Ome report

NYSE: OME Date: 2/26/15

Recommendation

BUY Key Statistics

Sector: Consumer Goods Industry: Processed & Packaged Goods Market Cap:

$238 M

Trailing P/E: 5 Yr Average: Industry Avg:

9.6 14.6 14.7

Forward P/E:

9.85

P/S: Industry Avg:

.87 2.71

P/B: Industry Avg:

.89 3.17

EV/EBITDA:

3.8

Beta:

1.6

ROA: ROE:

9.5% 10.0%

Fair Value: $13

Price: $11

Target Price: $18

Company Overview

Omega Protein Corporation manufactures Omega-3 fish oil, specialty fish products, and nutritional supplements for sale to various feed manufactures and wholesale organic distributors. The company operates in two segments: Animal Nutrition and Human Nutrition. The Animal Nutrition segment harvests fish (menhaden) to produce fish meal, crude fish oil, refined fish oil, and fish solubles. The Human Nutrition segment offers protein products, Omega-3 fish oil supplements and operates as an ingredient supplier for the nutraceutical industry.

1 - Year Price Performance OME

50%

S&P 500

25%

0%

Feb-­‐14 Mar-­‐14 Apr-­‐14 May-­‐14 Jun-­‐14 Jul-­‐14 Aug-­‐14 Sep-­‐14 Oct-­‐14 Nov-­‐14 Dec-­‐14 Jan-­‐15 Feb-­‐15

Investment Thesis

• Growing demand from consumers becoming more conscious about their health • Increased product offerings in Human segment will drive revenue growth • Acquisitions of Cyvex (12/10) and InCon (9/11) enable vertical integration and differentiate its fish oil from substitutes • Acquisition of Bioriginal (9/14)creates steady revenue stream for Human segment to hedge against seasonality in the Animal segment • Fish oil from menhaden is the only oil approved by the FDA • Consistent catch of menhaden will provide Omega with consistent revenue as demand for fish meal and fish oil grow • Acquisition of Wisconsin Specialty Protein (2/13) expands presence into specialty protein market and brings added value to its product line

Catalysts • Increasing pork production • Growing aquaculture environment • Plant nutrition • Sales price of fish oil and fish meal to animal end markets • Human supplements

Risks • New entrants into menhaden fishing market • Government / FDA regulations adversely affect the firm’s ability to catch menhaden • Energy swap adjustments and seasonality Omega’s animal segment could dilute earnings more than anticipated • Reliance on menhaden fish

Muma College of Business | Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

1

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Industry Landscape/Macro Drivers - Animal Segment Aquaculture Production The aquaculture industry is driven by the consumption of seafood, which is driven by consumer preference and the price of the fish. Seafood is generally more expensive than chicken, beef and other livestock. Seafood consumption has continued to grow despite it being an expensive source of protein. This is mainly because seafood is a healthy alternative to red meat. Consumers have shown the willingness to pay a higher price if the food is more beneficial to their health.

Aquaculture to out-pace wild capture of fish going forward

100

Total Capture

Capture for Food

Aquaculture

75

50

The majority of aquaculture production has been in China (65%) and the rest of Asia (15%).

We expect the U.S. to gain share of the aquaculture production industry with the growing demand for aquaculture harvesting.

By 2015 aquaculture production will out-pace the wild seafood captured for food. This translates to increased demand for Omega’s fish meal and crude fish oils. The rising demand will increase the prices throughout the entire fish industry. Omega is strategically positioned to benefit from increasing demand and prices, enabling higher revenue per ton.

Growing world population will also boost the industry. The more people there are, the higher the consumption of seafood, chicken and other kinds of meat.

25

0

1990

1996

2000

2004

2008

Traded Products

3,500

2012

2014

Aquaculture

2016E

2018E

2020E

2018E

2020E

Capture

3,000 2,500 2,000 1,500 1,000 500

Livestock Production

-­‐

1990

The majority of livestock products go to the cattle and hog/pig farming industries, livestock demand can be broken down into demand for cattle and demand for hog/pig. Demand for the cattle farming industry is driven by the price of red meat, demand for meat, beef, and poultry processing, and per capita beef production. These factors lead to an expected annual growth of 1.6% for the cattle farming industry. Hog/pig farming demand has very similar drivers to cattle demand, however the hog/pig industry is expected to grow at an annual rate of 2.7% from 2014-2019.

1998

2002

2006

2010

2014

2016E

China will lead global market in pork and beef imports China Global Meat Imports (kg per person)

2.5

Poultry

Pork

Beef

2 KG Per Person

We expect increased pork and beef consumption in China to be a major driver within its livestock segment. 30% of revenue in 2013 came from Asia with the majority coming directly from sales in China. We expect this trend to continue with the rising consumption of pork and beef in the region. We expect U.S. pork consumption to remain flat with low supply driving price increases for Omega’s products.

1994

1.5 1 0.5 0

2000

2005

2010

2012

2014

2016E

2018E

2020E

Global Animal Health to grow to a $30 billion market by 2016

Pet Food Production The pet food production industry is driven by pet ownership and demand from pet stores.

We expect pet ownership to increase during 2015, which has seen substantial growth since 1988. Since then, pet owner ship has expanded from 56% of households to 68%. We expect about a 2% increase in pet ownership, but are more bullish on households feeding their pets with healthy animal products.

$30

Demand from pet stores is expected to increase significantly as the “pet parents” trend drives demand for premium pet food and increased pet ownership drives overall growth in the pet industry. The combination of these factors gives an expected growth rate of 1.8% in the pet food production industry. We expect input prices to fall though, which will lower the price and hurt Omegas revenue from this segment. However, with only 3.5% of total revenue stemming from pet food production we view the positive trends in aquaculture and pork offsetting weak pet food prices.

2

USD in Billions

$20

$10

$0

2012

2014

2016E

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Industry Landscape/Macro Drivers - Human Segment Human Nutrition Industry

The nutrition supplements industry is driven by the interest in preventative health, focus on diet and nutrition, and awareness of nutritional product benefits. Healthy eating habits are spreading rapidly throughout the world. Consumers in developing countries are accumulating more money than ever before, with a $4,200 increase in GDP per capita from 2000 to 2010. As income grows and exceeds the cost for fundamental needs, attention devoted to health and personal longevity skyrockets.

The trend of healthy living and increasing focus on the ingredients within products, will create greater demand for Omega-3 oils, whey, flax and Omega’s other products.

U.S. supplement sales industry to generate $36 billion in 2017 U.S. Supplement Sales ($ in billions) $40

$36 $32 $20

The portion of U.S. population over 60 is set to expand from 2010 to 2020, reaching an estimated total of 21 million. People over 60 are much more likely to purchase nutritional supplements than the rest of the population. Rising health care costs will pressure families and spark an interest in nutritional supplements that improve health and reduce medical expenses.

Nutraceuticals

Nutraceuticals are diverse set of dietary supplements and ingredients. Products include antioxidants, anti-aging remedies and cognitive health boosters. As the population ages, demand grows, driving supplement sales to $36 billion by 2017.

$20

$0

2003

2013

2017E

Whey protein industry amass over $6 billion in revenue Global Revenue Whey Protein ($ in millions) $6,000

The human nutrition segment supplies protein, omega-3 fish oil and other ingredients to serve the vitamin and supplement manufacturing industry. We expect nutraceuticals to grow with the increasing priority of living a healthy life.

Whey Protein

Omega manufactures specialty organic and rBGH free whey protein. These products serve as ingredients for branded products. The customers for whey protein include supplement manufacturers, functional food producers and natural and organic retailers. The whey protein market is a very competitive market, with low barriers to entry. Looking forward, we expect Omega see a 7% annual increase in whey protein sales. Though the industry is highly competitive and fragmented we expect the Wisconsin Specialty Protein subsidiary to benefit Omega’s top line growth as the firm can leverage its current customer base to cross sell its products.

