It’s sunshine all the way on the Oslo stock exchange. While red numbers have dominated on European equity markets so far this year, Norway is soaring. The lead index, the OBX, is more than 15% above the level reached at the end of 2017. Two sectors have played a key part in the outperformance of the Scandinavians: oil & gas and fish farming. While the first of these is profiting from the rise in energy prices, it is structural factors that are driving prices in the fishing industry. As the world's leading producer of salmon, Norway is benefiting from the fish’s popularity. Whether the trend towards a healthy diet, the growing middle class in various regions of the world or its sheer taste, the typically pinkish and particularly protein-rich meat of the fish is making it enormously popular. And business for Norway’s fish farmers is booming accordingly.
According to figures from the Norwegian Seafood Council, the country exported 556,000 tonnes of salmon in the first half of the year. That represents an increase of 7% on the volume for the same period in 2017. While exports actually declined in the first three months of the year, in the 2nd quarter they rose by a tenth. “Some factors made a positive contribution to the record semester”, explains Paul T. Aandahl, analyst at the Norwegian Seafood Council. Pointing to the currency situation, Aandahl says the Norwegian krone (NOK) appreciated by 7% relative to the US dollar in the first six months, whereas it gave up 5% against the euro. “Since two thirds of Norwegian salmon goes into EU territory, the export results remained positive”, Aandahl says. This is reflected in the fact that volumes supplied into the EU rose by a disproportionate 13% in the first half. A decline in production within the EU also played into the hands of the Scandinavians. Looking ahead to the 2nd semester, the analyst assumes that Norwegian salmon exports will continue their upward trend.
Management fee: 0.70%
Index Sponsor: Swissquote Bank SA
Issuer: Leonteq Securities AG
Swissquote is now responding to the positive momentum in the sector with a special investment solution: the bank has launched the Norwegian Fishing Portfolio Index. To achieve the best possible returns, a team of experts systematically sought out the most promising fish farm operators. Eight of the industry representatives listed on the Oslo stock exchange feature in the initial make-up of the index, with Bakkafrost taking the role of heavyweight. Based on the Faeroe Islands, the company accounts for 19% of the benchmark. Bakkafrost covers the entire value added chain. Its fields of activity range from fish food to consumer products such as frozen fillets or fresh salmon. With the company's profits having fallen sharply in 2017, analysts anticipate a turnaround. The consensus is for average growth of 15.5% in earnings per share for 2018 and 2019 (see table). That makes Bakkafrost typical of the Norwegian Fishing Portfolio Index. The market anticipates double-digit percentage growth rates for all companies over the stated period.
Given these positive prospects, salmon farmers are still rather undervalued despite the most recent price rally. Based on the profits expected for 2019, the 8 companies in the index offer an average price-to-earnings ratio (PER) of less than 12. The dividend yields are also impressive: if the analysts are proved right in the profit distributions they expect for the current year, the shares would attract an average interest rate of 3%. All distributions will be reinvested in the index or used for the addition of new components. A tracker certificate from Leonteq enables investors to add the actively managed index to their portfolio. The open end product has a management fee of 0.70% p.a. A transaction fee will also be charged as soon as the expert team makes any changes in the underlying asset. However, this will hardly detract from the opportunity to profit from the rich catch of the Norwegian salmon farmers with this SIX-listed tracker.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.