SpareBank 1 downgrades Bakkafrost’s shares: “Too much uncertainty in our view”

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Russian red tape looms over Faroese salmon farmer.

Bakkafrost were hit hard after they were denied access to the lucrative Russian market in the fourth quarter. “Too much uncertainty in our view,” said SpareBank Markets 1 analyst Tore A. Tønseth. In response, Tønseth has cut EBIT estimates and downgraded shares to Sell (Neutral) in the company.

While CEO Regin Jacobsen thinks it is only a matter of time before Bakkafrost gets access to that market (“As we see it, they should have everything needed to reopen our operation to Russia,” said Jacobsen), Tønseth is cautious.

“Bakkafrost’s (BAKKA) fourth-quarter really highlights the favourable position the company has been in since Russian ban towards EU/EEA started in 2014. Combined with the lowest cost in the industry, BAKKA has delivered very strong results quarter after quarter.

“Seeing the financial impact of Russia being unavailable, should be an eye-opener for the market which so far has put a high multiple on “inflated” earnings estimates. The Russian market could be open again for BAKKA tomorrow – or we could see permanent ban over several years.

“The point is that we do not know how this will develop. We have cut our EBIT estimates with 12-7% for the period 2019-2020, and downgrade BAKKA to Sell (Neutral). New target set to NOK 410 (430),” added Tønseth.