$3,000

$-­‐

2008

2010

2012

2014E

2016E

2018E

Omega-3 Ingredients will reach over $3 billion in sales by 2016

Omega-3 Fish Oil

Fish oil is mainly used for dietary supplements and functional foods. It is available in a variety of specifications. Its customers include supplement manufacturers and functional food producers. The fish oil market is well diversified. Taking advantage of the geographical location and fish type, different companies in different parts of the world manufacture their unique type of fish oil, such as Norwegian fish oil or shark fish oil. From the perspective of the amount of Omega-3 DPA, a metabolic intermediary between EPA and DHA, which is important in supporting cardiovascular and cognitive health, menhaden fish is the optimal raw material for manufacturing the healthy fish oil. Looking forward, consumers are expected to increase their consumption of this kind of fish oil with an increasing focus on living a healthy lifestyle. We expect Omega-3 to be a main driver of Nutegrity’s revenue as the use and adoption of Omega-3 fish oil grows to over $3 billion.

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

Omega-­‐3 Ingedient Sales ($ in millions) $3,000

$1,500

$-­‐

2008

2010

2012

2014E

2016E

3

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Competitive Advantage Animal Nutrition

The animal nutrition segment competes in a diverse market, against both domestic and international fish processors and, to a lesser extent, against producers of vegetable and other animal protein products.

Domestically, Omega must compete against a smaller, privately-owned, menhaden fishing company. Omega has marginalized domestic competition with its near monopoly on the menhaden catch. In 2013, Omega caught about 84% of all menhaden in the United States. Omega caught more than five times the fish its competitor caught and is more than twice as efficient at catching menhaden. For the 2013 season, Omega operated a total of 31 boats and caught roughly 15,500 tons per boat whereas competition caught approximately 7,500 tons per boat. Omega will continue this market dominance, as regulation restricts new entrants into the commercial fishing of menhaden.

With regards to international competition and competition arising from vegetable and other animal protein products, Omega has several advantages. Menhaden is the only marine source of long-chain Omega-3 fatty acids directly affirmed by the FDA as Generally Recognized As Safe (GRAS). This GRAS certification insulates the company from competition from producers using other marine sources. Gaining GRAS designation requires a significant amount of time and scientific research, which not only differentiates Omega’s product, but also ensures little GRAS competition in the near term.

In addition to its superior product, Omega ‘s customer relationships offer a sizable advantage over its competitors.

Omega works with the leading animal and pet food manufactures and the four largest players in the pet food production industry. Combined, these companies account for roughly 51% of the total pet food production market. Omega’s animal food manufacturing clients have a similar position. Omega contracts with the top for companies in this space.

The companies combined market share within the animal food production industry is approximately 36%. These market share data points do not account for all of Omega’s clients and are used to show the size and importance of Omega’s customers.

Human Nutrition Omega’s protein products are derived from rBGH-Free (artificial growth hormone), gluten free, and organic cow milk.

The company also offers protein from gluten-free goat milk, perfect for those who do not tolerate cow milk products.

Omega’s wide variety of whey products broaden customer reach. Omega’s nutraceuticals are derived from fruit, vegetable and botanicals. These products include healthy signature ingredients that support different parts of the human body.

At the same time, Omega maintains high standards of quality in its manufacturing operations to attract and retain customers and maintain its competitive position. Omega’s human nutrition business Nutegrity uses independent labs to test the quality of its ingredients. Nutegrity also uses its NutriPrint quality assurance system, with the Fourier Transform – Near Infra Red technology for identity testing of incoming raw materials.

Regulation As one of the three companies to fish menhaden, Omega captures 85% of the fish quota. For this market, the barriers to entry are high; it is very difficult for competitors to obtain government approval to use vessels and aircrafts within the fishing area. It is difficult for other companies to compete with Omega in the same market. The trend in changing regulation may happen; however, this is a long-term process and we do not view it to happen in our investment horizon.

4

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Products Omega Protein Corporation operates two business segments: Animal Nutrition and Human Nutrition. The products for each group are as follows:

Animal Nutrition Fish Meal – The principle product made from menhaden. Predominately sold as a feed ingredient for livestock, aquaculture and household pets. The company markets several meals distinguished by end use.

Crude Fish Oil – The basic fish oil product from menhaden. This product is sold to the aquaculture industry and to producers of hydrogenated oils (margarine and shortening), with aquaculture accounting for 83% of sales in 2013.

Refined Fish Oil – Omega further refines the crude fish oil for use in additional markets.

The refined product is sold to pet and livestock feed manufactures, as well as the aquaculture industry. Some of the refined product is transferred to the human nutrition segment where it is refined further for human consumption.

Fish Solubles – A production by-product that is used as an additive to fish meal. This product is also sold to animal feed manufactures and the fertilizer industry.

Human Nutrition The segment operates under the name Nutegrity, with three main categories.

Protein Products – Through its subsidiary Nutegrity, Omega manufactures a variety of value-added whey protein products for a variety of end markets. Differentiators include hormone-free, gluten-free, USDA certified organic, and goat derived whey protein. These products are, as well as manufacturing by-products, are sold to nutritional, food and beverage, specialty food, and specialty supplement companies worldwide.

Omega-3 fish oil – The Company further refines and concentrates fish oil for sale as a dietary supplement and food additive. Unlike competitors who typically have only two, Omega’s Omega-3 products include three long-chain fatty acids with recognized health benefits.

Other Nutraceutical Ingredients – Nutegrity markets and sells an extensive list of other nutraceutical ingredients derived from fruit, vegetables and botanicals. These products are sold directly to retailer and to other dietary supplement manufacturers.

Omega recently made a major acquisition, to gain a greater piece of the Nutritional supplement market. The acquisition of Bioriginal will bring scale and new product offerings and generates a positive EBITDA. In FY 2013, the animal nutrition and human nutrition segments accounted for 87% and 13% of Omega’s revenue respectively. Within the animal segment, 67% of revenue came from fish meal, 31% from fish oil, and 2% from solubles. In human nutrition, 19% came from specialty oils, 31% from specialty protein, and 50% from other nutraceuticals. Animal nutrition accounted for 99% of 2013 EBITDA, human nutrition accounted for the remaining.

The acquisitions made by Omega over the last three years provide entrance in a market seeing robust growth and increasing demand while also lowering its exposure to the seasonality of fishing for menhaden. Furthermore, this will result in more stable margins going forward than the firm has seen historically as there will be a more transparent revenue stream from its operations.

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

5

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Animal Nutrition The animal nutrition segment is broken down into three main product lines, fish meal (67%), fish oil (31%) and solubles (2%).

Omega controls the entire production process, from catch to fished product.

Menhaden fish is an Omega-3 rich fish harvested in waters along the Atlantic and Gulf coasts. Taking advantage of the proven health benefits of Omega-3 fatty acids and the superior amino acid profile of fish protein, animal nutrition products produced by Omega meet the nutritional requirements for healthy pets, hearty livestock and abundant aquaculture.

The firm catches the menhaden used to produce the fish oil with a fleet of 28 vessels in operation in the gulf of Mexico (21 and 21 spotter aircrafts) and Atlantic Ocean (7 and 7 leased spotter aircrafts). The spotter aircrafts scan and find schools of menhaden, then the vessel moves to the location and catches the menhaden. The firm has another 9 vessels and 6 aircrafts under maintenance or used for other transportation businesses. The menhaden are caught and then processed into fish meal, fish oil, solubles or refined and sold in the human nutrition segment. Omega controls the entire process of the production.

Omega produces the menhaden into regular grade and value-added specialty fish meals, crude and refined fish oils and fish solubles. A portion of Omega Protein’s production is transferred to the human nutrition segment where it is further processed and sold. Omega Protein’s business is seasonal in nature and generally has higher revenues during the third quarter of each fiscal year.

Customers Most of Omega Protein’s marine products are sold directly to approximately 200 customers by Omega Protein’s agriproducts sales department, while a smaller amount is sold through independent sales agents and the Company’s human nutrition segment.

Omega Protein’s animal nutrition segment product inventory was $72.7 million as of September 30, 2014 versus $73.8 million as of December 31, 2013.

A portion of sales in this segment are sold on up to a twelvemonth forward contract basis with the balance sold on a spot basis through purchase orders or under longer-term forward contracts, which contain provisions on production allocation.

Historically, fish meal and fish oil sold on a forward contract basis has fluctuated from year to year based upon perceived market availability and forward price expectations. As of September 30, 2014, Omega Protein had sold forward on a contract basis approximately 25,000 short tons of fish meal and 10,000 metric tons of fish oil for 2014, for the same period last year the firm sold forward on a contract basis approximately 25,000 short tons of fish meal and 5,000 metric tons of fish oil.

