10.6 12.3 17.9 17.9 23.5 24.8 6.1 3.7 4.7 4.0 5.5
DPS 0.0 6.0 8.3 10.0 12.0 13.0 0.0 0.0 0.0 0.0 0.0

Revenue growth 34.3 % 7.7 % 6.2 % 11.6 % 6.3 % 6.4 % 0.3 % 47.5 % -1.3 % -5.5 % 11.4 %
EBITDA-margin 27.0 % 34.7 % 38.9 % 40.8 % 49.8 % 49.2 % 37.6 % 31.2 % 42.6 % 44.8 % 46.5 %
EBIT-margin 23.3 % 33.4 % 33.6 % 35.9 % 42.9 % 42.3 % 40.7 % 31.2 % 35.2 % 69.6 % 40.0 %
ROE 39.7 % 34.3 % 34.9 % 35.9 % 31.8 % 28.5 %
ROCE 28.0 % 41.4 % 37.6 % 35.3 % 38.4 % 36.9 %
P/E adj. 6.5 10.8 10.8 14.8 11.2 10.6 10.8 12.3 13.6 14.3 14.8
P/B 2.0 3.1 3.6 3.9 3.3 2.8 3.6 3.8 4.6 4.3 3.9
EV/EBITDA 5.8 7.0 8.8 10.1 7.7 7.1 8.8 9.7 11.1 11.2 10.1
EV/EBIT 6.7 7.3 10.2 11.5 8.9 8.2 10.2 12.2 13.8 12.9 11.5
EV/Sales 1.6 2.4 3.4 4.1 3.8 3.5 3.4 3.5 4.0 4.3 4.1
Solidity/Credit
EBIT/Kg 14.2 18.9 19.8 24.8 29.5 29.3 18.8 23.2 23.6 23.9 28.2
NIBD/Kilo (4q roll) 12.2 2.3 6.8 6.0 1.6 -5.3 6.8 3.3 11.1 9.7 6.0
NIBD/EBITDA (4q roll) 0.7 0.1 0.3 0.2 0.0 -0.2 0.3 0.2 0.5 0.4 0.2
EBITDA/Interest 95.4 -134.4 349.0 49.6 76.6 118.0 -158.2 40.9 56.1 45.5 56.2
OCF/TIBD (4q roll) 0.7 1.4 1.3 1.4 1.6 1.7 1.3 1.5 1.0 1.0 1.4
TIBD/Equity 0.5 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.2

Norway Royal Salmon ASA Target Price NOK 220 (215)
Lower volumes in 4Q16
 Limited harvest volumes in 4Q16 – down 45% y-o-y
 Contract volume in 4Q16 at 40% SELL HOLD BUY

 Growth potential still not fully reflected – BUY
Volumes nearly halved y-o-y Share data 08 Feb 2017

Sector: Aquaculture
NRS has guided 4,500T in 4Q16, down from 7,600T in 3Q16 and 8,250T in 4Q15. It
Reuters/Bloomberg NRS
sold ~1,800T in 4Q16 on contract at NOK 48-49/kg, while the remaining 2,700T was Risk rating Medium
sold in the spot market, but with most of the volume early in the quarter. It means Outstanding shares 44
Market cap (NOKm) 7,930
that NRS only to a very limited extent benefitted from the very high prices towards Net interest bearing debt -51
the end of the quarter and we assume an avg. price of NOK 59/kg. Enterprise value (NOKm) 7,879
Free float % 50 %
Operational EBIT down 50% sequentially – PTP gain on TRS agreement Est. Changes Q416E 2016E 2017E
We expect 4Q16 Operational EBIT of NOK 111m (91m in 4Q15), down from NOK Revenues 26% 6% 6%
218m in 3Q16. Costs are guided slightly higher both in Region North & South, but EBITDA -1% 0% 10%
Operational EBIT -1% 0% 11%
the biology is believed to be good, particularly in Region North. We have adjusted Pre-tax profit 129% 19% 10%
our estimate for reported PTP up by ~NOK 155m related to gain on the TRS EPS, rep. 5% 1% 10%
DPS n.a. 1% 10%
agreement for 2.4m shares of its own stock due to the shares performance in 4Q16.
Valuation still not reflecting the growth – BUY Revenues -3 % -1 % 11 %
EBITDA 0% 1% 3%
NRS has a significant growth potential next 2 – 3 years, through its green licenses
for triploid fish, which we do not consider is fully reflected in today’s valuation. We Pre-tax profit 55 % 14 % 7%
have raised our estimates by ~10% in 2017 due to our increased forecast for EPS, adj. 3% -3 % 3%
DPS n.a. 11 % 5%
salmon prices from NOK 60/kg to 63/kg, reiterate our BUY rating and raise our
target price to NOK 220/share (from NOK 215).
Key figures (NOKm) 2013 2014 2015 2016E 2017E 2018E Q415 Q416E Share price (NOK) vs. OSEBX
Operating revenues 2,604 2,600 3,210 4,221 5,152 5,795 990 1,180
EBITDA 290 199 256 711 1,031 1,134 106 126 265
Operational EBIT 256 158 202 651 962 1,054 91 111
215
EBIT 380 243 249 658 1,052 1,174 169 124
PTP 396 321 270 952 1,038 1,179 214 274 165
EPS adj. 4.8 3.2 4.2 13.1 17.1 19.4 2.3 2.0
115
DPS - 1.50 2.57 7.88 10.24 11.63
Revenue growth 49.3% -0.2% 23.5% 31.5% 22.1% 12.5% 26.7% 19.2% 65
EBIT-margin 10.9% 7.1% 7.0% 17.2% 20.4% 20.3% 17.0% 10.5%
15
Dividend yield 0.0% 2.9% 3.7% 4.3% 5.6% 6.4%
Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
EV/EBITDA 5.5 13.5 13.5 11.3 7.6 6.6 13.5 11.3
NRS share OSEBX (Rebased)
EV/EBIT 5.6 14.5 15.4 11.1 7.4 6.4 15.4 11.1
P/E adj. 6.4 15.8 16.3 13.9 10.7 9.4 16.3 13.9
EBIT/kg 11.7 9.9 8.7 27.0 30.0 28.1 11.7 25.0 Knut Erik Løvstad
EV/Kilo 63 120 124 302 229 188 TEL: +47 23 11 30 40
NIBD/EBITDA (4q roll) 0.9 2.3 1.8 0.2 -0.1 -0.4 1.8 0.2 knut.lovstad@beringerfinance.no
ROE 41.0% 27.0% 20.9% 50.1% 37.1% 35.2%
ROCE 27.6% 14.2% 14.4% 40.7% 52.8% 55.5% Magnus Granerød
Source: Beringer Finance TEL: +47 23 11 30 30
Norway Royal Salmon ASA - 4Q16 Preview - 8 February 2017
Company Profile
Lack of supply will keep prices high Primarily exposure to Region North
The algal bloom in Chile, combined with a drop in supply from Norway NRS was established in 1992 by 34 individual farming companies as a
due to sea lice problems, led to a cut in supply of ~7% in 2016. We joint sales and marketing company for farmed salmon. Over the years,
expect a continued tight supply situation going forward, as biological through a series of structural measures, the company has grown into
challenges will continue to limit the supply. We expect 2-3% annual farming with stakes in smolt production, seawater fish farming,
supply growth for 2017 & 2018. Therefore, with growing underlying primary processing, as well as global sales and marketing with its own
demand that cannot be satisfied, prices will remain high. We expect NRS-brand. The company harvested ~28,000 tonnes in 2015, of which
salmon prices of NOK 63/kilo in 23017E & NOK 62/kilo in 2018E. 82% in Region North and has guided a total harvest volume of ~26,700
Strong growth in harvest volumes due to available capacity tonnes in 2016, with a growth to 34,000 tonnes in 2017.
NRS has green licenses for triploid salmon which represents a One of the leading players in Region North – 10 new licenses
significant and attractive long term growth potential, which potentially NRS had previously a total of 25 licenses, split between 19 in Region
could increase production by more than 50%. We therefore believe North and 6 in Region South. It has now in addition obtained 10 new
NRS has the highest growth potential among the listed companies green licenses in Region North, which will increase the total capacity of
during the coming 3 – 5-year period. We do not believe that it is fully the company to ~45,000 tonnes to be reached perhaps in 2018/19. NRS
reflected in the valuation, as it is attractively priced relative to its peer has released roughly 10.1m smolt this year, of which 2.8m smolt is
group in relation to capacity rather than current volumes. We triploid.
therefore recommend to BUY the stock.
SWOT Analysis
 One of the leading players in Region North which has good  Still has to prove that it can successfully utilise the potential with
biological conditions the green licenses for triploid salmon
 Large unutilised capacity with the 10 green licenses for triploid  Not self-sufficient with smolt
 Considerable sales and distribution activities  Very dependent on developments in Region North
 Excellent demand in core markets in Europe  Biological incidences are always a risk, such as algal blooms, Sea
 Still very low per capita consumption, which along with product lice and fish diseases
development will drive demand  Triploid salmon on a large scale represents some uncertainties/
 Significant potential in Russia & China longer term challenges
 Significant production potential in Island facilitated by buying 50%  Still uncertainty whether the demand growth will continue at
of Arctic Fish higher retail prices
NRS Farming Volumes Peer Valuation - Consensus

40
35 NRS (FF est) 7,908 101 % 7.6 6.6 10.7 9.4 6% 6%
NRS (@ target) 9,586 101 % 9.3 8.4 12.9 11.4 5% 5%
30 7
NRS (BB) 7,908 100 % 8.1 7.1 11.0 9.7 5% 6%
25 5 5 5
20 4
7 Bakkafrost P/F 15,595 97 % 7.7 7.5 11.2 11.2 4% 5%
15 6 Grieg Seafood Asa 7,794 82 % 5.3 4.7 7.9 7.4 6% 7%
28
10 20 23 22 22 Scottish Salmon Co 1,826 82 % 6.5 4.8 10.2 7.4 2% 3%
5 18 Marine Harvest 67,157 89 % 7.8 7.5 10.8 10.5 7% 7%
2 13 14
5 Salmar Asa 26,875 93 % 7.7 7.4 10.3 10.1 6% 6%
4 6 Leroey Seafood Group 28,138 86 % 6.1 5.9 9.2 9.1 5% 5%
0 0
Average 6.4 5.8 9.7 9.1 5% 6%
Median 86 % 6.5 5.9 10.2 9.1 6% 6%
North Farming South Farming
Gåsø Næringsutvikling As 6.6 15.2 % Executive Management:

Glastad Invest As 5.3 12.3 % CEO Charles Høstlund
Måsøval Eiendom As 5.1 11.7 % CFO Ola Loe
Egil Kristoffersen Og Sønner As 4.7 10.7 %
Havbruksinvest As 3.9 8.9 % Board of Directors:
Dnb Nor Markets, Aksjehand/Analyse 2.3 5.3 % Chairman Helge Gåsø
Hellesund Fiskeoppdrett A/S 1.6 3.7 % Vice Chairman Kristine Landmark
Sparebank 1 Markets As Market-Making 1.5 3.5 % Board Member Marianne E. Johnsen
Lovundlaks As 1.1 2.4 % Board Member Inge Kristoffersen
Nyhamn As 1.0 2.3 % Board Member Lars Måsøval
Total 10 largest 33.2 76.1 % Board Member Trude Olafsen
Others 10.4 23.9 %
Total 43.6 100.0 %

Pricing & Valuation (FF estimates)

Average/total -12 % -3 % -2 % -12 % -3 % 1% 882,613 1,070,000
Median -2 % 2% 1% -3 % 0% 4%

Marine Harvest 66,299 74,229 9.8 6.6 6.1 11.8 7.5 6.9 14.1 9.2 8.6 5.7 % 7.2 % 8.6 % 189 23
Bakkafrost P/F 15,478 16,039 10.1 7.7 7.1 11.5 8.9 8.2 14.8 11.2 10.6 3.8 % 4.5 % 4.9 % 301 36
Salmar Asa 26,580 28,531 9.8 7.3 6.9 11.2 8.1 7.6 12.9 10.2 9.8 5.1 % 6.0 % 6.8 % 206 28
Average 11.5 7.5 6.5 20.5 9.4 7.8 31.5 12.3 10.4 3.5 % 4.4 % 5.4 % 189 24
Median 10.0 7.4 6.6 11.3 7.8 7.2 14.0 10.4 9.6 3.8 % 5.0 % 5.9 % 189 23
Valuation
20 15
15
10
10
5
5
0 0
SOTP Valuation
Norway Royal Salmon Licenses Ownership Vol 2017 Capacity Vol. per EBIT/kg EBIT EV/EBIT EV/kilo EV
license 2017E 2017E 2017E implied
Farming North 29 100 % 28 38 966 31 875 10.0 312 8,746
Farming South 6 100 % 6 8 1,000 24 144 10.0 240 1,440
Total farming 35 100 % 34 45 971 30 1,019 10.0 300 10,186
NRS S&D 100 % 75 0.65 49 9.0 442
EBIT adj. (Overhead/eliminations) -106 9.0 -954
Total farming 9,674
Total associates 10 10.0 1,000 22 220 9.0 71 713
10 green licenses: 2018 volumes 10 10.0 1,000 20 200 5.0 100 1,000
Total NRS EV 11,387
NIBD 51
Equity value 11,438
Outstanding NRS shares 44
Equity value per share 263

