so close, yet so far away · stefán broddi guðjónsson, head of arion bank research intrafish...
TRANSCRIPT
Stefán Broddi Guðjónsson, Head of Arion Bank Research
IntraFish Seafood Investor Forum
Reykjavík 4. October 2018
So close, yet so far
awayWhy institutional investors and fisheries
companies should fix their broken relationship
A less fishy economy Not a source of growth but of solid performance. In the beginning the Icelandic Stock Exchange was by and large a fish market
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Composition of Icelandic exports 1990 - 2018
Seafood Aluminum Tourism Other
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1992 1995 1998 2001 2004 2007 2010 2013 2016
Market cap of listed fisheries companies in Iceland
– of total stock market
Sources: Statistics Iceland, Arion Bank Research
Relative value of fisheries sales halved in 15 years
3
Total assets around 10% of domestic corporate assets
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Sales of fisheries companies - of total sales of Icelandic companies*
0%
5%
10%
15%
20%
25%
Assets of fisheries companies – of total assets of Icelandic companies*
Sources: Statistics Iceland, Arion Bank Research. Estimates are Arion Research´s. *Excluding financial firms and pharmaceuticals
Long term funding of fisheries companies equals 22-24% of GDP
4
Around 10% of all corporate long term financing allocated to fisheries companies
0%
5%
10%
15%
20%
25%
Total long term financing of fisheries companies
- of total long term financing of domestic companies*
-5%
0%
5%
10%
15%
20%
25%
30%
Total long term financing of fisheries companies – of GDP
Total equity of GDP Long term debt of GDP
Sources: Statistics Iceland, Arion Bank Research. Estimates are Arion Research´s. *Excluding financial firms and pharmaceuticals
Money well spent
5
Around 12% of all shareholders equity is in fisheries companies. In the past two years fisheries companies have outperformed the rest of the economy
-20%
-10%
0%
10%
20%
30%
40%
50%
Equity ratio of Icelandic fisheries companies
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Total equity of fisheries companies - of total equity of Icelandic companies*
Sources: Statistics Iceland, Arion Bank Research. Estimates are Arion Research´s. *Excluding financial firms and pharmaceuticals
Predominantly private companies
6
Small institutional ownership and foreign ownership negligible
Fisheries company* OwnershipHB Grandi hf. Publicly listed
Samherji Ísland ehf. Private
Síldarvinnslan hf. Private
FISK-Seafood ehf. Owned by the local Coop
Þorbjörn hf. Private
Skinney-Þinganes hf. Private
Vinnslustöðin hf. Private
Vísir hf. Private
Rammi hf. Private
Útgerðarfélag Reykjavíkur hf. Private
Ísfélag Vestmannaeyja hf. Private
Hraðfrystihúsið - Gunnvör hf. Private
Nesfiskur ehf. Private
Eskja hf. Private
Gjögur hf. Private
Jakob Valgeir ehf Private
Ögurvík ehf. Private
Loðnuvinnslan hf. Owned by the local Coop
Bergur-Huginn ehf. Private
Útgerðarfélag Akureyringa ehf. Private
0%
10%
20%
30%
40%
50%
60%
1992 1995 1998 2001 2004 2007 2010 2013 2016
Share of TAC held by listed companies
Sources: The Directorate of Fisheries, Arion Bank Research *20 largest fisheries companies by quota share in Icelandic waters
1999 – 2000: 24 listed Icelandic fisheries companies
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Básafell Fiskiðjusamlag
Húsavíkur
Grandi
HB
SVN
Skagstrendingur
SR-Mjöl
ÚA
SÍF
Þormóður rammi
Eskja
ÍS
Jökull
Samherji
SH
Vinnslustöðin
Þorbjörn
Guðmundur
Runólfsson
HG
Krossanes
HÞ
Tangi
FMB
LoðnuvinnslanInternational Seafood Stock
Exchange in Iceland?