6

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Animal Nutrition Fish Meal (67%)

The fish meal segment’s end market is aquaculture (34%), pet (33%), swine (26%) and dairy (7%).

The fish meal products are primarily used as a protein ingredient in animal feed for swine, aquaculture and household pets.

Omega Protein’s fish meal is sold to feed producers as a high-protein ingredient for the swine, aquaculture and pet food industries. Crude fish oil sales primarily involve export markets where the fish oil is used as an ingredient in aquaculture feeds. Over the past decade, increasing percentages of Omega Protein’s fish meal and oil products have been sold into the aquaculture industry. The growth of the worldwide aquaculture industry has resulted in increasing demand for fish oils and meals to improve feed efficiency, nutritional value and health of farm-raised fish species.

Knowing what specific nutrition different animals need, Omega can develop species-specific marine protein which will provide the healthiest and most efficient nutrition to pets, livestock, and aquaculture. Different types of fish meal include: Special Select, SeaLac and FAQ (Fair Average Quality) Meal.

Special Select TM is a premium grade fish meal that is targeted for monogastrics, including baby pigs, pets, shrimp and fish.

SeaLac TM is a premium grade fish meal that is targeted for the cattle industry.

FAQ Meal is Omega’s commodity grade fish meal that is typically used in protein blends for pets and other animals.

This kind of fish meal provides the highest quality amino acid profile of any single protein source. Each of its specialty fish meals provide a minimum 60% crude protein and 90% digestibility.

Fish Oil (31%)

Fish oil is utilized primarily for animal and aquaculture feeds, as well as additives to human food products and dietary supplements. Omega-3 fatty acids may provide a number of health and performance benefits. There are two types of fish oil produced by Omega: unrefined fish oil and refined fish oil.

Menhaden Fish Oil, Virginia Prime Gold, and OmegaEquis are the three types of fish oil feed ingredients for animal and aquatic feed.

Solubles (3%)

Omega Protein’s fish solubles are sold primarily to bait manufacturers, aquaculture feed manufacturers and for use as an organic fertilizer. Fish solubles serves as an additive product for fish meal and as an independent product to animal feed and fertilized industry.

Neptune Fish Concentrate is a liquid protein that can be added directly to growout ponds as a fertilizer to help feed plankton and other natural food sources.

OmegaGrow is a liquid soil or foliage-applied fertilizer for plant nutrition.

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

7

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Animal Nutrition Animal Nutrition Growth Catalysts Omega Protein’s animal segment is driven by the consumption of seafood and beef. Increased consumption will drive production of pork and aquaculture (breeding and harvesting of plants and animals). A growing interest in the health of and food quality for livestock and pets creates greater demand for Omega’s products than ever before. Rising production in these markets will drive sales for Omega’s fish meal and fish oil.

As the world population continues to grow, so does demand for food. To meet growing demand, more livestock will be raised and aquaculture will expand. This translates to more demand for feed and Omega’s animal nutrition products. Through its established, market-leading, customers Omega stands to capture a significant amount of this increasing demand.

We expect the Animal nutrition segment to be driven by two main catalysts; world pork production and aquaculture consumption. Increasing demand, a lack of supply and increased interest on breeding the healthiest livestock will drive growth for Omega’s animal fish meal and fish oil.

Over 20,000 published studies link consumption of Omega-3 fatty acids to numerous health benefits World Pork Production (metric tons)

Swine & Beef 120,000

METRIC TONS

Pig meat production will continue to rise. Within the entire human segment 17% stems from swine and 4% from beef.

Fish meal is considered a premium protein source for the feed because of its digestibility and amino acid profile. This creates a greater demand for its products when farmers are raising pigs and cattle. A lack of supply of fish meal gives Omega pricing power, which will drive the firms revenue per ton growth.

60,000

0

Aquaculture

8

2010

2015E

Fish Consumption & Sourcing (mt) Wild

Aquaculture

150

Metric Tons i(n Millions)

The growing trend of aquaculture breeding and harvesting will be the main driver of the Animal segments revenue as it accounts for 43% of net segment sales. Over the last 20 years there has been a growing demand for seafood, but wild catch was stagnate. This has led to other methods, the most practiced is aquaculture. The worldwide aquaculture industry has resulted in increased demand for Omegas unrefined fish oil (crude fish oil). The crude fish oil improves feed efficiency, nutritional value, survivability and health of farm-raised fish species. About 90% of Omega’s crude fish oil is sold to the aquaculture industry. We expect 73 metric tons of the consumption of seafood to stem from the aquaculture industry by 2020.

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13 50

57

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2020E

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Human Nutrition Specialty Oils & EFA’s (19%)

Derived from fish and plant oil and used in dietary supplements and foods. It is available in a variety of formulations and specifications. Most of these products are from the acquisition of Bioriginal.

Specialty Protein (31%)

Dairy proteins for dietary supplements and functional foods. This segment produces branded products as well as ingredients for other end products.

Nutraceuticals (50%)

Diverse set of dietary supplement ingredients. Products include antioxidants, anti-aging and cognitive health supplements. The key customers within these business segments are Whole Foods, Danone, Smart Balance and The Vitamin Shoppe, among other nutritional distributors and manufacturers.

Key Acquisitions Cyvex Cyvex Nutrition, Inc., acquired in December 2010, is a wholly owned subsidiary under the firm’s Nutegrity segment. Cyvex is a nutraceutical supplier to dietary supplement manufacturers that focus on human health and wellness. The acquisition expanded Nutegrity’s health and wellness market presence and access to premiere supplement manufacturers who also purchase fish oil among other ingredients.

InCon

Bioriginal

InCon Processing L.L.C., acquired in September 2011, operates as a specialty toll processor that designs, pilots, synthesizes and purifies specialty chemical compounds utilizing molecular distillation technology to concentrate a variety of compound products, including Omega-3 fish oils. Operated as part of Nutegrity, InCon’s concentrated technology can provide Omega’s customers with an enhanced range of Omega-3 fish oils in concentrated forms such as ethyl esters and triglycerides.

Bioriginal Food & Science Corp, acquired in September 2014 is headquartered in Canada with other operations in the Netherlands. Bioriginal is a leading supplier of plant and marine based specialty oils and essential fatty acids to the food and nutraceutical industries.

The acquisition will account for an additional $100 million in revenue for fiscal year 2015 and $7.5 million EBITDA and provides Omega with a solid revenue stream to withstand seasonality within its animal segment. Furthermore, the firm will be able to vertically integrate certain plant oils and gain a wider international presence and global reach. The company sells to blue-chip customers within a market with robust growth potential.

Wisconsin Specialty Protein (WSP) Wisconsin Specialty Protein, acquired in February 2013, operates as a wholly owned subsidiary of Omega. It is operated as part of Nutegrity in the human nutrition segment.

WSP produces and markets a variety of value-added whey protein ingredients for the food and nutritional supplement industries. The acquisition advances the firm’s goal of providing sustainable, value added nutrition ingredients.

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

9

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Human Nutrition The acquisition of Bioriginal will provide Omega with a solid revenue stream from its existing products. This revenue consistency will counter the seasonality inherent to menhaden catching. The acquisitions will continue to drive growth by innovation of products and vertical integration.

When first looking at the Human segment growth, historically it has seen over 40% for the last 5 years. However, the robust growth was mainly from the acquisitions made over the last three years. Since acquired, Omega’s management has proven competent in its abilities to integrate operations with its subsidiaries and operate profitable business segments.

We expect Omega to see mid double digit growth from its Nutegrity business. This will drive growth in the acquisitions as all segments work in different stages in the production and sale of supplements and nutrition products.

Customers

Omega sells its products to a variety of end markets within the health and nutrition industry. There are four main end customers: supplement manufacturers, contract manufacturers, food markets and private label firms.

While increasing demand through health trends and growing population will play a substantial part in Omega’s continuing business, Omega would not be able to capitalize on these trends without its strong customer relationship. Omega’s dedication to the highest standards of quality has established excellent relationships with market-leading companies within the human nutrition segment.