Norway Royal Salmon

Income Statement (NOKm) 2013 2014 2015 2016E 2017E 2018E Q415 Q116 Q216 Q316 Q416E
Operating revenues 2,604 2,600 3,210 4,221 5,152 5,795 990 939 995 1,107 1,180
Total OPEX -2,314 -2,400 -2,955 -3,510 -4,122 -4,660 -885 -771 -812 -874 -1,054
EBITDA 290 199 256 711 1,031 1,134 106 168 183 233 126
Operational EBIT 256 158 202 651 962 1,054 91 153 168 218 111
Fair value adj. Of biological assets 95 57 24 -67 0 0 65 3 -87 17 0
EBIT 380 243 249 658 1,052 1,174 169 171 112 251 124
Net financials 17 78 21 294 -14 5 46 82 26 36 150
PTP before fair value adj. Of bio. Assets 302 263 246 1,019 1,038 1,179 149 251 225 269 274
PTP 396 321 270 952 1,038 1,179 214 253 138 286 274
Net profit before minorities 316 268 238 768 778 885 196 216 119 228 206
Net profit 302 254 230 748 743 845 185 209 118 223 199
EBIT
North Farming 252 206 223 636 875 984 93 169 173 220 73
South Farming 42 16 20 83 144 138 4 10 24 8 40
NRS Sales -19 -5 27 -6 49 62 7 5 -10 -9 8
Group EBIT 275 216 269 712 1,068 1,184 104 184 187 220 121
EBIT per kilo
North Farming 12.3 11.4 9.7 29.3 31.2 28.9 13.6 26.0 31.7 31.1 28.0
South Farming 9.0 3.6 4.0 16.6 24.0 23.0 2.7 14.6 12.6 18.7 21.0
Volumes
North Farming 20.5 18.0 23.0 21.7 28.0 34.0 6.8 6.5 5.5 7.1 2.6
South Farming 4.7 4.4 4.9 5.0 6.0 6.0 1.4 0.7 1.9 0.5 1.9
Total Farming 25.2 22.4 27.9 26.6 34.0 40.0 8.3 7.2 7.4 7.5 4.5
Sold Volumes 62.1 59.1 70.0 68.6 75.3 81.3 20.6 15.9 15.6 17.7 19.5
Cash and cash equivalents 54 61 201 202 465 751 201 416 189 373 202
Property, plant and equipment 211 289 358 682 767 861 358 350 367 367 682
Total assets 2,052 2,599 2,870 3,376 3,882 4,337 2,870 2,980 2,836 3,210 3,376
Total Equity 869 1,014 1,187 1,803 2,203 2,602 1,187 1,364 1,368 1,605 1,803
Long-term interest bearing debt 333 538 666 290 290 290 666 655 303 290 290
Other short term liabilities 618 775 714 852 957 1,014 714 611 796 884 852
PTP pre fair value adj. 302 263 246 1,019 1,038 1,179 149 251 225 269 274
CF from operations 212 95 340 744 761 906 133 203 263 119 159
CF from investments -24 -162 -108 -277 -155 -174 -68 24 -15 44 -330
CF after capex 187 -67 232 467 606 732 65 226 249 163 -171
Dividends -44 -97 -65 -112 -343 -446 0 0 -112 0 0
Net cash flow 44 8 140 1 263 286 86 214 -227 185 -171
Share price (NOK) 30.4 51.2 69.0 182.0 182.0 182.0 69.0 86.6 107.7 107.7 182.0
Market capitalization (m) 1,324 2,229 3,005 7,930 7,930 7,930 3,004 3,774 4,692 4,692 7,930
NIBD (m) 269 457 452 121 -142 -428 452 226 146 -51 121
EPS adj. 4.8 3.2 4.2 13.1 17.1 19.4 2.3 3.3 3.6 4.2 2.0
DPS 0.0 1.5 2.6 7.9 10.2 11.6 0.0 0.0 0.0 0.0 0.0

Revenue growth 49.3 % -0.2 % 23.5 % 31.5 % 22.1 % 12.5 % 26.7 % 23.5 % 45.4 % 42.7 % 19.2 %
EBITDA-margin 11.1 % 7.7 % 8.0 % 16.8 % 20.0 % 19.6 % 10.7 % 17.9 % 18.4 % 21.1 % 10.7 %
EBIT-margin 10.9 % 7.1 % 7.0 % 17.2 % 20.4 % 20.3 % 17.0 % 18.2 % 11.3 % 22.6 % 10.5 %
ROE 41.0 % 27.0 % 20.9 % 50.1 % 37.1 % 35.2 %
ROCE 27.6 % 14.2 % 14.4 % 40.7 % 52.8 % 55.5 %
P/E adj. 6.4 15.8 16.3 13.9 10.7 9.4 16.3 12.8 10.7 8.0 13.9
P/B 1.5 2.2 2.5 4.4 3.6 3.0 2.5 2.8 3.4 2.9 4.4
EV/EBITDA 5.5 13.5 13.5 11.3 7.6 6.6 13.5 11.7 9.8 6.7 11.3
EV/EBIT 5.6 14.5 15.4 11.1 7.4 6.4 15.4 12.1 9.6 6.6 11.1
EV/Sales 0.6 1.0 1.1 1.9 1.5 1.3 1.1 1.2 1.3 1.2 1.9
Solidity/Credit
EBIT/Kg 11.7 9.9 8.7 27.0 30.0 28.1 11.7 24.9 26.7 30.4 25.0
NIBD/Kilo (4q roll) 10.7 20.5 16.2 4.5 -4.2 -10.7 16.2 8.2 5.0 -1.7 4.5
NIBD/EBITDA (4q roll) 0.9 2.3 1.8 0.2 -0.1 -0.4 1.8 0.7 0.3 -0.1 0.2
EBITDA/Interest 13.7 9.0 14.9 40.2 73.6 -226.9 24.1 32.4 41.0 77.7 25.2
OCF/TIBD (4q roll) 0.6 0.2 0.5 2.6 2.6 3.1 0.5 0.7 2.2 2.5 2.6
TIBD/Equity 0.4 0.5 0.6 0.2 0.1 0.1 0.6 0.5 0.2 0.2 0.2

Lerøy Seafood Group Target Price NOK 530 (500)
Broad product offering!
 Improved biology expected in 4Q16
 Excellent product offering through white fish acquisitions SELL HOLD BUY
 Estimates raised – Target up to NOK 530 (500)
Significantly improved 4Q16 expected Share data 08 Feb 2017

Sector: Aquaculture
We expect LSG to deliver 4Q16 Operational EBIT of NOK 975m (353m in 4Q15),
Reuters/Bloomberg LSG
which is also well above 3Q16 of NOK 481m. The sequential improvement is due to Risk rating Medium
better prices, but also lower costs which means that EBIT/kg for farming is up from Outstanding shares 60
NOK 12/kg to NOK 21/kg. We have also raised our estimates slightly due to better Net interest bearing debt 2,716
than expected price realisation in the quarter. Enterprise value 30,359
Free float % 100 %
Better operational performance Est. Changes Q416E 2016E 2017E
The 3Q16 operations were hurt due to very poor biology in especially Region Mid Revenues 2% 0% 0%
with low harvest weight, high costs and low price realisation. In 4Q16, we expect EBITDA 8% 3% 8%
higher harvest weight which improves price realisation combined with a significant Pre-tax profit 9% 3% 9%
reduction in cost (-15%) which more than doubles the EBIT/kg in Region Mid. EPS, rep. 9% 3% 9%
DPS 0% 0% 5%
Undemanding valuation – BUY reiterated BF vs Consensus Q416E 2016E 2017E
We have increased our estimates, due to higher salmon price of NOK 63/kg (up Revenues 10% 3% 8%
EBITDA -3% -1% -2%
from NOK 60/kg) in 2017, we raise our target price to NOK 530 (from 500) and
Operational EBIT -1% -2% 5%
reiterate our BUY rating. We consider Lerøy to be well positioned with its broad Pre-tax profit 3% -1% 1%
product range now also covering white fish and therefore truly becoming a fully EPS, adj. 7% -1% 6%
DPS n.a. 10% -2%
integrated seafood provider. We see considerable sales & processing synergies in
better utilising its strong European distribution network.
Key figures (NOKm) 2013 2014 2015 2016E 2017E 2018E Q415 Q416E 500
Operating revenues 10,818 12,580 13,485 17,652 21,673 21,473 3,564 5,308 450
EBITDA 1,938 2,043 1,815 3,275 4,691 4,827 478 1,091
400
Operational EBIT 1,626 1,789 1,382 2,800 4,219 4,347 353 975
EBIT 2,390 1,462 1,571 2,754 4,219 4,347 1,042 975 350
PTP 2,480 1,434 1,503 2,864 4,265 4,447 1,033 980 300
EPS adj. 22.7 22.6 19.2 35.4 54.0 56.3 6.1 12.4
250
DPS 10.00 12.00 12.00 18.00 23.00 25.00
Revenue growth 18.8% 16.3% 7.2% 30.9% 22.8% -0.9% 9.3% 48.9% 200
Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
EBIT-margin 15.0% 14.2% 10.3% 15.9% 19.5% 20.2% 29.2% 18.4%
LSG OSEBX Index (Rebased)
Dividend yield 0.0% 5.2% 4.0% 3.9% 5.0% 5.4%
EV/EBITDA 5.9 7.7 11.2 9.4 6.2 5.7 10.4 9.4
EV/EBIT 7.1 8.8 14.8 11.0 6.9 6.3 13.7 11.0
P/E adj. 7.6 11.2 17.0 13.1 8.6 8.2 15.6 13.1 Knut Erik Løvstad
EBIT/kg 9.2 8.7 6.3 16.0 22.9 21.4 5.3 20.5 TEL: +47 23 11 30 40
EV/Kilo 80 99 129 203 184 160 knut.lovstad@beringerfinance.no
NIBD/EBITDA (4q roll) 1.1 0.9 1.4 1.0 0.3 -0.1 1.4 1.0
ROE 26.5% 12.8% 14.0% 19.0% 22.6% 20.4% Magnus Granerød
ROCE 18.2% 18.2% 13.0% 20.2% 25.4% 25.6% TEL: +47 23 11 30 30
Source: Beringer Finance magnus.granerod@beringerfinance.com
Lerøy Seafood Group - 4Q16 Preview - 8 February 2017
Company Profile
Lack of supply will keep prices high Norway’s second largest farmer
The algal bloom in Chile, combined with a drop in supply from Norway Lerøy Seafood Group is the second largest farmer of Atlantic salmon
due to sea lice problems, led to a cut in supply of ~7% in 2016. We and the world’s largest farmer of trout. It is a fully integrated with its
expect a continued tight supply situation going forward, as biological own smolt capacity and with extensive operations in three clusters
challenges will continue to limit the supply. We expect 2-3% annual along the Norwegian coast, a global distribution network and a
supply growth for 2017 & 2018. Therefore, with growing underlying growing value added downstream operation with primarily Nordic and
demand that cannot be satisfied, prices will remain high. We expect European VAP/Sales & Distribution exposure. Amongst others, it is
salmon prices of NOK 63/kilo in 2017E & NOK 62/kilo in 2018E. Norway’s largest producer of sushi. The company holds 146 licenses in
An integrated seafood company Norway and the production guidance for 2016 is 152,000 tonnes and
We expect LSG to generate solid growth from its existing farming 165,000 tonnes in 2017.
operations. In addition, the acquisition of Havfisk & Norway Seafoods
will enable LSG to expand its range of offering and the market for Acquisition of Havfisk & Norway Seafoods
Lerøy owns 50% of Norskott Havbruk, which owns Scottish Sea Farms,
white fish is considerably underdeveloped. LSG becomes a fully
with production of 26,000 tonnes in 2016 and a guidance of 30,000
integrated seafood supplier with an attractive offering to retailers
tonnes in 2017. It has recently also bought Havfisk and Norway
which will generate both revenue & cost synergies.
Seafoods. Havfisk is the largest trawler company in Norway with a total
Attractive valuation catch of white fish of ~60,000 tonnes, 9 vessels and a turnover of NOK
LSG is attractively valued relative to its peers considering its market 1.1bn. Norway Seafoods is one of Europe’s largest processing, sales
position, growth and the potential related to the recent acquisitions. and distribution companies for white fish.
We therefore recommend to BUY the stock.
SWOT Analysis
 Strong track record, particularly in Region North and in its  Region Mid is still faced with biological challenges which may
downstream operations continue hampering growth
 Significant smolt investments last year in all regions  Limited experience and track record in white fish operations
 Fully integrated seafood supplier with the acquisitions of white
fish operations
 Excellent demand for salmon in core European markets  New biological incidences are always a threat
 Significant untapped potential in Europe & US  Integration and development of the white fish operations
 Broader product offering to retailers with white fish as well represents a degree of uncertainty
LSG Farming Volumes Peer Valuation - Consensus