Sources: Nasdaq OMX Iceland, Arion Bank Research
Then…something happened
8
34
8 8 8
14
21
24
18 18
1312
9
6
3 3
1 1 1 1 1 1 1 12 2 2
0
5
10
15
20
25
30
Number of listed fisheries companies on The Iceland Stock Exchange
Sources: Nasdaq OMX Iceland, Arion Bank Research
The Breakup
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• The fisheries sector overshadowed by the
pharmaceutical sector and later the financial sector
• Little interest among traditional institutional
investors
• Negligible research coverage
• Rationalization and underlying operational
improvement left unnoticed by the investor
community
• Lack of visible investor support for rational while
politically difficult management decisions
• Poor performance of fisheries stocks, especially
relative to pharmaceutical and financial stocks
• Real and perceived political instability surrounding
the TAC system
• Quarterly reporting and IR considered time
consuming and of little value for the companies
• Little free float
• Ownership tightly held and shares illiquid
• Concerns among management to loose control of
companiesSources: Media Reports, Annual Reports of Fisheries Companies, Arion Bank Research
The Breakup
10
• The fisheries sector overshadowed by the
pharmaceutical sector and later the financial sector
• Little interest among traditional institutional
investors
• Negligible research coverage
• Rationalization and underlying operational
improvement left unnoticed by the investor
community
• Lack of visible investor support for rational while
politically difficult management decisions
• Poor performance of fisheries stocks, especially
relative to pharmaceutical and financial stocks
• Real and perceived political instability surrounding
the TAC system
• Quarterly reporting and IR considered time
consuming and of little value for the companies
• Little free float
• Ownership tightly held and shares illiquid
• Concerns among management to loose control of
companies
10 most common reasons for a breakup - according to Phsycology Today
1. Trust Issues2. Different Expectations
3. Moving Through Life at Different Speeds4. Compatibility Issues
5. Communication Issues6. Narcissism
7. Relational Abuse 8. Life Habit Abuse
9. Grown Apart, Boredom, Staleness, Rut10. Money Issues
Sources: Media Reports, Annual Reports of Fisheries Companies, Psychology Today, Arion Bank Research
A very private sector
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Neither the public nor institutional investors have opportunities to invest in domestic fisheries
Icelandic Fisheries Companies: Composition of Interest Bearing Debt
- Arion Research´s estimate
Domestic banks Foreign banks Capital Markets
Equity Ownership of Icelandic Fisheries Companies
- Arion Research´s estimate
Private Publicly listed Other
Sources: Statistics Iceland, Bank Annual Reports, Arion Bank Research
Total assets of pension funds six times the size of long term funding
of Icelandic fisheries companies
12
With net pension fund inflow around 100 b.ISK and 5-6% annual growth of the pension fund system, there should be ample appetite for investing in seafood
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
Pension fund assets to total long term funding in Icelandic fisheries companies
Total Assets of Pension Funds/Long Term Debt and Equity of FisheriesCompanies
0%
50%
100%
150%
200%
250%
300%
350%
400%
19
97
20
01
20
05
20
09
20
13
20
17
20
21
20
25
20
29
20
33
20
37
20
41
20
45
20
49
20
53
20
57
20
61
20
65
Total assets of Icelandic pension funds- of GDP
Scenario
Sources: Central Bank of Iceland, Arion Bank Research
Fisheries, energy, tourism…
13
The significant other picks up the baton
10,9%
4,8%
3,5% 3,1%2,3%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
2016 2017 2018 2019 2020
Exports- growth contribution of components
Ships and aircrafts Aluminum Marine products
Other Services Exports (YoY growth)
0
20
40
60
80
100
120
2010 2011 2012 2013 2014 2015 2016 2017
Other exports- bn. ISK, constant exchange rate
Manufacturing goods other than aluminium Medical products
Silicon metal Fish farming
Food and beverages Petrolium and petrolium products
Animal products Fishing equipment
Sources: Statistics Iceland, Arion Bank Research
Conclusion
• Private companies – bank funding
• Rationalization and operational
improvement
• The Crash of 2008 was reality check
for domestic investors
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• More coverage
• Stronger popular attachment
• Better popular understanding
• New generation, new opportunities
• Wave of public listings two decades
ago – listed company in every fjord
• Soon overshadowed by other sectors
• Lack of investor interest, knowledge
and appetite
• Financial and operational strength has
been recognized
• Core domestic business –
underexposure by domestic institutional
investors
• Lesser economic dependency on
fisheries – less complicated investment
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