10

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Human Nutrition Human Nutrition Growth Catalysts Increasing Demand for Supplements in U.S.

Mega Trend - Healthy Living Consumers are putting a bigger emphasis on living more active lifestyles and becoming increasingly focused on healthy living, nutrition and supplementation. Consumers who increasingly embrace health and wellness as an important part of their lifestyles will drive Omega’s growth within the human nutrition segment.

There are over 20,000 published scientific studies that have linked consumption of Omega-3 fatty acids to a number of nutritional and health benefits, such as heart health, alleviation of arthritis and other inflammatory diseases, optimal brain and eye development and maintenance, and minimization of depression.

Expanded Product Offerings The development of new products will be a key revenue driver for Omega’s net revenue.

Its ability to implement its knowledge with menhaden fish oil and integrate that with its other business lines in the future will be vital to the success of the firm.

A competent management and growing demand for healthy supplements will drive this segments revenue coupled with a solid customer base. This will lead to about 10-15% organic growth from the original Nutegrity business, with the businesses acquired in recent years growing a net of 3.5% annually.

Through the acquisition of Bioriginal, Omega will substantially expand its offerings in the human nutrition space. Some of the added products include flaxseed, coconut, and krill oils. Through the expanded product line, Omega will reach more customers, further asserting its position as a market-leader within the nutraceutical industry.

Omega will now scale up the human nutrition segment’s production and increase markets served. Bioriginal’s operations in Canada and the Netherlands and its established position within the North American, European, and Asian markets allows Omega to expand its global customer reach and presents the ability to cross sell Omega’s other nutraceutical products. In addition to the production expansion from the Bioriginal acquisition, the company invested roughly $22 million to double Nutegrity’s whey protein capacity.

U.S. Supplement Sales ($ in billions) $40

$20

$0

2003

2013

2017E

Supplement sales is a major revenue driver for Omega’s human nutrition segment and we expect growth to be mainly driven by increasing demand from end consumers for supplements. We estimate by 2017 there will be approximately $36 billion in supplement sales in the U.S. The strategic acquisitions made by the firm over the last three years provide it with the scale to reach multiple end manufacturers.

The size and scale added through the Bioriginal acquisition and Nutegrity’s expansion will enable economies of scale and significantly improve human nutrition margins. The value-added, downstream nature of the products in this division, coupled with increasing demand for the products will improve and stabilize human segment margins.

Wisconsin Specialty Protein, a subsidiary of Nutegrity, will drive human segment growth as whey protein continues to be a key ingredient in nutrition supplement. We expect the whey protein to grow at a compounded annual rate of 8%.

Innovation

The acquisitions of Bioriginal and InCon not only provide Omega with instant scale and presence in the nutrition market, but also give them the ability to be on the cutting edge of new supplement production.

The technology used at InCon will applied to Nutegrity and Bioriginal to ensure that Omega is at the forefront of providing consumers with healthy nutritional products.

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

11

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Valuation - FCFE Model Free Cash Flows to Equity Model

Free Cash Flows to Equity Model 2014 2015 2016 2017 2018 Term Val EPS $ 1.25 $ 1.37 $ 1.44 $ 1.50 $ 1.65 $ 19.01 Deprc / Sh $ 0.99 $ 1.05 $ 1.08 $ 1.11 $ 1.14 Cap Ex / Sh $ (1.76) $ (1.94) $ (1.99) $ (2.04) $ (2.10) NWC / Sh $ (0.36) $ (0.09) $ (0.13) $ (0.13) $ (0.13) FCFE $ 0.13 $ 0.39 $ 0.40 $ 0.44 $ 0.56 PV of FCFE 0.11 0.35 0.32 0.32 12.50 Intrinsic Value 13.60 Discount Rate Stock Price $11.03 shares out % to fair value 23% 21,580 Beta 1.6 MRP 6.1% 10Yr Yield 2.1% CAPM 11.9% To establish the value of Omega’s future prospects we conducted a Free Cash Flows to Equity Model. Our model has multiple assumptions; • Capital expenditures growing at 11.5%, 150 basis points above historical average as it will invest in its human segment • Acquisition of Bioriginal will enhance bottom line earnings by $.18-$.20 per share annually over the investment time horizon • The 36 month historical beta of Omega is 1.6, which is the beta we expect going forward • This model assumes growth in animal nutrition of 2.5%, 5-5.5% from human segment and 3% from Bioriginal operations Omega FCFE Sensitivity Analysis

Terminal Value

$14.51 $16.01 $17.51 $19.01 $20.51 $22.01 $23.51

% to Fair Value 12

14.1% $10.0 $10.8 $11.7 $12.6 $13.5 $14.4 $15.3 bear 12%

13.4% $10.2 $11.1 $12.0 $12.9 $13.8 $14.7 $15.7 base 23%

12.6% $10.5 $11.4 $12.3 $13.3 $14.2 $15.1 $16.1 bull 29%

Discount Rate 11.9% $10.7 $11.7 $12.6 $13.6 $14.6 $15.5 $16.5

12.6% $10.5 $11.4 $12.3 $13.3 $14.2 $15.1 $16.1

13.4% $10.2 $11.1 $12.0 $12.9 $13.8 $14.7 $15.7

14.1% $10.0 $10.8 $11.7 $12.6 $13.5 $14.4 $15.3

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Valuation - P/E Model Omega is trading at a significantly low price/earnings multiple. This is mainly because the firm missed on revenue estimates for Q3 of this year. The stock has been oversold and at its current price offers significant upside with little downside.

Price / Earnings Expansion Model 2014 2015 2016 2017 2018 EPS $ 1.25 $ 1.37 $ 1.44 $ 1.50 $ 1.65 Fwd P/E 8.83 10.19 10.47 10.77 11.07 Price $ 11.03 $ 13.92 $ 15.06 $ 16.19 $ 18.30 Annual (E)Ret 26.2% 18.2% 15.6% 16.5% P/E Expansion - Industry Model 2014 2015 2016 2017 2018 EPS $ 1.25 $ 1.37 $ 1.44 $ 1.50 $ 1.65 Fwd P/E 10.40 13.13 13.49 13.87 14.26 Price $ 12.99 $ 17.94 $ 19.40 $ 20.86 $ 23.57 Annual (E)Ret 17.8% 62.6% 59.8% 29.7% 41.7%

The base P/E model assumes its grows from its 2015 forward price/ earning multiple of 8.02. With next years growth we estimate that Omega should trade at a 10.1 multiple, a 26% annual return. From there the P/E growth becomes more consistent as top growth remain somewhat stable at 3% and bottom line growth to fluctuate between 5% and 9%.

EPS Fwd P/E Price Annual (E)Ret

P/E Constant Model 2014 2015 2016 2017 2018 $ 1.25 $ 1.37 $ 1.44 $ 1.50 $ 1.65 8.83 9.85 9.85 9.85 9.85 $ 11.03 $ 13.45 $ 14.16 $ 14.82 $ 16.28 22.0% 14.2% 11.4% 11.9%

A secondary P/E model was conducted to show what would happen if Omega’s P/E expanded to the industry average. This shows the significant upside potential Omega has. This “bull” case yields an annualized return of 39%.

The bear case shows the annual returns if the p/e remained constant at its forward multiple. This “bear” model yields an annual return of 12%.

