Marine Harvest (OTC:MHGVY) Is a buy: Here’s Why

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The Norwegian based company Marine Harvest (OTC:MHGVY) which is the largest salmon producer in the world recently announced that they have signed a deal with the Alibaba (NYSE:BABA). The strategic alliance between the Norwegian salmon producer and the Chinese e-commerce giant might enable Marine Harvest to serve as much as 580 million new users.

While Alibaba is most known throughout the world for being China’s equivalent to Amazon.com, they are also in fact Chinas largest player within disruption of fresh food.

“China is the world’s largest seafood market, and the potential for Norwegian salmon is enormous. Together with Alibaba we shall conquer the Chinese market. We have already started selling some products through Alibaba. However, this deal makes it possible for us to scale up the whole pipeline and target our products towards the Chinese market in a new way”, says Chairman of Marine Harvest, Ole-Eirik Lerøy.

The deal is a strategic alliance between Marine Harvest and Win-Chain which is Alibaba’s global platform.

“From today, we the parties involved in the deal, shall work closely together to optimize the supply chain from the early start out to the the customer. Win-Chian will be the strategic partner to sell frozen salmon through Marine Harvest’s processing factories in Shanghai” –Michael Evans, CEO of Alibaba.

While Marine Harvest might be a new name to most investors, its about time one notice this enormous dominant player. The stock has done nothing else since 2012 than go straight up, rewarding patient investors with serious capital appreciation gains as well as a high dividend income return.

Marine Harvest, Salmon, Alibaba,
Source: Stockcharts.com

Marine Harvest currently trades with a 6.2% yield and the price to earnings ratio is 19.4 which is slightly above the Norwegian index, but if the analysts estimates come true, Marine Harvest is cheap. The P/E for 2019 is expected to be 11.4 due to earnings growth at 10.3% and 10.5 for 2020. Furthermore, due to increased earnings, the yield will grow from 6.2% in 2018 to 6.9% in 2019 and 7.3% in 2020.

The firm is also highly profitable. The return on equity (ROE) for 2018 is 28.2% and 31.6% for 2019 and 34.4% for 2020 (based on estimates). The return on invested capital is also very high at 20.2% for 2018, 26.4% for 2019 and 28.8% for 2020.

Consensus estimates

There are 11 analyst following Marine Harvest and the mean consensus is that the firm should outperform. The bear case is that the fair value is €18.60 ($21.39), which gives a negative 12.60% spread. The bull case is a fair value at €25.19 ($28.97), which provides a possible 19% capital appreciation from the current price at €21.20 ($24.38). Combine this with at least a 6.2% dividend return, and investors might be looking at a hidden gem in an otherwise highly attractive and growing market.

Disclaimer: The author owns no shares in Marine Harvest.

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