SpareBank 1 upgrades NTS to “buy”, as vessel costs fall

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Oslo-based SpareBank1 Markets on Friday upgraded the growing central-Norway based aquaculture player, NTS, to “buy” from “neutral”, a day after a promising fourth-quarter earnings report that spoke of investment and growth. 

“NTS’s wellboat activities NTS’ well boat activities impressed us with NOK 59 million (EUR 6.1 million) in EBITDA, above our NOK 53 million (EUR 5.5 million) estimate, driven up by high activity level and attractive rates,” SpareBank analyst, Tore A. Tonseth said in a note to investors.

The company’s farming operations — including new holdings in MNH — were, Tonseth said, “somewhat mixed” with NOK 14.4/kg in operational EBIT, “13 percent below our forecast, driven down by higher than expected costs.”

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“But the other segments were more or less in line. With the NTS share underperforming the sector by 10 percent over the past six months and having an underlying (sum of the parts valuation of) around NOK 52 (plus-3) per share, we believe it is time to upgrade to “Buy” (from “Neutral”) and set our six month target to NOK 50 (plus-3),” Tonseth wrote.

In his analyses, Tonseth said heavy maintenance costs and upgrades had dragged down NTS vessel operations and led to an “artificially low EBITDA” for the segment. “The higher rates could be explained by some of the vessels with upgraded sea lice treatment equipment, creating additional revenues.”

For 2018, he said, NTS is looking at about EUR 3 million in maintenance costs and EUR 3 million capital spending.

Meanwhile, the company’s growing salmon-farming interests in central Norway’s MNH made it “among the better performing farmers in Norway” despite rising costs that reached EUR 3.63 per kilogram.