Omega P/E Price Target 2018 Sensitivity Analysis

7.4 8.6 Fwd P/E 9.8 Multiple 11.0 12.2 13.4 14.6 Expected Return Total Return Annualized Return

$0.76 $5.6 $6.6 $7.5 $8.4 $9.3 $10.2 $11.1 bear 21% 7%

$1.06 $7.9 $9.1 $10.4 $11.7 $13.0 $14.2 $15.5 base 66% 22%

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

EPS Estimate FY 2018 $1.36 $1.66 $1.96 $10.1 $12.3 $14.5 $11.7 $14.3 $16.9 $13.3 $16.3 $19.2 $15.0 $18.3 $21.6 $16.6 $20.3 $23.9 $18.2 $22.3 $26.3 $19.9 $24.3 $28.6 bull 117% 39%

$2.26 $16.7 $19.4 $22.1 $24.9 $27.6 $30.3 $33.0

$2.56 $18.9 $22.0 $25.1 $28.2 $31.2 $34.3 $37.4

13

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Valuation - EV/EBITDA Model ($ in thousands) Animal -­‐ EBITDA Human -­‐ EBITDA Bioriginal -­‐ EBITDA OME EBITDA Corp Exp Net EBITDA

2014 $ 83,422 $ 2,161 $ 1,843 $ 87,426 $ (17,992)

$ 69,434

bear $ 79,822 $ 1,537 $ 6,557 $ 87,916 $ (17,992)

$ 69,924

2015 base $ 84,822 $ 2,537 $ 7,557 $ 94,916 $ (17,992)

$ 76,924

EV / EBITDA Multiple Model 2016 bull bear base bull bear $ 89,822 $ 81,943 $ 86,943 $ 91,943 $ 84,116 $ 3,537 $ 2,290 $ 3,290 $ 4,290 $ 2,851 $ 8,557 $ 6,746 $ 7,746 $ 8,746 $ 6,940 $ 101,916 $ 90,978 $ 97,978 $ 104,978 $ 93,907 $ (17,992)

$ (17,992)

$ (17,992)

$ (17,992)

$ (17,992)

$ 83,924 $ 72,986 $ 79,986 $ 86,986 $ 75,915

2017 base $ 89,116 $ 3,851 $ 7,940 $ 100,907 $ (17,992)

$ 82,915

bull $ 94,116 $ 4,851 $ 8,940 $ 107,907 $ (17,992)

$ 89,915

bear $ 86,344 $ 3,476 $ 7,138 $ 96,959 $ (17,992)

$ 78,967

2018 base $ 91,344 $ 4,476 $ 8,138 $ 103,959 $ (17,992)

$ 85,967

bull $ 96,344 $ 5,476 $ 9,138 $ 110,959 $ (17,992)

$ 92,967

EV / EBITDA Multiple 4.2 3.7 4.2 4.7 3.7 4.2 4.7 3.7 4.2 4.7 3.7 4.2 4.7 Enterprise Value less: debt plus: cash Market Cap

$ 291,624 55,546 15,297 $ 251,375

$ 258,719 55,321 25,733 $ 229,131

$ 323,081 55,321 25,733 $ 293,493

$ 394,443 55,321 25,733 $ 364,855

$ 270,049 55,321 44,108 $ 258,836

$ 335,942 55,321 44,108 $ 324,730

$ 408,836 55,321 44,108 $ 397,623

$ 280,884 55,321 68,063 $ 293,627

$ 348,241 55,321 68,063 $ 360,984

$ 422,599 55,321 68,063 $ 435,341

$ 292,176 55,321 95,755 $ 332,611

$ 361,060 55,321 95,755 $ 401,494

$ 436,943 55,321 95,755 $ 477,377

Shares Out

21,580 21,580 21,580 21,580 21,580 21,580 21,580 21,580 21,580 21,580 21,580 21,580 21,580

Equity Value / Share Expected Return

$ 11.65 $ 10.62 $ 13.60 $ 16.91 $ 11.99 $ 15.05 $ 18.43 $ 13.61 $ 16.73 $ 20.17 $ 15.41 $ 18.60 $ 22.12 -­‐8.8% 16.8% 45.1% -­‐11.8% 10.6% 35.5% -­‐9.6% 11.2% 34.1% -­‐7.9% 11.2% 32.2%

Historically Omega’s EV / EBITDA multiple has traded around 4 times EBITDA. We believe this does not reflect the business Omega has established (with acquisitions) over the last 3 years. Or the market has priced in a higher multiple for the human segment, but it has not earned enough EBITDA to move the needle. This trend will change with the acquisition of Bioriginal and the high growth potential of nutritional supplements.

The firm is now well positioned in two markets that are seeing increasing demand and has the ability to leverage its operations to benefit in the animal and nutrition segment.

Omega EV / EBITDA 2018 Sensitivity Analysis

1.2 2.2 EV / 3.2 EBITDA Multiple 4.2 6.2 8.2 10.2 Expected Return Total Return Annualized Return 14

$76,967 $6.2 $9.7 $13.3 $16.9 $24.0 $31.1 $38.3 bear 29% 10%

$79,967 $6.3 $10.0 $13.7 $17.4 $24.8 $32.3 $39.7 base 69% 23%

$82,967 $6.5 $10.3 $14.2 $18.0 $25.7 $33.4 $41.1 bull 149% 50%

EBITDA ($ in millions) $85,967 $88,967 $6.7 $6.8 $10.6 $10.9 $14.6 $15.1 $18.6 $19.2 $26.6 $27.4 $34.5 $35.7 $42.5 $43.9

$91,967 $7.0 $11.2 $15.5 $19.8 $28.3 $36.8 $45.3

$94,967 $7.2 $11.6 $16.0 $20.4 $29.2 $38.0 $46.8

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Valuation - SOTP Model

$ 83,422 4 $ 333,687 $ (71,742) $ 261,944 $ 221,695 $ 10.27

bear $ 79,822 3.8 $ 303,323 $ (61,471) $ 241,853 $ 212,265 $ 9.84

2015 base $ 84,822 4 $ 339,288 $ (72,754) $ 266,534 $ 236,947 $ 10.98

Sum Of The Parts Model 2016 bull bear base bull bear $ 89,822 $ 81,943 $ 86,943 $ 91,943 $ 84,116 4.2 3.8 4 4.2 3.8 $ 377,252 $ 311,382 $ 347,770 $ 386,159 $ 319,641 $ (87,920) $ (61,497) $ (73,188) $ (88,734) $ (61,513) $ 289,332 $ 249,885 $ 274,582 $ 297,424 $ 258,128 $ 259,745 $ 238,672 $ 263,369 $ 286,212 $ 270,870 $ 12.04 $ 11.06 $ 12.20 $ 13.26 $ 12.55

2017 base $ 89,116 4 $ 356,464 $ (73,460) $ 283,004 $ 295,747 $ 13.70

bull $ 94,116 4.2 $ 395,288 $ (89,231) $ 306,056 $ 318,799 $ 14.77

bear $ 86,344 3.8 $ 328,107 $ (61,531) $ 266,576 $ 307,010 $ 14.23

2018 base $ 91,344 4 $ 365,376 $ (73,752) $ 291,624 $ 332,058 $ 15.39

bull $ 96,344 4.2 $ 404,645 $ (89,773) $ 314,872 $ 355,306 $ 16.46

Human EBITDA EV / EBITDA Multiple Enterprise Value Corp Exp Market Cap Equity Value / Sh

$ 2,161 8 $ 17,291 $ (1,859) $ 15,432 $ 0.72

$ 1,537 4 $ 6,147 $ (1,838) $ 4,308 $ 0.20

$ 2,537 8 $ 20,293 $ (2,176) $ 18,118 $ 0.84

$ 3,537 13 $ 45,977 $ (2,629) $ 43,347 $ 2.01

$ 2,290 4 $ 9,158 $ (1,839) $ 7,319 $ 0.34

$ 3,290 8 $ 26,316 $ (2,189) $ 24,127 $ 1.12

$ 4,290 13 $ 55,764 $ (2,654) $ 53,110 $ 2.46

$ 2,851 4 $ 11,403 $ (1,840) $ 9,563 $ 0.44

$ 3,851 8 $ 30,805 $ (2,197) $ 28,608 $ 1.33

$ 4,851 13 $ 63,058 $ (2,669) $ 60,390 $ 2.80

$ 3,476 4 $ 13,905 $ (1,840) $ 12,065 $ 0.56

$ 4,476 8 $ 35,810 $ (2,206) $ 33,604 $ 1.56

$ 5,476 13 $ 71,191 $ (2,685) $ 68,506 $ 3.17

Bioriginal EBITDA EV / EBITDA Multiple Enterprise Value Corp Exp Market Cap Equity Value / Sh

