Mowi: Long-Term Compounder, Hit By Proposed New Salmon Tax

(Preview) Initiating Coverage (MOWI NO) (Neutral)

Summary

• Shares in Mowi, the #1 global salmon producer, crashed 22% in two days to a 5-year low. The P/E is 11.3x and Dividend Yield is 5.3%.

• The salmon industry has good long-term structural growth, and we believe Mowi can grow earnings at high-single-digits.

• However, the industry is cyclical, and Mowi earnings have been volatile; Canada was a drag, but issues there have been resolved.

• The shares crashed due to a proposed new 40% salmon tax in Norway. We think it will happen and can cut earnings by up to a third.

• Adjusted for this new tax, the shares are not cheap enough at NOK 133.55, especially compared to others in the market. Avoid.

Introduction

Mowi ASA, the global #1 salmon producer with a $6.4bn market capitalization, saw its stock crashed 22% in the last two days to a 5-year low.

The crash has been caused by a proposed new 40% “resource rent tax” on salmon production in Norway, which can cut Mowi earnings by up to a third.

The salmon industry has favourable characteristics that give it…