200 FUNDAMENTALS EV/EBITDA P/E adj. Div. yield
150 LSG (BF est) 28,109 91 % 6.2 5.7 8.6 8.2 5% 5%
63 57 67 LSG (@ target) 31,576 92 % 7.3 7.1 9.8 9.4 4% 5%
57 72 62 69 69
100 32 37 LSG (BB) 28,109 86 % 6.1 5.9 9.2 9.1 5% 5%
25
68 71 59 Austevoll Seafood Asa 15,863 54 % 3.4 3.1 7.8 7.8 6% 6%
50 57 59 62 62 59 53 53
55 Bakkafrost P/F 15,595 97 % 7.7 7.5 11.2 11.2 4% 5%
24 27 29 30 30 39 Norway Royal Salmon 7,908 100 % 8.1 7.1 11.0 9.7 5% 6%
0 17 19 20 18 20
Scottish Salmon Co 1,826 82 % 6.5 4.8 10.2 7.4 2% 3%
Marine Harvest 67,157 89 % 7.8 7.5 10.8 10.5 7% 7%
Salmar Asa 26,875 93 % 7.7 7.4 10.3 10.1 6% 6%
Aurora Farming Midt Farming Sjøtroll Farming
Grieg Seafood Asa 7,794 82 % 5.3 4.7 7.9 7.4 6% 7%
Median 89 % 7.7 7.1 10.3 9.7 6% 6%
Austevoll Seafood Asa 31.4 52.7 % Executive Management:

Folketrygdfondet 2.6 4.4 % CEO Henning Beltestad
State Street Bank And Trust Comp 1.3 2.2 % Executive Vice President Farming Stig Nilsen
Danske Invest Norske Instit. Ii. 0.7 1.1 % CFO Sjur Malm
Pareto Aksje Norge 0.6 1.1 % Board of Directors:
Clearstream Banking S.A. 0.6 1.0 % Chairman Helge Singelstad
Jpmorgan Chase Bank, N.A., London 0.6 1.0 % Board Member Arne Møgster
Ferd As 0.6 1.0 % Board Member Britt Kathrine Drivenes
State Street Bank And Trust Comp 0.6 1.0 % Board Member Hege Charlotte Bakken
Total 10 largest 39.7 66.7 % Board Member Didrik Munch
Others 19.9 33.3 % Board Member Marianne Møgster
Total 59.6 100.0 %


Average/total -12 % -3 % -2 % -12 % -3 % 1% 882,613 1,070,000
Median -2 % 2% 1% -3 % 0% 4%

Marine Harvest 66,299 74,229 9.8 6.6 6.1 11.8 7.5 6.9 14.1 9.2 8.6 5.7 % 7.2 % 8.6 % 189 23
Bakkafrost P/F 15,478 16,039 10.1 7.7 7.1 11.5 8.9 8.2 14.8 11.2 10.6 3.8 % 4.5 % 4.9 % 301 36
Salmar Asa 26,580 28,531 9.8 7.3 6.9 11.2 8.1 7.6 12.9 10.2 9.8 5.1 % 6.0 % 6.8 % 206 28
Average 11.5 7.5 6.5 20.5 9.4 7.8 31.5 12.3 10.4 3.5 % 4.4 % 5.4 % 189 24
Median 10.0 7.4 6.6 11.3 7.8 7.2 14.0 10.4 9.6 3.8 % 5.0 % 5.9 % 189 23
Valuation
20 20
15 15
10 10
5 5
0 0
SOTP Valuation
Lerøy Seafood Group Licenses Volume Capacity Vol. per EBIT/kg EBIT EV/EBIT EV/kilo EV
2017E license 2017E 2017E 2017 Implied
LSG Midt 57 55 75 965 24.6 1,352 10.0 246 13,515
LSG Aurora 26 37 40 1,404 27.1 991 10.0 271 9,910
LSG Sjøtroll 63 67 80 1,063 19.1 1,281 10.0 191 12,815
EV LSG farming Norway 146 158 195 1,086 22.9 3,624 10.0 229 36,239
LSG VAP 88 7.0 616
LSG S&D 310 7.0 2,168
HQ & Eliminations -40 10.0 -400
Wild catch and white fish 237 10.0 2,375
Seistar Holding (50%) 80
Scottish Sea Farms (50%) 41 30 30.0 732 12.0 360 8.0 1,440
Total EV 4,579 9.3 42,519
NIBD -2,716
Minority value in Sjøtroll (20.7% adj) 13 14 19.1 264 10.0 -2,644
Equity values 37,159
Outstanding shares 60
SOTP per share 624

Lerøy Seafood Group ASA

Operating revenues 10,818 12,580 13,485 17,652 21,673 21,473 3,564 3,815 4,262 4,268 5,308
Total OPEX -8,880 -10,536 -11,670 -14,377 -16,981 -16,647 -3,086 -3,118 -3,386 -3,656 -4,217
EBITDA 1,938 2,043 1,815 3,275 4,691 4,827 478 697 876 612 1,091
Operational EBIT 1,626 1,789 1,382 2,800 4,219 4,347 353 584 760 481 975
Fair value adj. Of biological assets 764 -328 189 -46 0 0 689 172 -147 -70 0
EBIT 2,390 1,462 1,571 2,754 4,219 4,347 1,042 756 613 411 975
Net financials -102 -120 -130 -115 -129 -92 -32 -34 -27 -22 -33
PTP before fair value adj. Of bio. Assets 1,716 1,761 1,314 2,909 4,265 4,447 344 612 774 544 980
PTP 2,480 1,434 1,503 2,864 4,265 4,447 1,033 783 626 474 980
Net profit before minorities 1,887 1,105 1,234 2,207 3,325 3,468 879 601 473 370 763
Minority interest -99 -106 -53 -131 -106 -112 -52 -50 -26 -30 -25
Net profit 1,788 999 1,181 2,076 3,219 3,356 827 551 447 340 738
EBIT
Aurora Farming 359 370 450 666 991 952 181 169 122 79 296
Midt Farming 508 666 468 812 1,352 1,350 48 198 249 113 252
Sjøtroll Farming 460 343 72 948 1,281 1,342 -7 154 303 200 291
Farming EBIT, before value adj. 1,327 1,379 990 2,426 3,624 3,645 222 521 674 392 839
Wild catch and white fish 0 0 0 73 237 319 0 0 0 13 60
VAP 66 95 106 56 88 106 39 13 23 8 12
S&D 207 241 287 286 310 316 97 57 74 82 73
Elim. 26 75 0 -41 -40 -40 -5 -7 -11 -13 -10
Group EBIT, before value adj. 1,626 1,789 1,382 2,800 4,219 4,346 353 584 760 481 974
EBIT per kilo
Aurora Farming 15 14 15 22 27 24 17 22 22 18 24
Midt Farming 9 10 7 15 25 23 3 15 18 8 23
Sjøtroll Farming 7 5 1 14 19 19 0 9 14 15 17
Group EBIT per kilo 9 9 6 16 23 21 5 14 16 12 21
Volumes
Aurora Farming 24 27 29 30 37 40 10 8 5 4 13
Midt Farming 59 68 71 53 55 59 15 14 14 14 11
Sjøtroll Farming 62 63 57 69 67 71 16 17 21 13 17
Total Farming 145 158 158 152 158 170 42 38 41 32 41
Cash and cash equivalents 874 1,359 1,247 1,442 3,185 5,005 1,247 1,470 3,491 1,944 1,442
Property, plant and equipment 2,377 2,677 2,900 5,325 5,720 5,993 2,900 2,900 2,981 4,281 5,325
Licenses & other non-curr. intangibles 3,999 4,277 4,391 7,229 7,229 7,229 4,391 4,388 4,381 7,229 7,229
Total assets 13,905 14,857 15,983 22,223 24,608 26,526 15,983 16,255 18,275 21,400 22,223
Total Equity 7,549 8,080 8,764 13,130 15,382 17,480 8,764 9,292 11,237 12,367 13,130
Long-term interest bearing debt 2,357 2,767 2,377 3,725 3,725 3,725 2,377 2,445 2,435 3,725 3,725
Other long term liabilities 1,527 1,670 1,698 1,897 1,897 1,897 1,698 1,765 1,723 1,897 1,897
Other short term liabilities 2,471 2,342 3,144 3,471 3,604 3,424 3,144 2,753 2,880 3,412 3,471
PTP 2,480 1,434 1,503 2,864 4,265 4,447 1,033 783 626 474 980
CF from operations 1,259 1,415 767 2,792 3,682 3,944 163 652 840 643 657
CF from investments -698 -540 -657 -3,621 -867 -753 -185 -120 -228 -2,113 -1,159
CF after capex 560 875 110 -828 2,815 3,190 -22 531 612 -1,470 -502
Dividends -394 -579 -680 -664 -1,072 -1,370 0 0 -664 0 0
Net cash flow -223 346 -112 195 1,742 1,820 192 223 2,021 -1,547 -502
Share price (NOK) 157.0 231.3 298.8 464.0 464.0 464.0 298.8 335.4 397.8 392.0 464.0
NIBD (m) 2,165 1,877 2,595 3,218 1,475 -345 2,595 2,092 -7 2,716 3,218
EPS adj. 22.7 22.6 19.2 35.4 54.0 56.3 6.1 7.8 9.3 6.5 12.4
DPS 10.0 12.0 12.0 18.0 23.0 25.0 12.0 0.0 0.0 0.0 18.0

Revenue growth 18.8 % 16.3 % 7.2 % 30.9 % 22.8 % -0.9 % 9.3 % 16.4 % 27.2 % 29.7 % 48.9 %
EBITDA-margin 17.9 % 16.2 % 13.5 % 18.6 % 21.6 % 22.5 % 13.4 % 18.3 % 20.5 % 14.3 % 20.5 %
EBIT-margin 15.0 % 14.2 % 10.3 % 15.9 % 19.5 % 20.2 % 29.2 % 19.8 % 14.4 % 9.6 % 18.4 %
ROE 26.5 % 12.8 % 14.0 % 19.0 % 22.6 % 20.4 %
ROCE 18.2 % 18.2 % 13.0 % 20.2 % 25.4 % 25.6 %
P/E adj. 7.6 11.2 17.0 13.1 8.6 8.2 15.6 15.5 15.9 13.7 13.1
P/B 1.2 1.7 2.0 2.1 1.8 1.6 1.9 2.0 2.1 1.9 2.1
EV/EBITDA 5.9 7.7 11.2 9.4 6.2 5.7 10.4 10.1 9.8 9.8 9.4
EV/EBIT 7.1 8.8 14.8 11.0 6.9 6.3 13.7 13.1 12.1 12.0 11.0
EV/Sales 1.1 1.2 1.5 1.7 1.3 1.3 1.4 1.5 1.6 1.6 1.7
Solidity/Credit
EBIT/Kg 9.2 8.7 6.3 16.0 22.9 21.4 5.3 13.7 16.4 12.3 20.5
NIBD/Kilo (4q roll) 15.0 11.9 16.4 21.2 9.3 -2.0 16.4 13.0 0.0 17.8 21.2
EBITDA/Interest 19.1 17.1 14.0 28.4 36.4 52.5 14.9 20.7 32.7 28.1 33.0
OCF/TIBD (4q roll) 0.4 0.4 0.2 0.6 0.8 0.8 0.2 0.3 0.5 0.5 0.6
TIBD/Equity 0.4 0.4 0.4 0.4 0.3 0.3 0.4 0.4 0.3 0.4 0.4