$ 1,843 8 $ 14,746 $ (1,585) $ 13,161 $ 0.61

$ 6,557 4 $ 26,229 $ (5,477) $ 20,752 $ 0.96

$ 7,557 8 $ 60,459 $ (6,482) $ 53,977 $ 2.50

$ 8,557 13 $ 111,245 $ (7,833) $ 103,412 $ 4.79

$ 6,746 4 $ 26,985 $ (5,479) $ 21,506 $ 1.00

$ 7,746 8 $ 61,970 $ (6,521) $ 55,449 $ 2.57

$ 8,746 13 $ 113,701 $ (7,906) $ 105,795 $ 4.90

$ 6,940 4 $ 27,760 $ (5,481) $ 22,279 $ 1.03

$ 7,940 8 $ 63,519 $ (6,545) $ 56,974 $ 2.64

$ 8,940 13 $ 116,219 $ (7,950) $ 108,269 $ 5.02

$ 7,138 4 $ 28,554 $ (5,482) $ 23,071 $ 1.07

$ 8,138 8 $ 65,107 $ (6,571) $ 58,536 $ 2.71

$ 9,138 13 $ 118,799 $ (7,998) $ 110,801 $ 5.13

Omega Equity Value Upside / Downside

$ 11.60 $ 11.00 $ 14.32 $ 18.84 $ 12.40 $ 15.89 $ 20.63 $ 14.03 $ 17.67 $ 22.59 $ 15.85 $ 19.66 $ 24.77 -­‐5% 23% 62% -­‐13% 11% 44% -­‐12% 11% 42% -­‐10% 11% 40%

($ in thousands)

2014

Animal EBITDA EV / EBITDA Multiple Enterprise Value Corp Exp Net EV Market Cap Equity Value / Sh

We also conducted a Sum of The Parts model assigning a different EV/EBITDA multiple for each segment. The animal segment is modeled with a 4 times EBITDA multiple, which is slightly below Omega’s historical average. This is where most of the value of the firm comes from though (over $9 per share currently).

We believe that the market has priced in a higher multiple within the human segment. The human segment has generated such a small amount to net EBITDA that it has not drove the stock price up with its robust growth. With the Bioriginal acquisition, the firm’s human segment will generate 10% of total EBITDA. The growth potential in this segment deserves a higher multiple than its animal segment. Furthermore, comparable companies that sell organic and natural products have an average EV/EBITDA multiple of 27, with the low being STKL at 13 times EBITDA. Our model of an 8 EV/EBITDA is low (to imply a margin of safety) and we believe that by 2018 the human segment could trade at a 13 times EBITDA (reflected in the bull case).

Omega Protein SOTP Sensitivity Analysis

2.6 3.2 EV / 3.9 EBITDA Multiple 4.5 5.1 5.7 6.3 Expected Return Total Return Annualized Return

97,209 $11.43 $13.64 $15.86 $18.07 $20.29 $22.50 $24.72 bear 52% 13%

99,459 $11.73 $14.03 $16.33 $18.63 $20.93 $23.23 $25.53 base 79% 20%

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

EBITDA ($ in millions) 101,709 103,959 106,209 $12.02 $12.32 $12.61 $14.41 $14.79 $15.17 $16.80 $17.27 $17.74 $19.19 $19.74 $20.30 $21.57 $22.22 $22.86 $23.96 $24.69 $25.42 $26.35 $27.17 $27.98 bull 107% 27%

108,459 $12.91 $15.56 $18.20 $20.85 $23.50 $26.15 $28.80

110,709 $13.20 $15.94 $18.67 $21.41 $24.15 $26.88 $29.62

15

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Valuation - SOTP Sensitivity Analysis Animal Nutrition

Animal Nutrition SOTP Sensitivity Analysis

86,844 $9.98 $11.53 $13.08 $14.63 $16.18 $17.73 $19.28 bear 32% 8%

2.5 3.0 3.5 4.0 4.5 5.0 5.5 Expected Return Total Return Annualized Return EV / EBITDA Multiple

88,344 $10.16 $11.74 $13.32 $14.91 $16.49 $18.07 $19.66 base 51% 13%

EBITDA ($ in millions) 89,844 91,344 92,844 $10.33 $10.50 $10.68 $11.95 $12.16 $12.36 $13.57 $13.81 $14.05 $15.18 $15.46 $15.74 $16.80 $17.12 $17.43 $18.42 $18.77 $19.12 $20.04 $20.42 $20.81 bull 70% 17%

94,344 $10.85 $12.57 $14.30 $16.02 $17.74 $19.47 $21.19

95,844 $11.02 $12.78 $14.54 $16.30 $18.05 $19.81 $21.57

Human Nutrition

Human Nutrition SOTP Sensitivity Analysis

3.5 5.0 EV / 6.5 EBITDA Multiple 8.0 9.5 11.0 12.5 Expected Return Total Return Annualized Return

3,726 $0.55 $0.79 $1.04 $1.28 $1.53 $1.77 $2.02 bear 105% 26%

3,976 $0.59 $0.85 $1.11 $1.37 $1.64 $1.90 $2.16 base 118% 30%

EBITDA ($ in millions) 4,226 4,476 4,726 $0.63 $0.67 $0.71 $0.91 $0.96 $1.02 $1.19 $1.26 $1.34 $1.47 $1.56 $1.65 $1.75 $1.86 $1.97 $2.03 $2.15 $2.28 $2.31 $2.45 $2.60 bull 131% 33%

4,976 $0.75 $1.08 $1.41 $1.74 $2.08 $2.41 $2.74

5,226 $0.79 $1.14 $1.49 $1.84 $2.19 $2.54 $2.89

3.5 5.0 EV / 6.5 EBITDA Multiple 8.0 9.5 11.0 12.5 Expected Return Total Return Annualized Return

16

6,638 $0.90 $1.32 $1.74 $2.16 $2.58 $3.00 $3.42 bear 315% 79%

7,138 $0.98 $1.44 $1.89 $2.35 $2.80 $3.26 $3.71 base 346% 86%

The human segment should trade at a higher multiple than the animal segment, reflecting the high growth, new opportunities and less cyclical nature than Omega’s animal segment. We expect a 30% annual return from the human segment in our investment horizon

Bioriginal

Bioriginal SOTP Sensitivity Analysis

EBITDA ($ in millions) 7,638 8,138 8,638 $1.06 $1.15 $1.23 $1.55 $1.67 $1.79 $2.04 $2.19 $2.35 $2.53 $2.72 $2.90 $3.02 $3.24 $3.46 $3.51 $3.77 $4.02 $4.00 $4.29 $4.58 bull 376% 94%

will continue to drive the value of Omega Protein. We modeled for an EV/EBITDA multiple of 4, in line with Omega’s 10 yr average. We believe that the market views Omega’s animal segment on low multiple for its low growth and high uncertainties in regards to regulations.

9,138 $1.31 $1.90 $2.50 $3.09 $3.68 $4.28 $4.87

9,638 $1.39 $2.02 $2.65 $3.28 $3.90 $4.53 $5.16

We expect Bioriginal will grow at around 2.5% because of the intense competition. However, we expect it to trade at the same multiple as the human segment.

Since the benefits of the acquisition are not accurately priced in, we get an annual return of 86%.

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Valuation - P/S Model ($ in thousands)

2014

bear Animal Nutrition Revenue $ 223,950 $ 222,049 Rev / Sh 10.38 10.29 P/S Multiple 0.87 0.7 Price $ 9.03 $ 7.20

Price 2015 base bull $ 229,549 $ 237,049 10.64 10.98 0.87 1 $ 9.25 $ 10.98

/ Sales Segment Model 2016 2017 2018 bear base bull bear base bull bear base bull $ 227,788 $ 235,288 $ 242,788 $ 233,670 $ 241,170 $ 248,670 $ 239,699 $ 247,199 $ 254,699 10.56 10.90 11.25 10.83 11.18 11.52 11.11 11.46 11.80 0.7 0.9 1 0.75 0.95 1 0.8 1 1.2 $ 7.39 $ 9.81 $ 11.25 $ 8.12 $ 10.62 $ 11.52 $ 8.89 $ 11.46 $ 14.16

Human Nutrition Revenue $ 32,610

$ 33,240 $ 34,240 $ 35,240 $ 35,038 $ 36,038 $ 37,038 $ 37,020 $ 38,020 $ 39,020 $ 39,225 $ 40,225 $ 41,225 Rev / Sh 1.51 1.54

