“We are initiating coverage of Blumar with a BUY recommendation, introducing a 2019E target price of CL$300, which combined with an expected dividend return of 4.2% provides a return for the period of 22.5%”.

2018 is expected to be a record year for the company due to the solid conditions in white fish and salmon that it has faced, with which for 2018 an EBITDA and Net Income of US$ 136.8 and $78.5 million respectively are expected. However, in 2019 there will be a slowdown due to lower physical sales in salmon (given the rest cycle of its operating concessions) and a possible decrease in margins, however, the investment plan in salmon in the Magallanes region should generate attractive profit growth in the coming years.

In addition to the above, the new regulatory framework is expected to generate more sustainable development of the salmon farming industry, which should improve the valuation of local companies versus Norwegian ones.

In the case of the company’s fishing segment, greater regulatory risk is observed, however, it is compensated with the historical stability of cash flows and low investment plan requirements.

This is why in relative terms Blumar is seen as one of the companies with the highest growth potential in the salmon business. Even with a valuation penalized by its fishing business, Blumar would be trading at a discount compared to its peers, which creates room for growth in its valuation.

Banco Bice’s estimates indicate that Blumar would be trading at a multiple of 16.8x P/E 19E, 8.2x EV/EBITDA 19E and 1.2x P/B, with a dividend return of 4.2% in 2019E. Based on the above, a 2019E target price of CL$300 is established, which combined with an expected dividend return of 4.2% provides a return for the period of 22.5%.

Contact:

Studies Department:

Agustín Alvarez M.
Head of Studies
Agustin.alvarez@bice.cl
+(562)26922576