Benchmark’s recent Q1 FY22 results highlighted strong operating trends in its three business areas and a positive outlook in key end-markets, especially farmed salmon. The group’s strong position serving the aquaculture industry should, in our view, insulate it from economic shocks resulting from the geo-political situation and thus make for attractive, safe haven investment.
The company has a strong balance sheet and liquidity position following its £20m equity fundraising last year, which we consider will become a more prominent positive element in its investment case. However, Benchmark will have to refinance its NOK855m senior bond, which falls due on in July 2023. Doing so would remove something that may otherwise become an overhang as it approaches the due date.
Benchmark will have to contend with significant input cost inflation and will undoubtedly see some knock-on effects from disruption to its customers’ end markets. Although the Q1 results would ordinarily have supported a modest upgrade, we have decided to maintain our current financial forecasts pending greater clarity. These forecasts support a DCF-based valuation of £583m, equivalent to 83p/share.
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