1.59

1.63

1.62

1.67

1.72

1.72

1.76

1.81

1.82

1.86

1.91

P/S Multiple 0.87 0.7 0.87 1 0.8 1 1.2 0.8 1.05 1.4 0.9 1.1 1.6 Price $ 1.31 $ 1.08 $ 1.38 $ 1.63 $ 1.30 $ 1.67 $ 2.06 $ 1.37 $ 1.85 $ 2.53 $ 1.64 $ 2.05 $ 3.06 Bioriginal Revenue

$ 32,232

$ 98,450 $ 100,450 $ 102,450 $ 100,961 $ 102,961 $ 104,961 $ 103,535 $ 105,535 $ 107,535 $ 106,174 $ 108,174 $ 110,174 Rev / Sh 1.49 4.56

4.65

4.75

4.68

4.77

4.86

4.80

4.89

4.98

4.92

5.01

5.11

P/S Multiple 0.87 0.7 0.87 1 0.8 1 1.2 0.8 1.05 1.4 0.9 1.1 1.6 $ 1.30 $ 3.19 $ 4.05 $ 4.75 $ 3.74 $ 4.77 $ 5.84 $ 3.84 $ 5.13 $ 6.98 $ 4.43 $ 5.51 $ 8.17

Price OME Revenue

$ 288,792 $ 353,739 $ 364,239 $ 374,739 $ 363,787 $ 374,287 $ 384,787 $ 374,225 $ 384,725 $ 395,225 $ 385,098 $ 395,598 $ 406,098 Rev / Sh 13.38 16.39 16.88 17.37 16.86 17.34 17.83 17.34 17.83 18.31 17.85 18.33 18.82 P/S Multiple 0.87 0.7 0.87 1 0.77 0.97 1.13 0.78 1.02 1.27 0.87 1.07 1.47 OME Price 11.64 11.47 14.68 17.37 12.92 16.77 20.21 13.58 18.12 23.20 15.47 19.55 27.60 Expected Return -­‐1.4% 26.1% 49.2% -­‐12.0% 14.2% 37.6% -­‐19.0% 8.1% 38.4% -­‐14.7% 7.9% 52.3%

A Price / Sales Multiple model was also conducted. This was to show the added value coming from Bioriginal’s revenue. Next year, at Omega’s current multiple (.87) Bioriginal will be worth $4.05 per share. The rest of the human nutrition segment will account for $1.38 per share. At its current price/sales multiple Omega Protein is undervalued with a 26% upside in next year.

At its current price to sales multiple of .87 multiple there is very little downside for the price target in 2015.

Omega Protein P/S Price Target 2018 Sensitivity Analysis

0.40 0.55 Price / 0.70 Sales Multiple 1.07 1.57 2.07 2.57 Expected Return Total Return Annualized Return

388,098 $7.2 $9.9 $12.6 $19.2 $28.2 $37.2 $46.2 bear 16% 4%

390,598 $7.2 $10.0 $12.7 $19.3 $28.4 $37.4 $46.5 base 77% 19%

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

Revenue ($ in millions) 393,098 395,598 398,098 $7.3 $7.3 $7.4 $10.0 $10.1 $10.1 $12.8 $12.8 $12.9 $19.4 $19.6 $19.7 $28.5 $28.7 $28.9 $37.6 $37.9 $38.1 $46.8 $47.1 $47.3 bull 162% 41%

400,598 $7.4 $10.2 $13.0 $19.8 $29.1 $38.4 $47.6

403,098 $7.5 $10.3 $13.1 $19.9 $29.3 $38.6 $47.9

17

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Valuation - P/S Sensitivity Analysis

Animal Nutrition P/S Price Target 2018 Sensitivity Analysis

0.70 0.80 Price / 0.90 Sales Multiple 1.00 1.33 1.66 1.99 Expected Return Total Return Annualized Return

239,699 $7.8 $8.9 $10.0 $11.1 $14.8 $18.4 $22.1 bear 13% 3%

242,199 $7.9 $9.0 $10.1 $11.2 $14.9 $18.6 $22.3 base 27% 7%

Revenue ($ in millions) 244,699 247,199 249,699 $7.9 $8.0 $8.1 $9.1 $9.2 $9.3 $10.2 $10.3 $10.4 $11.3 $11.5 $11.6 $15.1 $15.2 $15.4 $18.8 $19.0 $19.2 $22.6 $22.8 $23.0 bull 70% 18%

252,199 $8.2 $9.3 $10.5 $11.7 $15.5 $19.4 $23.3

254,699 $8.3 $9.4 $10.6 $11.8 $15.7 $19.6 $23.5

Human Nutrition P/S Price Target 2018 Sensitivity Analysis

0.40 0.60 Price / 0.80 Sales Multiple 1.10 1.60 2.10 2.60 Expected Return Total Return Annualized Return

37,975 $0.7 $1.1 $1.4 $1.9 $2.8 $3.7 $4.6 bear 11% 3%

38,725 $0.7 $1.1 $1.4 $2.0 $2.9 $3.8 $4.7 base 56% 14%

Revenue ($ in millions) 39,475 40,225 40,975 $0.7 $0.7 $0.8 $1.1 $1.1 $1.1 $1.5 $1.5 $1.5 $2.0 $2.1 $2.1 $2.9 $3.0 $3.0 $3.8 $3.9 $4.0 $4.8 $4.8 $4.9 bull 131% 33%

41,725 $0.8 $1.2 $1.5 $2.1 $3.1 $4.1 $5.0

42,475 $0.8 $1.2 $1.6 $2.2 $3.1 $4.1 $5.1

Bioriginal P/S Price Target 2018 Sensitivity Analysis

0.65 0.75 Price / 0.85 Sales Multiple 1.10 1.60 2.10 2.60 Expected Return Total Return Annualized Return

18

103,674 $3.1 $3.6 $4.1 $5.3 $7.7 $10.1 $12.5 bear 4% 1%

105,174 $3.2 $3.7 $4.1 $5.4 $7.8 $10.2 $12.7 base 36% 12%

Revenue ($ in millions) 106,674 108,174 109,674 $3.2 $3.3 $3.3 $3.7 $3.8 $3.8 $4.2 $4.3 $4.3 $5.4 $5.5 $5.6 $7.9 $8.0 $8.1 $10.4 $10.5 $10.7 $12.9 $13.0 $13.2 bull 101% 34%

111,174 $3.3 $3.9 $4.4 $5.7 $8.2 $10.8 $13.4

112,674 $3.4 $3.9 $4.4 $5.7 $8.4 $11.0 $13.6

Animal Nutrition - We expect a 7% annual return from Omega’s Animal segment, driven by the consumption of seafood and aquaculture industry. In the past Omega’s revenue has been solely driven from this segment. We do not expect the multiple for the animal segment to expand above 1, which implies a 7% return.

Human Nutrition - Through acquisitions the firm has gained a position in a high growth area, human nutrition supplements. This business segment deserves a higher multiple than its animal because of the different end markets and potential it has. Therefore, the bull case for its animal segment has an annual return of over 30% and a 1.6 times multiple.

Bioriginal - Only 4 months of Bioriginal’s sales will be attributed to Omega Protein for FY 2014. It will generate over $100 million in sales operating as a subsidiary of Omega in 2015. This is a play on healthy living. The market typically assigns a premium for companies that provide healthy products to consumers. Therefore, we assigned a slightly higher multiple to this segment.

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Risks & Mitigants The dependency on a single natural resource: menhaden fish. Extreme weather such a hurricanes will lower the output and raise the price of menhaden fish. Vary fish populations, fish disease, and oil spill can also have the same effect on Omega Protein’s primary raw material menhaden.

Omega Protein’s operations are located in the Gulf of Mexico where is subject to an annual hurricane season. However, the company maintains insurance against physical loss and damage to its assets and coverage against third party liability it may incur in the course of its operations.

Increased regulation in fishing could adversely affect Omega Protein’s business. The Atlantic States Marine Fisheries Commission (ASMFC) established a coast-wide limit on the amount of Atlantic menhaden that can be harvested each year in December 2012.

The allowable catch for 2014 and 2015 is expected to be between about 129,900 mt and 131,500 mt for each year, lower than the five year average catch through 2012 of 163,300. As a result, Omega has reduced the number of its vessel and employees.