Grieg Seafood ASA Target Price NOK 90
Benefitting from high volume in 4Q16
 Excellent position to enjoy high spot prices...
 .. as only 15% of 2017 volume has been sold on contracts SELL HOLD BUY
 Pricing does not reflect growth potential – BUY reiterated
All time high EBIT in 4Q16 Share data 08 Feb 2017

Sector: Aquaculture
We expect 4Q16 EBIT of NOK 450m (43m in 4Q16), well above the NOK 186m in Reuters/Bloomberg GSF
3Q16. The main reason is 60% higher volume, but also higher avg prices as only Risk rating Medium
30% of the volumes are on contracts vs 47% in 3Q16. The contracts are still at prices
negotiated in the fall-2015 though, with the new contracts commencing 1Q17. We Net interest bearing debt 1,329
have therefore lowered our expectations slightly and cut EBIT by 4% in 4Q16. Enterprise value 9,033
Free float % 50%
Lowering of 2017 volumes due to the ISA outbreak Est. Changes Q416E 2016E 2017E
GSF reported in Jan.17 that the ISA outbreak in Finnmark led to the destruction of Revenues -1 % 0% -1 %
EBITDA -3 % -1 % 3%
1.3m fish with an averge weight of less than 1kg. Due to small size, the fish had no EBIT, bef. val. adj. -4 % -1 % 3%
value and was not sold in the market, but simply destroyed. This led to a negative Pre-tax profit -9 % -3 % 4%
EPS, rep. -3 % -1 % 12 %
one-off effect in the 4Q16 accounts of NOK 25m. In addition, we have reduced the
DPS 0% 0% 0%
harvest volume in 2017 by 3,000T, to 70,000T.
Revenues 0% 0% 13 %
Attractive valuation – Target NOK 90
EBITDA -1 % -2 % 2%
GSF has shown better operational control, and it has potential to grow production EBIT, bef. val. adj. -1 % -11 % 3%
significantly with its existing licenses in Norway. We have raised 2017 estimates on Pre-tax profit -6 % 4% 2%
EPS, adj. -8 % -8 % -1 %
the back of raising our salmon price forecast from NOK 60/kg to NOK 63/kg, but DPS 35 % -6 % -5 %
pulled down somewhat due to lower volumes. We reiterate our BUY rating with a
NOK 90/share target as today’s pricing does not reflect GSF’s growth potential.
100
Key figures (NOKm) 2013 2014 2015 2016E 2017E 2018E Q415 Q416E
Operating revenues 2,404 2,665 4,567 6,540 7,579 8,531 1,149 2,053 80
EBITDA 484 482 261 1,336 1,676 1,923 87 496
EBIT bef. adj. 348 341 48 1,162 1,482 1,716 43 450 60
EBIT af. adj. 616 214 81 1,450 1,482 1,716 204 450 40
PTP 545 161 -9 1,283 1,413 1,662 167 406
20
EPS adj. 2.2 2.1 -0.2 6.4 8.7 10.3 0.3 2.5
DPS - 0.50 1.50 2.50 3.50 4.50 0
Revenue growth 16.7% 12.9% 69.3% 42.0% 15.0% 12.6% 55.3% 72.6% Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
EBIT-margin 14.4% 12.4% 1.0% 17.6% 19.6% 20.1% 17.8% 21.9% GSF share OSEBX Index (Rebased)
Dividend yield 0.0% 1.8% 4.9% 3.6% 5.1% 6.5%
EV/EBITDA 7.5 9.6 19.2 6.8 5.1 4.1 19.1 6.8
EV/EBIT 10.5 13.6 105.1 7.8 5.8 4.6 104.3 7.8
P/E adj. 9.2 13.2 n.m. 10.8 7.9 6.7 n.m. 10.8 Knut Erik Løvstad
EBIT/kg 6.0 5.3 0.7 17.6 21.2 21.2 2.8 20.3 TEL: +47 23 11 30 40
ROE 25% 7% 0% 35% 30% 29% Magnus Granerød
ROCE 11% 9% 1% 29% 34% 38% TEL: +47 23 11 30 30
Grieg Seafood ASA - 4Q16 Preview - 8 February 2017
Company Profile
Lack of supply will keep prices high GSF – an international seafood company
The algal bloom in Chile, combined with a drop in supply from Norway GSF is one of the world’s largest producers of farmed salmon, with a
due to sea lice problems, led to a cut in supply of ~7% in 2016. We production capacity of ~95,000 tonnes yearly gutted weight at full
expect a continued tight supply situation going forward, as biological capacity. The guidance for 2016 is at 66,000 tonnes, growing to 73,000
challenges will continue to limit the supply. We expect 2-3% annual tonnes in 2017.
supply growth for 2017 & 2018. Therefore, with growing underlying
The group’s targeted production for 2017 is split between 38% in
demand that cannot be satisfied, prices will remain high. We expect
Finnmark (Norway), 27% in Rogaland (Norway), 11% in Canada & 23%
in Shetland. The company is self-sufficient with smolt (with a smolt sixe
GSF with very strong earnings growth of ~150g) in all regions, but are buying some external smolt as a
GSF has a production capacity of ~95,000 tonnes, while the expected precaution.
production in 2016 is less than 70,000 tonnes. We therefore expect an
The farming licenses are divided between Finnmark (27 licenses;
annual volume growth of ~10% combined for 2017 & 2018 as the
33,000 tonnes) & Rogaland (19: 24,000) in Norway, British Columbia
company is utilising its existing capacity better. This combined with
(21: 18,000) in Canada and in Shetland (39: 20,000) UK.
continued high & rising prices for salmon drives a very significant
earnings growth for GSF. We do not believe this potential growth is The company’s main markets are EU (55%), Far East (15%), the US (14%)
discounted in today’s pricing, as GSF is priced at a considerable and Russia/East EU (6%). GSF owns 60% of the sales company Ocean
discount to its peers. We therefore recommend to Buy the stock. Quality, which sells all the fish for GSF & Bremnes, which owns the
remaining 40%.
SWOT Analysis
 One of the leading players in Finnmark, where the biological  Still has to prove that it can utilise its excess capacity, and lift the
situation is very favourable production closer to industry standards
 The number one player in Rogaland  Biological challenges in Rogaland, Shetland & Canada
 Significant free capacity (all regions)  Very high costs in Shetland & Canada – to be brought down
 Excellent demand in core markets in Europe  Biological incidences, including algal blooms, Sea lice and fish
 Still very low per capita consumption, which along with product diseases
development will drive demand  Still uncertainty whether the demand growth will continue at
 Great potential in the US market longer term higher retail prices
 Lifting of trade barriers in Russia & China  International trade barriers preventing export volumes
GSF Farming Volumes Peer Valuation - Consensus

80.0 70 70
64 65 65 66 66 Company M. cap. MC/EV 17E 18E 17E 18E 17E 18E
60 58
54 50 17 17 GSF (BF est) 7,794 85 % 5.1 4.1 7.9 6.7 5% 7%
60.0 16 13 13
17 15 19
13 8
GSF (@ target) 10,050 88 % 6.8 5.9 10.3 8.7 4% 5%
14 14 10 10
40.0 14 14 7 6 14 GSF (BB) 7,794 82 % 5.3 4.7 7.9 7.4 6% 7%
13
16 10 20 23 23 25 Austevoll Seafood Asa 15,863 54 % 3.4 3.1 7.8 7.8 6% 6%
21 16 23 26 19
20.0 14 Bakkafrost P/F 15,595 97 % 7.7 7.5 11.2 11.2 4% 5%
17
13 16 19 15 13 15 19 19 20 Norway Royal Salmon 7,908 100 % 8.1 7.1 11.0 9.7 5% 6%
7 12
0.0 Scottish Salmon Co 1,826 82 % 6.5 4.8 10.2 7.4 2% 3%
Marine Harvest 67,202 89 % 7.8 7.5 10.8 10.5 7% 7%
Salmar Asa 26,875 93 % 7.7 7.4 10.3 10.1 6% 6%
Rogaland Finnmark Canada Shetland Leroey Seafood Group 28,109 86 % 6.1 5.9 9.2 9.1 5% 5%
Median 89 % 7.7 7.1 10.3 9.7 5% 6%

Grieg Holdings As 55.8 50.0 % Executive Management:
Om Holding As 3.3 3.0 % CEO Andreas Kvame
Folketrygdfondet 3.2 2.9 % CFO Atle Harald Santorv
Ystholmen As 2.9 2.6 % CAO Trude Østvedt
Verdipapirfondet Pareto Investment 2.0 1.8 % COO Farming Knut Utheim
Euroclear Bank S.A./N.V. 1.4 1.2 % Board of Directors:
Grieg Seafood Asa 1.3 1.1 % Chairman Per Grieg jr.
Arctic Funds Plc 1.2 1.1 % Vice Chairman Asbjørn Reinkind
Morgan Stanley And Co Intl Plc 1.1 1.0 % Board Member Ola Braanaas
Total 10 largest 74.0 66.2 % Board Member Kari Bing Orgland
Others 37.7 33.8 % Board Member Wenche Kjølås
Total 111.7 100.0 %


Average/total -12 % -3 % -2 % -12 % -3 % 1% 882,613 1,070,000
Median -2 % 2% 1% -3 % 0% 4%

Marine Harvest 66,299 74,229 9.8 6.6 6.1 11.8 7.5 6.9 14.1 9.2 8.6 5.7 % 7.2 % 8.6 % 189 23
Bakkafrost P/F 15,478 16,039 10.1 7.7 7.1 11.5 8.9 8.2 14.8 11.2 10.6 3.8 % 4.5 % 4.9 % 301 36
Salmar Asa 26,580 28,531 9.8 7.3 6.9 11.2 8.1 7.6 12.9 10.2 9.8 5.1 % 6.0 % 6.8 % 206 28
Average 11.5 7.5 6.5 20.5 9.4 7.8 31.5 12.3 10.4 3.5 % 4.4 % 5.4 % 189 24
Median 10.0 7.4 6.6 11.3 7.8 7.2 14.0 10.4 9.6 3.8 % 5.0 % 5.9 % 189 23
Valuation
30
30
25
20
20
15
10 10
5
0 0
Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17
SOTP Valuation
Grieg Seafood ASA Licenses Capacity Volume Vol. per EBIT/kg EBIT EV/EBIT EV/kilo EV
GWE tons 2017E license 2017E 2017E 2017 implied
Norway - Rogaland 19 24 20.0 1,053 23.9 478 10.0 239.0 4,780
Norway - Finnmark 27 33 25.0 926 27.1 678 10.0 271.0 6,776
Canada 21 18 8.0 381 13.0 104 9.0 116.6 932
UK - Shetland 39 20 17.0 436 13.6 231 9.0 122.3 2,079
Total farming 106 95 70.0 660 21.3 1,490 9.8 208.1 14,567
Ocean Quality AS (40%), adj. to min. -150
Total Group EV 14,417
NIBD -1,329
Equity Value 13,089
Outst. shares 112
SOTP/share 117

Grieg Seafood
Total OPEX -1,941 -2,257 -4,377 -5,252 -5,902 -6,608 -1,102 -1,047 -1,326 -1,322 -1,557
EBITDA 484 482 261 1,336 1,676 1,923 87 252 356 231 496
EBIT, before fair value adj. 348 341 48 1,162 1,482 1,716 43 214 312 186 450
Fair value adj. Of biological assets 267 -127 33 289 0 0 161 79 116 93 0
EBIT 616 214 81 1,450 1,482 1,716 204 294 427 279 450
Share of profit from ass. Companies 2 3 3 12 0 0 1 12 0 0 0
Net financials -71 -53 -90 -167 -69 -53 -38 -42 -39 -43 -44
PTP before fair value adj. Of bio. Assets 277 288 -42 994 1,413 1,662 6 173 273 143 406
PTP 545 161 -9 1,283 1,413 1,662 167 252 389 236 406
Income tax expense -114 -23 19 -341 -396 -465 -11 -61 -91 -55 -134
Net profit before minorities 431 138 9 942 1,018 1,197 156 191 298 181 272
Net profit 431 138 -2 901 976 1,155 152 179 290 171 260
Farming EBIT
Farming Rogaland 145 117 84 431 478 515 38 73 172 45 141
Farming Finnmark 217 235 124 472 678 809 58 125 19 59 270
Farming Canada -8 -23 13 76 104 155 22 -1 58 10 9
Farming Shetland 27 81 -165 175 231 245 -68 7 63 72 33
Eliminations to EBIT -33 -69 -8 8 -8 -8 -7 11 0 -1 -2
Group EBIT 348 341 48 1,162 1,482 1,716 43 214 312 186 450
EBIT per kilo
Farming Rogaland 9.6 9.1 5.5 22.7 23.9 23.4 10.2 19.3 26.5 19.2 22.1
Farming Finnmark 9.4 8.9 6.4 20.3 27.1 27.0 10.8 19.8 9.6 13.2 25.7
Farming Canada -1.2 -3.6 0.9 7.3 13.0 14.1 10.0 -0.6 11.7 4.0 5.7
Farming Shetland 2.1 4.2 -10.1 13.0 13.6 13.6 -17.2 3.1 22.0 15.9 8.6
Farming Volumes (HOG)
Farming Rogaland 15.1 12.8 15.2 19.0 20.0 22.0 3.7 3.8 6.5 2.3 6.4
Farming Finnmark 23.1 26.5 19.5 23.3 25.0 30.0 5.3 6.3 2.0 4.5 10.5
Farming Canada 6.7 6.3 14.3 10.3 8.0 11.0 2.2 1.3 4.9 2.5 1.5
Farming Shetland 13.2 19.2 16.4 13.4 17.0 18.0 4.0 2.2 2.9 4.5 3.8
Total farming volume 58.1 64.7 65.4 66.0 70.0 81.0 15.3 13.6 16.3 13.9 22.2
Cash and cash equivalents 164 144 392 193 670 1,318 392 369 371 199 193
Licenses & other non-curr. intangibles 994 1,066 1,093 1,051 1,051 1,051 1,093 1,095 1,087 1,051 1,051
Total assets 4,591 5,042 5,964 6,456 7,068 7,871 5,964 5,833 6,095 6,146 6,456
Total Equity 1,989 2,222 2,243 2,891 3,587 4,351 2,243 2,398 2,602 2,742 2,891
Short term interest bearing libilities 582 541 163 161 161 161 163 157 156 161 161
Other short term liabilities 406 498 1,172 1,294 1,211 1,249 1,172 969 1,077 1,158 1,294
EBIT after fair value adj. 616 214 81 1,450 1,482 1,716 204 294 427 279 450
CF from operations 317 193 349 689 1,059 1,335 -20 109 213 129 239
CF from investments -146 -271 -316 -260 -303 -297 -81 1 -49 -78 -133
CF after capex 171 -78 33 429 756 1,038 -101 110 163 50 105
Dividends 0 0 -55 -167 -279 -391 0 0 -55 0 -112
Net cash flow -77 -29 205 -199 477 648 82 -23 0 -170 -6
Share price (NOK) 19.6 27.1 30.8 69.0 69.0 69.0 30.8 32.0 45.7 54.8 69.0
NIBD (m) 1,463 1,616 1,584 1,335 858 210 1,584 1,509 1,368 1,329 1,335
EPS adj. 2.2 2.1 -0.2 6.4 8.7 10.3 0.3 1.1 1.9 0.9 2.5
DPS 0.0 0.5 1.5 2.5 3.5 4.5 0.5 0.0 0.0 1.0 2.5

Revenue growth 16.7 % 12.9 % 69.3 % 42.0 % 15.0 % 12.6 % 55.3 % 25.7 % 43.7 % 24.8 % 72.6 %
EBITDA-margin 20.0 % 17.6 % 5.6 % 20.3 % 22.1 % 22.5 % 7.3 % 19.4 % 21.2 % 14.9 % 24.2 %
EBIT-margin 14.4 % 12.4 % 1.0 % 17.6 % 19.6 % 20.1 % 17.8 % 23.2 % 25.7 % 17.9 % 21.9 %
ROE 24.7 % 6.6 % -0.1 % 35.1 % 30.1 % 29.1 %
ROCE 10.7 % 9.4 % 1.2 % 28.9 % 34.2 % 38.1 %
P/E adj. 9.2 13.2 n.m. 10.8 7.9 6.7 n.m. 49.3 16.6 13.1 10.8
P/B 1.1 1.4 1.5 2.7 2.1 1.8 1.5 1.5 1.9 2.2 2.7
EV/EBITDA 7.5 9.6 19.2 6.8 5.1 4.1 19.1 12.4 8.6 8.0 6.8
EV/EBIT 10.5 13.6 105.1 7.8 5.8 4.6 104.3 26.2 12.2 9.9 7.8
EV/Sales 1.5 1.7 1.1 1.4 1.1 0.9 1.1 1.0 1.2 1.3 1.4
Solidity/Credit
EBIT/Kg 6.0 5.3 0.7 17.6 21.2 21.2 2.8 15.7 19.2 13.3 20.3
NIBD/Kilo (4q roll) 25.2 25.0 24.2 20.2 12.3 2.6 24.2 22.9 21.2 22.5 20.2
EBITDA/Interest 6.6 8.6 2.8 7.4 24.4 36.0 0.0 0.0 0.0 0.0 0.0
OCF/TIBD (4q roll) 0.2 0.1 0.2 0.5 0.7 0.9 0.2 0.2 0.3 0.3 0.5
TIBD/Equity 0.8 0.8 0.9 0.5 0.4 0.4 0.9 0.8 0.7 0.6 0.5

SalMar ASA Target Price NOK 275 (270)
Good performance despite difficult biology
 4Q16 to benefit from better pricing
 Biological challenges in Region Mid hampers growth SELL HOLD BUY

 More appealing valuation – Upgrade to BUY (Hold)
Solid 4Q16 due to improved spot & contract price Share data 08 Feb 2017
Sector: Aquaculture
We expect SalMar to deliver 4Q16 operational EBIT of NOK 640m (374m in 4Q15),
Reuters/Bloomberg SALM
also well above the NOK 576m in 3Q16. This, mostly due to higher spot prices in Risk rating Medium
4Q16, and although the contract share of 55% is higher than the 49% contract share Outstanding shares 112
in 3Q16, contract prices are guided up from previous quarters. The cost situation in Net interest bearing debt 1,951
Central Norway continues to be a challenge though, and the margin squeeze on the Enterprise value 28,365
Free float % <55%
organic salmon is expected to prevail also in 4Q16.
Est. Changes Q416E 2016E 2017E
Biology to continue hampering growth & supporting strong prices Revenues 0% 0% 1%
We have raised our forecast for salmon prices from NOK 60/kg to NOK 63/kg for EBITDA 0% 0% 5%
2017, while we have maintained our NOK 62/kg forecast for 2018. We therefore Pre-tax profit 0% 0% 5%
increased our estimates for Salmar for 2017, although we have cut volumes EPS, rep. 0% 0% 5%
DPS n.a. 0% 0%
somewhat, as the company has ~60% of volumes in Region Mid, which suffers from
BF vs Cons. Q416E 2016E 2017E
biological challenges. Revenues 6% 2% -1 %
EBITDA -3 % -2 % -1 %
Estimates raised – Upgrade to BUY (Hold)
Operational EBIT -4 % -1 % 1%
SalMar is priced in line with peers, but given the stocks lacklustre performance the Pre-tax profit -1 % 0% 3%
last few months, we see more upside potential. We have therefore upgraded the EPS, adj. 1% 0% 1%
DPS n.a. -4 % -5 %
stock to a BUY (from Hold), we have raised our estimates for 2017 and lifted our
target price slightly to NOK 275 (from NOK 270).
Key figures (NOKm) 2013 2014 2015 2016E 2017E 2018E Q415 Q416E Share price (NOK) vs. OSEBX
300
Operating revenues 6,246 7,186 7,326 8,828 9,151 9,089 2,035 2,275
EBITDA 1,485 2,157 1,725 2,863 3,688 3,807 469 725 250
Operational EBIT 1,260 1,879 1,404 2,515 3,338 3,447 374 640 200
EBIT af. adj. 1,788 1,647 1,444 2,632 3,338 3,447 393 640
150
PTP 2,322 1,629 1,383 2,794 3,486 3,627 377 670
EPS adj. 12.4 12.0 9.6 18.2 23.1 24.0 3.2 4.5 100
DPS - 10.04 10.00 12.00 14.00 16.00 50

Revenue growth 48.6 % 15.0 % 2.0 % 20.5 % 3.7 % -0.7 % 1.3 % 11.8 % 0
EBIT-margin 20.2 % 26.1 % 19.2 % 28.5 % 36.5 % 37.9 % 19.3 % 28.1 % Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
Dividend yield 0.0 % 9.5 % 7.4 % 5.1 % 6.0 % 6.8 %
SALM share OSEBX Index
EV/EBITDA 5.7 6.6 10.3 9.8 7.3 6.9 10.3 9.8
EV/EBIT 6.7 7.5 12.7 11.2 8.1 7.6 12.7 11.2
P/E adj. 4.7 8.7 14.2 12.9 10.2 9.8 14.1 12.9 Knut Erik Løvstad
EBIT/kg 13.3 12.8 10.7 27.4 28.5 26.2 12.8 26.5 TEL: +47 23 11 30 40
NIBD/EBITDA (4q roll) 1.2 1.1 1.5 0.6 0.1 -0.1 1.5 0.6
Magnus Granerød
ROE 45 % 23 % 21 % 38 % 38 % 34 %
TEL: +47 23 11 30 30
ROCE 20 % 26 % 18 % 32 % 42 % 43 %
SalMar ASA - 4Q16 Preview - 8 February 2017
Company Profile
Lack of supply will keep prices high SalMar is the no 3 player in aquaculture
The algal bloom in Chile, combined with a drop in supply from Norway SalMar was established in 1991, and is one of the leading producers of
due to sea lice problems, led to a cut in supply of ~7% in 2016. We Atlantic salmon. The company is integrated from broodstock, roe and
expect a continued tight supply situation going forward, as biological smolt to value added products and sales. SalMar has initiated major
challenges will continue to limit the supply. We expect 2-3% annual investments to increase its smolt capacity, in order to be self-sufficient.
supply growth for 2017 & 2018. Therefore, with growing underlying The smolt will be produced on-shore, and will have a size up to 200g.
demand that cannot be satisfied, prices will remain high. We expect The company has a total of 100 licenses in Norway, with 68 licenses in
salmon prices of NOK 63/kilo in 2017E & NOK 62/kilo in 2018E. Central Norway & 32 in Northern Norway with a guided production for
More appealing valuation 2016 of ~118,000 tonnes, expected to grow to 128,000 tonnes in 2017.
SalMar is valued at an EV/kilo above its peer group, but the company It also owns 50% of Norskott Havbruk (Lerøy owns the other 50%),
has also achieved an EBIT/kilo well above its peers. The company has which owns Scottish Sea Farms, that has a guidance of 26,000 tonnes
60% of its volume in Region Mid, which suffers from a challenging in 2016.
biological situation. There is therefore more uncertainty with regards
SalMar has also been awarded 8 development licenses for its Offshore
to the volume growth for SalMar, which may be more limited than for
Fish Farming concept, where the objective is the realisation of a fish
some of the others. Given more appealing valuation, due to lackluster
farm based on offshore technology. The first fish is targeted to be
share price performance lately, we see more upside potential.
transferred summer 2017.
SWOT Analysis
 Strong track record in Region North  No growth in 2016 due to Sea lice and ISA outbreak
 Accretive new smolt investments in Region Mid and North  Not yet self-sufficient with smolt
 Good operations with above peer EBIT/kilo contribution  Exposure towards Central Norway that currently has high fixed
costs due to biological challenges
 Good demand in core markets in Europe  Several biological incidences recently with both Sea lice and ISA
 Significant untapped potential in Europe by product improvement outbreaks on certain locations
& marketing to develop the market  Major biological incidences, including algal blooms, Sea lice and
 Great potential in the US longer term fish diseases
 Lifting of trade barriers in Russia & China  Uncertainty related to demand when retail prices move higher
SALM Farming Volumes Peer Valuation - Consensus

150 FUNDAMENTALS EV/EBITDA P/E adj. Div. yield
SALM (BF est) 26,875 93 % 7.3 6.9 10.2 9.8 6% 7%
49 40
SALM (@ target) 30,910 94 % 8.9 8.6 11.9 11.4 5% 6%
100 24 45 45 48 SALM (BB) 26,875 93 % 7.7 7.4 10.3 10.1 6% 6%
19 22
Austevoll Seafood Asa 15,863 54 % 3.4 3.1 7.8 7.8 6% 6%
16 14 Bakkafrost P/F 15,595 97 % 7.7 7.5 11.2 11.2 4% 5%
50 11 92 97
85 73 73 77 Grieg Seafood asa 7,794 82 % 5.3 4.7 7.9 7.4 6% 7%
64 65
42 50 47 Scottish Salmon Co 1,826 82 % 6.5 4.8 10.2 7.4 2% 3%
Marine Harvest 67,157 89 % 7.8 7.5 10.8 10.5 7% 7%
0 Norway Royal Salmon Asa 7,908 100 % 8.1 7.1 11.0 9.7 5% 6%
Average 6.4 5.8 9.7 9.0 5% 5%
Median 86 % 6.5 5.9 10.2 9.1 5% 6%
Farming Region Mid Farming Region North
Kverva As 60.5 53.8 % Executive Management:

Folketrygdfondet 8.2 7.3 % CEO Trond Williksen
State Street Bank And Trust Comp 4.4 3.9 % CFO Trond Tuvstein
Jpmorgan Chase Bank, N.A., London 3.3 2.9 %
Lin As 2.0 1.8 % Board of Directors:
Jpmorgan Chase Bank, N.A., London 1.1 1.0 % Chairman Bjørn Flatgård
Salmar Asa 1.0 0.9 % Vice Chairman Gustav Witzøe
State Street Bank And Trust Comp 0.9 0.8 % Board Member Kjell A. Storeide
Clearstream Banking S.A. 0.9 0.8 % Board Member Tove Nedreberg
Morgan Stanley And Co Intl Plc 0.7 0.7 % Board Member Bent Rathe
Total 10 largest 83.0 73.9 %
Others 29.4 26.1 %
Total 112.4 100.0 %


Average/total -12 % -3 % -2 % -12 % -3 % 1% 882,613 1,070,000
Median -2 % 2% 1% -3 % 0% 4%

Marine Harvest 66,299 74,229 9.8 6.6 6.1 11.8 7.5 6.9 14.1 9.2 8.6 5.7 % 7.2 % 8.6 % 189 23
Bakkafrost P/F 15,478 16,039 10.1 7.7 7.1 11.5 8.9 8.2 14.8 11.2 10.6 3.8 % 4.5 % 4.9 % 301 36
Salmar Asa 26,580 28,531 9.8 7.3 6.9 11.2 8.1 7.6 12.9 10.2 9.8 5.1 % 6.0 % 6.8 % 206 28
Average 11.5 7.5 6.5 20.5 9.4 7.8 31.5 12.3 10.4 3.5 % 4.4 % 5.4 % 189 24
Median 10.0 7.4 6.6 11.3 7.8 7.2 14.0 10.4 9.6 3.8 % 5.0 % 5.9 % 189 23
Valuation
20 20
15 15
10 10
5 5
0 0
Feb-09 Feb-11 Feb-13 Feb-15 Feb-17 Feb-09 Feb-11 Feb-13 Feb-15 Feb-17
SOTP Valuation
Salmar Licenses Capacity Vol 2017 Vol. per EBIT/kg EBIT EV/EBIT EV/kilo EV
license 2017E 2017E 2017E Implied

SalMar Central Norway 68 90 77 1,132 26.0 2,000 10.0 259.8 20,002
SalMar Northern Norway 32 50 48 1,500 32.4 1,557 10.0 324.4 15,570
EV SALM Farming 100 140 125 1,250 28.5 3,557 10.0 284.6 35,572
S&P 140 129 -0.8 -99 9.0 -892
HQ/elim./contracts -120 8.0 -960
Total farming (incl. sales) 33,720
Scottish Sea Farms (50%) 41 30 26 634 12.0 360 8.0 1,440
Arnarlax (34%) 10 5 12.0 60 5.0 102
Total EV Group 35,262
NIBD -1,951
Equity values 33,311
Outs shares (mill) 112.4
SOTP values 296

SalMar
Total OPEX -4,761 -5,029 -5,601 -5,965 -5,463 -5,282 -1,566 -1,352 -1,468 -1,596 -1,550
EBITDA 1,485 2,157 1,725 2,863 3,688 3,807 469 652 820 667 725
Operational EBIT 1,260 1,879 1,404 2,515 3,338 3,447 374 567 732 576 640
Fair value adj. Of biological assets 528 -232 40 118 0 0 19 168 -224 173 0
EBIT 1,788 1,647 1,444 2,632 3,338 3,447 393 735 508 750 640
Net financials 376 -114 -100 -53 -82 -60 -30 -12 -15 -1 -25
PTP before fair value adj. Of bio. Assets 1,794 1,861 1,343 2,676 3,486 3,627 358 612 751 643 670
PTP 2,322 1,629 1,383 2,794 3,486 3,627 377 780 527 817 670
Income tax expense -427 -413 -255 -643 -814 -847 10 -176 -125 -189 -154
Net profit before minorities 1,895 1,215 1,129 2,151 2,672 2,780 387 605 402 627 516
Minority interest 105 23 26 16 70 80 9 15 -7 -7 15
Net profit 1,790 1,192 1,103 2,135 2,602 2,700 378 590 410 635 501
EBIT
Farming Region Mid 1,086 1,161 948 1,830 2,000 2,007 236 351 538 546 396
Farming Region North 320 641 506 1,408 1,557 1,475 252 372 484 181 371
Farming EBIT, before value adj. 1,244 1,802 1,454 3,238 3,557 3,482 488 723 1,022 727 766
S&D -161 138 74 -601 -99 85 -45 -133 -253 -119 -96
Elim. 176 -61 -123 -122 -120 -120 -69 -24 -37 -32 -30
Group EBIT, before value adj. 1,260 1,879 1,404 2,515 3,338 3,447 374 567 732 576 640
EBIT per kilo
Farming Region Mid 13 13 10 25 26 24 10 24 30 23 23
Farming Region North 13 13 13 31 32 30 18 29 33 29 33
Group EBIT per kilo 13 13 11 27 28 26 13 26 32 25 27
Volumes
Farming Region Mid 85 92 97 73 77 83 24 14 18 23 18
Farming Region North 24 49 40 45 48 50 14 13 15 6 11
Total Farming 109 141 136 118 125 133 38 27 32 30 29
Cash and cash equivalents 1,071 167 274 636 1,887 2,564 274 210 199 420 636
Licenses & other non-curr. intangibles 2,464 2,899 2,914 2,912 2,912 2,912 2,914 2,912 2,913 2,912 2,912
Total assets 9,931 10,124 10,944 12,779 14,493 15,400 10,944 11,118 11,570 12,417 12,779
Total Equity 5,053 5,137 5,227 6,146 7,399 8,526 5,227 5,790 5,048 5,645 6,146
Other long term liabilities 1,207 1,257 1,231 1,229 1,229 1,229 1,231 1,241 1,189 1,229 1,229
Other short term liabilities 1,226 1,539 1,724 3,173 3,634 3,415 1,724 2,088 2,845 3,313 3,173
PTP 2,322 1,629 1,383 2,779 3,416 3,547 377 780 527 817 655
CF from operations 1,107 1,649 1,624 3,341 3,241 2,887 417 1,001 1,027 937 375
CF from investments 331 -1,032 -725 -1,249 -641 -636 -320 -277 -567 -246 -159
CF after capex 1,439 617 899 2,092 2,601 2,251 97 724 461 691 216
Dividends 0 -896 -1,125 -1,126 -1,349 -1,574 -5 0 -1,121 -5 0
Net cash flow 1,037 -1,650 -1,017 -766 1,252 677 173 -64 -1,134 217 216
Share price (NOK) 59.2 105.5 135.3 235.0 235.0 235.0 135.3 167.5 218.7 235.0 235.0
NIBD (m) 1,772 2,301 2,627 1,735 483 -194 2,627 1,930 2,610 1,951 1,735
EPS adj. 12.4 12.0 9.6 18.2 23.1 24.0 3.2 4.2 5.1 4.5 4.5
DPS 0.0 10.0 10.0 12.0 14.0 16.0 0.0 0.0 0.0 0.0 0.0

Revenue growth 48.6 % 15.0 % 2.0 % 20.5 % 3.7 % -0.7 % 1.3 % 24.0 % 27.2 % 20.5 % 11.8 %
EBITDA-margin 23.8 % 30.0 % 23.5 % 32.4 % 40.3 % 41.9 % 23.0 % 32.5 % 35.8 % 29.5 % 31.9 %
EBIT-margin 20.2 % 26.1 % 19.2 % 28.5 % 36.5 % 37.9 % 19.3 % 36.7 % 22.2 % 33.1 % 28.1 %
ROE 44.7 % 23.4 % 21.3 % 37.5 % 38.4 % 33.9 %
ROCE 20.1 % 26.3 % 18.4 % 32.0 % 42.4 % 42.5 %
P/E adj. 4.7 8.7 14.2 12.9 10.2 9.8 14.1 14.7 15.0 13.8 12.9
P/B 1.3 2.3 2.9 4.3 3.6 3.1 2.9 3.3 4.9 4.7 4.3
EV/EBITDA 5.7 6.6 10.3 9.8 7.3 6.9 10.3 10.7 11.5 10.9 9.8
EV/EBIT 6.7 7.5 12.7 11.2 8.1 7.6 12.7 12.9 13.5 12.6 11.2
EV/Sales 1.3 2.0 2.4 3.2 2.9 2.9 2.4 2.7 3.3 3.3 3.2
Solidity/Credit
EBIT/Kg 13.3 12.8 10.7 27.4 28.5 26.2 12.8 26.5 31.7 24.6 26.5
NIBD/Kilo (4q roll) 16.3 16.3 19.3 14.7 3.9 -1.5 19.3 14.2 19.6 15.3 14.7
EBITDA/Interest -6.9 18.9 17.2 33.1 45.0 63.5 15.7 53.8 36.8 24.7 29.0
OCF/TIBD (4q roll) 0.5 0.8 0.6 1.5 1.5 1.3 0.6 0.9 0.9 1.4 1.4
TIBD/Equity 0.5 0.4 0.5 0.4 0.3 0.3 0.6 0.4 0.6 0.4 0.4

The Scottish Salmon Company Target Price NOK 8.75 (8.00)
4Q16 Preview - 8 February 2017 Share Price NOK 9.35
Considerable biological challenges
 4Q16 also expected to be difficult
 Biology to remain a challenge SELL HOLD BUY

 Discount to peers on EV/kilo – HOLD
4Q16 expected to be hampered by biological challenges Share data 08 Feb 2017

Sector: Aquaculture
We expect SSC to deliver 4Q16 Operational EBIT of GBP 3.2m (0.4m in 4Q15), and a Reuters/Bloomberg SSC
significant improvement over the 3Q16 loss of GBP -3.4m. In 3Q16, the company Risk rating Medium
experienced high levels of mortality, to low harvest weight and poor quality. We Outstanding shares 194
Market cap (GBPm) 172
expect the poor biology to continue impacting 4Q16 as well, but not to the same NIBD (GBPm) 36
very severe degree as we saw in 3Q16. SSC expects no volume growth in 2017. Enterprise value 209
Free float % 27 %
Strategic initiatives to drive sustainable growth Est. Changes Q416E 2016E 2017E
SSC has taken initiatives to try to remedy the very difficult situation by making Revenues 0% 0% 3%
considerable investments in equipment and sites in order to try to drive long term EBITDA 0% 0% 17%
sustainable growth. They are investing in new well-boat & service boats in addition Pre-tax profit 0% 0% 32%
to a new site and cleaner fish project, which all is expected to improve the situation EPS, rep. 0% 0% 32%
DPS n.a. n.a. n.a.
with time, but in the short term this leads to expected costs above GBP 4.00/kg.
BF vs Cons Q416E 2016E 2017E
Discount to peers on EV/kilo but expensive on multiples – HOLD Revenues 2% -4% -14%
EBITDA -35% -55% -34%
SSC will continue with biological challenges leading to no growth in volume and high
Operational EBIT -55% -77% -54%
costs also in 2017. We therefore believe that any hope for improvement in terms of Pre-tax profit -64% -67% -46%
better biological control combined with growth in volume has to be pinned on 2018. EPS, adj. -68% -84% -47%
DPS n.a. -100% -100%
We therefore reiterate our HOLD despite raising estimates due to increased salmon
price forecast for 2017, and thereby raising target to NOK 8.75 (from 8.00).
Key figures (GBPm) 2013 2014 2015 2016E 2017E 2018E Q415 Q416E 12
Operating revenues 82.4 125.9 100.4 112.2 126.3 143.1 23.9 29.5 10
EBITDA 10.7 20.0 10.6 11.0 23.8 29.0 1.2 3.2
Operational EBIT 3.3 12.4 4.1 2.9 15.8 21.0 0.4 1.2 8
EBIT 9.8 21.1 0.5 11.1 15.8 21.0 5.7 1.2 6

Net profit 5.3 20.0 0.2 7.3 10.6 14.6 4.2 0.6 4
EPS adj. 0.00 0.08 0.01 0.01 0.05 0.08 0.00 0.00
2
DPS 0.00 0.01 0.00 0.00 0.00 0.02
Revenue growth 3.7% 52.8% -20.3% 11.8% 12.5% 13.4% -22.5% 23.3% 0
EBIT-margin 3.0% 9.9% 4.1% 2.6% 12.5% 14.7% 23.9% 4.2% Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17
Dividend yield 0.0% 1.7% 0.0% 0.0% 0.0% 2.2% SSC share OSEBX Index
EV/EBITDA 11.2 6.6 10.4 19.1 8.5 6.6 10.4 19.1
EV/EBIT 48.9 10.5 27.1 72.6 12.7 9.1 27.1 72.6
P/E adj. n.m. 6.7 24.6 126.2 16.2 11.8 24.6 126.2 Knut Erik Løvstad
EBIT/kg 0.3 0.4 0.2 0.1 0.6 0.8 0.1 0.2 TEL: +47 23 11 30 40
EV/Kilo 12.2 4.3 4.4 8.4 8.0 7.0 knut.lovstad@beringerfinance.no
ROE 8.6% 29.6% 0.3% 8.4% 11.2% 13.8% Magnus Granerød
ROCE 2.4% 11.4% 3.4% 2.3% 12.3% 16.2% TEL: +47 23 11 30 30
The Scottish Salmon Company - 4Q16 Preview - 8 February 2017
Company Profile
Lack of supply will keep prices high SSC - Outer and Inner Hebrides, Loch Fyne, Sky, Mull & Arran
The algal bloom in Chile, combined with a drop in supply from Norway The Scottish Salmon Company (SSC) is headquartered in Edinburgh,
due to sea lice problems, led to a cut in supply of ~7% in 2016. We incorporated at Jersey and listed on the Oslo Stock Exchange. The
expect a continued tight supply situation going forward, as biological company conducts all operational activities, from salmon farming and
challenges will continue to limit the supply. We expect 2-3% annual processing through to sales and marketing.
supply growth for 2017 & 2018. Therefore, with growing underlying It harvested ~25,000 tonnes in 2015, and has guided a harvest quantity
demand that cannot be satisfied, prices will remain high. We expect of 25,000 tonnes both for 2016 & 2017, but still has a goal to raise that
salmon prices of NOK 63/kilo in 2017E & NOK 62/kilo in 2018E. to above 30,000 tonnes long term. It also has smolt capacity of around
SSC – A high end strategy using more fish content in feed 7m per year, divided among 7smolt plants
SSC exports 40% of its volumes to 24 countries, mostly in Europe, while
The company has a high end strategy using more expensive fish feed
domestic sales make up 60% of sales revenues. We expect the
with higher contain of marine ingredients than many others.
company to further develop both the domestic market and export
markets in Europe. In 2013, SSC was awarded the internationally acclaimed Label Rouge
accreditation for the quality and taste of its salmon. This is the official
We believe the short-to-medium term potential may be limited until it
endorsement of the French authorities for superior fresh products. To
achieves better control on the biology and demonstrates some volume
achieve the recognition, SSC had to meet stringent standards relating
growth, which is unlikely until 2018. It is valued at a discount on EV/kilo,
to farming techniques, feed, equipment, etc.
but at a premium on near term earnings. We believe there are other
more attractive investment opportunities in the sector.
SWOT Analysis
 New sites granted in the UK  Historically, SSC has underperformed its peers when it comes to
 SSC is a high end producer for European destinations mortality and cost
 Unique Native Hebridean Broodstock programme and brand  Biological conditions at the West Coast of Scotland are still very
development challenging
 Excellent demand for salmon in core European markets  New biological incidences are always a risk, such as algal blooms,
 Significant untapped potential in Europe & US Sea Lice and fish diseases
 Potential for good growth in harvest volumes through 2018  Underlying demand may slow when prices move higher
SSC Total Farming Volumes Peer Valuation - Consensus

35 Company M. cap. MC/EV 17E 18E 17E 18E 17E 18E
30 SSC (BF est) 1,826 83 % 8.5 6.6 16.2 11.8 0% 2%
SSC (@ target) 1,693 82 % 8.3 6.8 15.2 11.1 0% 2%
25 SSC (BB) 1,826 82 % 6.5 4.8 10.2 7.4 2% 3%

Bakkafrost P/F 15,591 97 % 7.7 7.5 11.2 11.2 4% 5%
15 30 Norway Royal Salmon 7,908 100 % 8.1 7.1 11.0 9.7 5% 6%
25 25 25 25 Grieg Seafood Asa 7,794 82 % 5.3 4.7 7.9 7.4 6% 7%
10 21
Marine Harvest 67,202 89 % 7.8 7.5 10.8 10.5 7% 7%
5 Salmar Asa 26,875 93 % 7.7 7.4 10.3 10.1 6% 6%
- Average 6.6 6.2 9.8 9.4 6% 6%
2013 2014 2015 2016E 2016G 2017G Median 89 % 7.7 7.1 10.3 9.7 6% 6%
Six Sis Ag 25Pct Account 137.0 70.8 % Executive Management:

Teigen Frode C/O Kontrari As 8.0 4.1 % CEO Craig Anderson
Vpf Nordea Avkastnin C/O Jpmorgan Europe 4.7 2.4 % CFO Fiona Larkin
Vpf Nordea Kapital C/O Jpmorgan Europe 3.9 2.0 %
Kontrari As 3.2 1.7 % Board of Directors:
Bnp Paribas Sec. Ser S/A Uk Residents 2.7 1.4 % Chairman Robert M Brown III
Skandinaviska Enskil A/C Clients Account 2.6 1.3 % Board Member Merete Myhrstad
Six Sis Ag Account 2 2.0 1.0 % Board Member Martins Jaunarajs
Clearstream Banking 1.9 1.0 % Board Member Viacheslav Lavrentyev
Mp Pensjon Pk 1.6 0.8 % Board Member Douglas Low
Total 10 largest 167.5 86.6 %
Others 26.0 13.4 %
Total 193.5 100.0 %

Average/total -12 % -3 % -2 % -12 % -3 % 1% 882,613 1,070,000
Median -2 % 2% 1% -3 % 0% 4%

Marine Harvest 66,299 74,229 9.8 6.6 6.1 11.8 7.5 6.9 14.1 9.2 8.6 5.7 % 7.2 % 8.6 % 189 23
Bakkafrost P/F 15,478 16,039 10.1 7.7 7.1 11.5 8.9 8.2 14.8 11.2 10.6 3.8 % 4.5 % 4.9 % 301 36
Salmar Asa 26,580 28,531 9.8 7.3 6.9 11.2 8.1 7.6 12.9 10.2 9.8 5.1 % 6.0 % 6.8 % 206 28
Average 11.5 7.5 6.5 20.5 9.4 7.8 31.5 12.3 10.4 3.5 % 4.4 % 5.4 % 189 24
Median 10.0 7.4 6.6 11.3 7.8 7.2 14.0 10.4 9.6 3.8 % 5.0 % 5.9 % 189 23
Valuation
25 20
20
15
15
10
10
5
5
0 0
Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17 Feb-11 Feb-12 Feb-13 Feb-14 Feb-15 Feb-16 Feb-17
SOTP Valuation
Scottish Salmon Licenses Ownership Volume EBIT/kg EBIT EV/EBIT EV/kilo EV

2018 2018E 2018E 2018 implied
Farming 45 100 % 27.5 0.76 21 8.0 6.1 168
Total farming 45 100 % 27.5 0.76 21 8.0 6.1 168
Group EV 168
NIBD -36
Equity values 132
SOTP value per share 0.68
GBPNOK 10.5
SOTP NOK 7.1

The Scottish Salmon Company - 4Q16 Preview - 8 February 2017
Scottish Salmon Company PLC

Income Statement (GBPm) 2013 2014 2015 2016E 2017E 2018E Q415 Q116 Q216 Q316 Q416E
Operating revenues 82.4 125.9 100.4 112.2 126.3 143.1 23.9 29.1 28.5 25.2 29.5
Total OPEX -71.7 -106.0 -89.8 -101.2 -102.5 -114.1 -22.7 -24.9 -23.5 -26.6 -26.2
EBITDA 10.7 20.0 10.6 11.0 23.8 29.0 1.2 4.2 5.0 -1.4 3.2
Depreciation and Amortization -7.4 -7.5 -6.5 -8.1 -8.0 -8.0 -0.8 -2.2 -1.9 -2.0 -2.0
Operational EBIT 3.3 12.4 4.1 2.9 15.8 21.0 0.4 2.0 3.0 -3.4 1.2
Fair value adj. Of biological assets 7.4 8.7 -3.6 8.2 0.0 0.0 5.3 -2.6 19.9 -9.1 0.0
EBIT 9.8 21.1 0.5 11.1 15.8 21.0 5.7 -0.5 22.9 -12.5 1.2
Net financials -6.3 -6.1 -0.9 -2.3 -1.6 -1.6 -0.5 -1.0 -0.7 -0.2 -0.4
PTP before fair value adj. Of bio. Assets -3.9 6.4 3.2 0.6 14.2 19.4 -0.1 1.0 2.3 -3.6 0.8
PTP 3.5 15.0 -0.4 8.8 14.2 19.4 5.2 -1.6 22.2 -12.7 0.8
Income tax expense 1.8 5.0 0.6 -1.5 -3.5 -4.9 -1.0 0.5 -4.3 2.5 -0.2
Net profit before minorities 5.3 20.0 0.2 7.3 10.6 14.6 4.2 -1.1 17.9 -10.2 0.6
Minority interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net profit 5.3 20.0 0.2 7.3 10.6 14.6 4.2 -1.1 17.9 -10.2 0.6
Operating revenue
UK 38.4 72.1 55.6 64.1 69.8 78.7 15.1 16.7 16.6 14.6 16.2
Europe 16.2 45.6 37.7 42.6 48.0 55.8 8.5 11.2 11.1 10.1 10.3
North America 1.7 4.2 1.7 2.6 5.0 4.3 0.0 0.8 0.2 0.1 1.5
Rest of the world 2.4 4.0 5.3 2.9 3.5 4.3 0.3 0.5 0.5 0.4 1.5
Total Revenue 58.7 125.9 100.4 112.2 126.3 143.1 23.9 29.1 28.5 25.2 29.5
Group EBIT per kilo 0.33 0.41 0.16 0.12 0.63 0.76 0.07 0.30 0.47 -0.62 0.19
Total Farming 9.8 30.2 24.8 25.0 25.0 27.5 6.1 6.7 6.4 5.5 6.4
Cash and cash equivalents -1.7 1.9 4.5 1.3 10.7 19.5 4.5 4.2 2.2 2.8 1.3
Other current assets 80.1 87.3 90.2 94.1 96.4 97.2 90.2 83.0 102.7 92.3 94.1
Property, plant and equipment 34.5 36.1 39.6 39.8 40.7 42.7 39.6 40.0 39.6 39.8 39.8
Licenses & other non-curr. intangibles 21.8 21.9 22.3 22.3 22.3 22.3 22.3 22.3 22.3 22.3 22.3
Other non-current assets 2.3 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2 2.2
Total assets 137.0 149.4 158.8 159.6 172.2 183.8 158.8 151.6 168.9 159.3 159.6
Total Equity 62.6 72.9 84.1 89.8 100.4 111.1 84.1 83.7 100.2 89.2 89.8
Long-term interest bearing debt 35.1 36.5 42.2 35.0 35.0 35.0 42.2 20.5 33.1 35.0 35.0
Other long term liabilities 13.6 19.4 6.6 9.9 9.9 9.9 6.6 6.5 11.5 9.9 9.9
Other short term liabilities 25.7 20.7 25.9 24.9 26.9 27.8 25.9 41.0 24.1 25.2 24.9
Total liabilities 74.4 76.5 74.7 69.8 71.8 72.7 74.7 68.0 68.7 70.1 69.8
Equity and liabilities 137.0 149.4 158.8 159.6 172.3 183.9 158.8 151.6 168.9 159.3 159.6
PTP 3.5 15.0 -0.4 8.8 14.2 19.4 5.2 -1.6 22.2 -12.7 0.8
CF from operations -1.1 15.3 8.7 13.6 18.3 22.7 -7.5 4.3 7.3 1.5 0.5
CF from investments -6.9 -9.1 -10.4 -8.3 -8.8 -10.0 -0.3 -2.5 -1.5 -2.2 -2.1
CF after capex -7.9 6.2 -1.7 5.3 9.4 12.7 -7.8 1.8 5.7 -0.7 -1.5
Dividends 0.0 -1.4 0.0 0.0 0.0 -3.9 0.0 0.0 0.0 0.0 0.0
Net cash flow -4.4 3.6 2.6 -3.2 9.4 8.8 1.3 -0.3 -2.0 0.6 -1.5
Share price (NOK) 3.9 5.2 4.6 9.4 9.4 9.4 4.6 5.0 6.7 9.4 9.4
Market capitalization (GBPm) 77 92 68 172 172 172 68 79 110 172 172
NIBD (GBPm) 43 39 42 38 29 20 42 41 35 36 38
Enterprise value (m) 120 131 110 210 201 192 110 119 145 209 210
EPS adj. 0.00 0.08 0.01 0.01 0.05 0.08 0.00 0.00 0.02 -0.02 0.00
Dividend per share, paid 0.00 0.01 0.00 0.00 0.00 0.02 0.00 0.00 0.00 0.00 0.00

Revenue growth 3.7 % 52.8 % -20.3 % 11.8 % 12.5 % 13.4 % -22.5 % 6.5 % -8.7 % 40.1 % 23.3 %
EBITDA-margin 13.0 % 15.9 % 10.6 % 9.8 % 18.8 % 20.3 % 4.9 % 14.5 % 17.4 % -5.6 % 11.0 %
EBIT-margin 3.0 % 9.9 % 4.1 % 2.6 % 12.5 % 14.7 % 23.9 % -1.8 % 80.6 % -49.7 % 4.2 %
ROE 8.6 % 29.6 % 0.3 % 8.4 % 11.2 % 13.8 %
ROCE 2.4 % 11.4 % 3.4 % 2.3 % 12.3 % 16.2 %
P/E adj. n.m. 6.7 24.6 126.2 16.2 11.8 24.6 180.9 39.5 155.2 126.2
P/B 1.2 1.3 0.8 1.9 1.7 1.6 0.8 0.9 1.1 1.9 1.9
EV/EBITDA 11.2 6.6 10.4 19.1 8.5 6.6 10.4 14.5 16.4 23.4 19.1
EV/EBIT 48.9 10.5 27.1 72.6 12.7 9.1 27.1 83.2 70.7 100.1 72.6
EV/Sales 1.5 1.0 1.1 1.9 1.6 1.3 1.1 1.2 1.5 2.0 1.9
Solidity/Credit
EBIT/Kg 0.3 0.4 0.2 0.1 0.6 0.8 0.1 0.3 0.5 -0.6 0.2
NIBD/Kilo (4q roll) 4.4 1.3 1.7 1.5 1.1 0.7 1.7 1.6 1.5 1.5 1.5
EBITDA/Interest 4.9 9.7 7.6 7.2 14.9 18.1 3.0 10.3 14.2 -3.8 8.1
OCF/TIBD (4q roll) 0.0 0.4 0.2 0.3 0.5 0.6 0.2 0.1 0.2 0.1 0.3
TIBD/Equity 0.7 0.6 0.6 0.4 0.4 0.4 0.6 0.5 0.4 0.4 0.4

Fondsfinans AS has acquired Beringer Finance AB with all its subsidiaries and is using Beringer Finance as a brand name.
Fondsfinans AS is regulated by the NFSA (Financial Supervisory Authority of Norway). Beringer Finance AB and its subsidiaries
are not regulated by NFSA.
Definitions of ratings
Buy > 10%
Hold From -10% to 10%
Sell < -10%
Target: Our valuation as of today.
Time frame of target: Target is what we value the share as of today.
Recommendation distribution as of 16.12.2016: Companies in each recommendation category that have been
investment banking clients over the past 12 months:
Recommendation Percent Recommendation Percent
Buy 71 % Buy 12 %
Hold 29 % Hold 23 %
Sell 0% Sell 0%
Total 100 % Total
Our intention is to issue preview and update research on a quarterly basis.

Our investment recommendation is elaborated in accordance with “The Norwegian Securities Dealers Associations” standards.
This report has not been sent to the company for correction of any factual errors.
Fondsfinans is organized with Chinese walls between the Corporate Department and the Research/Broking Department. In
addition, Fondsfinans has internal instructions and guidelines for handling sensitive information.
The analyst receives compensation that is impacted by overall firm profitability, including investment banking activities.
Fondsfinans is under supervision of The Financial Supervisory Authority of Norway.
Ownership per 09.01.17 in Marine Harvest Group:

Analyst (including his/her closely related persons or companies):
0, corresponding to 0% of the company share capital
Employees (including their respective closely related persons or companies):
Group Fondsfinans (including the holdings of its Chairman, his spouse and their closely related companies, Erik Must AS and its
100% controlled subsidiaries):
17.000, corresponding to 0% of the company share capital.
Fondsfinans may hold shares in Marine Harvest Group as a result of daily trading/market making. Information on such holdings
is not given when of non-significant value. Fondsfinans does not act as market maker in Marine Harvest Group. Fondsfinans has
not acted as corporate adviser, lead manager in IPO etc. during the past 12 months.
The recommendation has not been changed from BUY. The previous recommendation was issued 03.11.16.
Ownership per 09.01.17 in Salmar ASA:

0, corresponding to 0% of the company share capital.
Fondsfinans may hold shares in Salmar ASA as a result of daily trading/market making. Information on such holdings is not
given when of non-significant value. Fondsfinans does not act as market maker in Salmar ASA. Fondsfinans has not acted as
corporate adviser, lead manager in IPO etc. during the past 12 months.
Ownership per 09.01.17 in Lerøy Seafood Group:

Fondsfinans may hold shares in Lerøy Seafood Group as a result of daily trading/market making. Information on such holdings
is not given when of non-significant value. Fondsfinans does not act as market maker in Lerøy Seafood Group. Fondsfinans has
Ownership per 09.01.17 in Grieg Seafood ASA:

Fondsfinans may hold shares in Grieg Seafood ASA as a result of daily trading/market making. Information on such holdings is
not given when of non-significant value. Fondsfinans is acting as market maker in Grieg Seafood ASA. Fondsfinans has not acted
as corporate adviser, lead manager in IPO etc. during the past 12 months.
Ownership per 09.01.17 in Bakkafrost:

Fondsfinans may hold shares in Bakkafrost as a result of daily trading/market making. Information on such holdings is not
given when of non-significant value. Fondsfinans does not act as market maker in Bakkafros. Fondsfinans has not acted as
corporate adviser, lead manager in IPO etc. during the past 12 months.
The recommendation has not been changed from HOLD. The previous recommendation was issued 08.11.16.
Ownership per 09.01.17 in Norway Royal Salmon:

Fondsfinans may hold shares in Norway Royal Salmon as a result of daily trading/market making. Information on such holdings
is not given when of non-significant value. Fondsfinans does not act as market maker in Norway Royal Salmon. Fondsfinans has
The recommendation has been changed from HOLD to BUY. The previous recommendation was issued 08.11.16.
Ownership per 09.01.17 in Scottish Salmon Company:

Fondsfinans may hold shares in Scottish Salmon Company as a result of daily trading/market making. Information on such
holdings is not given when of non-significant value. Fondsfinans does not act as market maker in Scottish Salmon Company.
Fondsfinans has not acted as corporate adviser, lead manager in IPO etc. during the past 12 months.
The recommendation has not been changed from HOLD. The previous recommendation was issued 24.11.16.
Fondsfinans may hold shares in the companies as a result of daily trading/market making. Information on such holdings is not
given
when of non-significant value.
This report was issued and distributed 08.02.17

DISCLAIMER
This report is provided for information purposes only. It should not be used or considered as an offer to sell or a solicitation of
an offer to buy any securities. Any opinions expressed are subject to change without prior notice. This report is based on
information from various sources believed to be reliable. Although all reasonable care has been taken to ensure that the
information herein is not misleading, Fondsfinans AS makes no representation or warranty expressed or implied as to its
accuracy or completeness. Neither Fondsfinans AS, its partners and employees, nor any other person connected with it, accepts
any liability whatsoever for any direct or consequential loss of any kind arising out of the use or reliance on the information in
this report. This report is prepared for general circulation and general information. It does not take into account the specific
investment objectives and financial situation of any recipient. Investors seeking to buy or sell any securities discussed or
recommended in this report, should seek independent financial advice relating thereto. This report may not be distributed,
quoted from or reproduced for any purpose without written approval by Fondsfinans AS.
DISCLOSURE OF INTERESTS
Fondsfinans AS is constantly seeking investment-banking mandates, and may at any time perform investment banking or other
services or solicit investment banking or other mandates from the company or companies covered in this report. Fondsfinans
AS may from time to time as part of its investment services hold positions in securities covered in this report. Under our
internal regulations, our analysts are not permitted to purchase new securities in the companies they cover. Holdings are
specified as part of shareholder information in each report.
DISTRIBUTION IN THE US
Research reports are prepared by Fondsfinans AS for information purposes only. Fondsfinans AS and its employees are not
subject to the Rules of the Financial Industry Regulatory Authority (FINRA) governing research analyst conflicts. The research
reports are intended for distribution in the United States solely to “major U.S. institutional investors” as defined in Rule 15a-6
under the United States Securities Exchange Act of 1934, as amended and may not be furnished to any other person in the
United States. Each major U.S. institutional investor that receives a copy of a Fondsfinans AS research report by its acceptance
thereof represents and agrees that it shall not distribute or provide copies to any other person. Reports are prepared by
Fondsfinans AS and distributed to major U.S. institutional investors under Rule 15a-6(a)(2). These research reports are prepared
by Fondsfinans AS and distributed in the United States by Fondsfinans Inc. under Rule 15a-6(a)(2). Any U.S. Person receiving
these reports that desires to effect transactions in any securities discussed within the report should call or write Fondsfinans
Inc., a member of FINRA.

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Aquaculture Sector Preview Sector View: Positive

4Q16 Preview - 8 February 2017

Moderate supply growth drives high prices

 Salmon prices raised for 2017… Global Supply

Sector valuation remains attractive 40

Oslo Seafood Index vs. OSEBX

Pricing & Valuation 8

Page 2 8 February 2017 Beringer Finance

Global Supply (1,000t) Global Supply (1,000t)

Norway 1,144 1,199 1,234 1,171 1,176 1,200

FCA Oslo (NOK/kg) Fishpool Forward prices (NOK/kg)

Beringer Finance 8 February 2017 Page 3

20,000 20,000 70.00

15,000 15,000 50.00

10,000 10,000 30.00

5,000 5,000 10.00

Norway: Biomass (1000t WFE) Norway: Sea temperatures

Page 4 8 February 2017 Beringer Finance

Chile: Biomass (1000t WFE) Chile: Smolt Release

Global Demand (1,000t) Market Size (1,000t) & Consumption/capita (kg)

6% 6% 100 1.2 0.9 0.5 1.4 0.5 1.1 1.0

2010 2011 2012 2013 2014 2015 2016E

Beringer Finance 8 February 2017 Page 5

Competitive Position – Volume Guidance 4Q16

SALM(1,000t) LSG (1,000t)

GSF (1,000t) NRS (1,000t)

BAKKA (1,000t) SSC (1,000t)

Source: Company Data, Beringer Finance

Page 6 8 February 2017 Beringer Finance

Volume Growth 2016-18E EBIT/kg (NOK)

Cost/kg (NOK) Norway: Cost Development (NOK/kg)

Source: Company Data, Beringer Finance

Beringer Finance 8 February 2017 Page 7

Pricing & Valuation

Oslo Seafood Index vs. OSEBX EBIT/kg vs EV/kg

P/E – 12m forward EV/EBIT – 12m forward

Peer Group Comparison (BF estimates)

EV/EBITDA EV/EBIT P/E Div. yield

Source: Company Data, Beringer Finance

Page 8 8 February 2017 Beringer Finance

Pricing & Valuation (BF estimates)

P/E – 2017 P/E 2018

SSC 16.2x SSC 11.8x

EV/EBIT 2017 EV/EBIT –2018

SSC 12.7x SSC 9.1x

Dividend Yield – 2017 Dividend Yield – 2018

EV/kg – 2017 EBIT/kg – 2018

BAKKA 301 BAKKA

NRS 232 NRS 30

Source: Company Data, Beringer Finance

Beringer Finance 8 February 2017 Page 9

Supply constraints driving prices

 New potential markets opening up with China & Russia

Exciting 4Q16 trading update Share data 08 Feb 2017

MHG Farming Volumes Peer Valuation - Consensus

10 Largest Shareholders No. Shares (m) % Management & Board of Directors

Beringer Finance 8 February 2017 Page 11

Pricing & Valuation (BF estimates)

EV/EBITDA EV/EBIT P/E Div. yield

Page 12 8 February 2017 Beringer Finance

EBIT per kilo

Cash and cash equivalents 72 157 72 77 324 475 72 95 90 66 77

Profitability & return