Fundamental shift away from menhaden to alternative that is better. However, it is difficult to gain license from state and federal governments to allow access to commercial fishing waters.

Management Bret D. Scholtes has served as the company’s President and CEO since January 2012, and as a director since February 2013. His former positions include five years of public accounting, positions with two publicly traded energy companies, Vice President at GE Energy Financial Services, Omega’s Senior Vice President in 2010, and Omega’s Executive Vice President and CFO in 2011.

Andrew C. Johannesen has served as Executive Vice President and CFO since January 2012 and as a Senior Vice President for the last six months of 2011. Prior to his work at Omega, Mr. Johannesen various corporate development and finance positions at Reliant Energy, including Vice President and Treasurer.

Mr. Johannesen is a Certified Public Accountant.

Dr. Mark E. Griffin has served as Vice President of Research and Development since 2009 and in 2011, his VP responsibilities expanded to include Sales and Marketing. Prior to Omega, Dr. Griffin served in various capacities for Land O’Lakes Purina Feed, LLC, including Technical Director in 2009 and Director of Zoo and Aquaculture divisions.

Matthew W. Phillips has served as the Chief Commercial Officer since June 2013 and as President of Cyvex Nutrition (acquired December 2010) since 2008. Prior to these positions, Mr. Phillips held positions throughout the vitamin and supplement industry, including Vice President of Marketing and Sales over America and Europe for BI Nutraceuticals.

Montgomery C. Deihl has served as Omega’s Senior Director of Operations, since January 2015. Prior his current positon, Mr. Deihl was Senior Director of Fishing Plant Operations from 2012 to 2015 and as General Manager of the Virginia facility from 2009 to 2012. Mr. Deihl also served as a Senior Managing Consultant for IBM from 2007 to 2009.

Joseph R. Vidal has served as Bioriginal’s President and Chief Executive Officer since 2005 Prior thereto, Mr. Vidal served as the Company’s Chief Financial Officer beginning in 1999. Mr. Vidal served as General Manager of Hitachi Canadian Industries from 1991 to 1998.

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

19

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Appendix Income statement ($ in thousands)

Omega Protein Corporation

2011 2012 2013 2014 2015 2016 2017 2018 Revenues $251,743 $ 235,639 $ 244,293 $ 287,700 $ 363,120 $ 373,139 $ 383,549 $ 394,392 $197,069 $ 193,583 $ 161,543 $ 208,274 $ 270,875 $ 278,331 $ 285,958 $ 293,897 Cost of sales Gross profit $ 54,674 $ 42,056 $ 82,750 $ 79,426 $ 92,244 $ 94,809 $ 97,591 $ 100,495 Selling, general, and administrative expense $ 6,090 $ 6,359 $ 9,703 $ 10,926 $ 17,475 $ 17,545 $ 17,992 $ 18,464 Corporate Expenses $ 18,424

$ 18,156 $ 17,671 $ 17,671 $ 17,671 $ 17,671 $ 17,671 $ 17,671 One Time Expense (benefit) -­‐ Plant Closures $ (24,323) $ 5,484 $ 7,042 $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ 1,588 $ 2,209 $ 2,407 $ 2,014 $ 2,542 $ 2,612 $ 2,685 Research and development expense

$ 2,761 EBIT $ 54,359 $ 12,626 $ 48,013 $ 48,815 $ 54,557 $ 56,980 $ 59,243 $ 61,600 Interest income $ 43 $ 32 $ 18 $ 24 $ 30 $ 31 $ 32 $ 33 Interest expense $ (2,109) $ (1,335) $ (1,658) $ (2,647) $ (2,647) $ (2,647) $ (2,647) $ (2,295) $ (408) $ (365) $ (394) $ (559) $ (706) $ (725) $ (745) Other expense, net

$ (766) EBT $ 51,885 $ 10,958 $ 45,979 $ 45,633 $ 51,235 $ 53,639 $ 55,883 $ 58,571 $ 17,728 $ 6,895 $ 15,464 $ 15,515 $ 17,420 $ 18,237 $ 19,000 $ 19,914 Provision for income taxes Net income $ 34,157 $ 4,063 $ 30,515 $ 30,118 $ 33,815 $ 35,402 $ 36,883 $ 38,657 Other comprehensive income (loss): Energy Swap Agreements $ (925) $ 448 $ 151 $ (580) $ (733) $ (753) $ (774)

$ (796) Pension benefits adjustments, net of tax $ (2,071) $ 307 $ 3,565 $ (1,965) $ (2,815) $ (2,815) $ (2,815) $ (1,330) Foreign Currency Adjustment $ (627) $ (791) $ (813) $ (835)

$ (859) Comprehensive income $ 31,161 $ 4,818 $ 34,231 $ 26,946 $ 29,476 $ 31,022 $ 32,458 $ 35,672 Diluted EPS $1.71 $0.20 $1.45 $ 1.25 $ 1.37 $ 1.44 $ 1.50 $ 1.65 Weighted Avg Shares Out 19,923 19,874 20,634 21,580 21,580 21,580 21,580 21,580

Common Size Income Statement Revenues -­‐6.4% 3.7% 17.8% 26.2% Cost of sales 78.3% 82.2% 66.1% 72.4% 74.6% Gross profit 21.7% 17.8% 33.9% 27.6% 25.4% Selling, general, and administrative expense 2.4% 2.7% 4.0% 3.8% 4.8% Corporate Expenses 0.6% 0.9% 1.0% 0.7% 0.7% One Time Expense (benefit) -­‐ Plant Closures Research and development expense EBIT 21.6% 5.4% 19.7% 17.0% 15.0% Interest income 0.02% 0.01% 0.01% 0.01% 0.01% Interest expense -­‐0.8% -­‐0.6% -­‐0.7% -­‐0.9% -­‐0.7% Other expense, net -­‐0.2% -­‐0.2% -­‐0.2% -­‐0.2% -­‐0.2% EBT 20.6% 4.7% 18.8% 15.9% 14.1% Provision for income taxes 34.2% 62.9% 33.6% 34.0% 34.0% Net income 13.6% 1.7% 12.5% 10.5% 9.3% Other comprehensive income (loss): 0.0% 0.0% 0.0% 0.0% 0.0% Energy Swap Agreements -­‐0.4% 0.2% 0.1% -­‐0.2% -­‐0.2% Pension benefits adjustments, net of tax -­‐0.8% 0.1% 1.5% -­‐0.7% -­‐0.8% Foreign Currency Adjustment 0.0% 0.0% 0.0% -­‐0.2% -­‐0.2% Comprehensive income 12.4% 2.0% 14.0% 9.4% 8.1% EPS Growth -­‐88.3% 625.0% -­‐13.9% 9.4%

20

2.8% 74.6% 25.4% 4.7% 0.7%

2.8% 74.6% 25.4% 4.7% 0.7%

2.8% 74.5% 25.5% 4.7% 0.7%

15.3% 0.01% -­‐0.7% -­‐0.2% 14.4% 34.0% 9.5% 0.0% -­‐0.2% -­‐0.8% -­‐0.2% 8.3% 5.2%

15.4% 0.01% -­‐0.7% -­‐0.2% 14.6% 34.0% 9.6% 0.0% -­‐0.2% -­‐0.7% -­‐0.2% 8.5% 4.6%

15.6% 0.01% -­‐0.6% -­‐0.2% 14.9% 34.0% 9.8% 0.0% -­‐0.2% -­‐0.3% -­‐0.2% 9.0% 9.9%

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Appendix

Balance Sheet ($ in thousands) Current assets: Cash and cash equivalents Receivables, net Inventories Deferred tax asset, net Prepaid expenses and other current assets Total Current Assets Other assets, net Property, plant and equipment, net Goodwill Other intangible assets, net Total Assets Current liabilities: Current maturities of long-­‐term debt Current portion of capital lease obligation Accounts payable Accrued liabilities Total Current Liabilities Long-­‐term debt, net current maturities Deferred tax liability, net Pension liabilities, net Other long-­‐term liabilities Total liabilities Stockholders' equity: Preferred Stock Common Stock Capital in excess of par value Retained earnings Accumulated other comprehensive loss Total stockholder's Equity Total Liabilities & Stockholder's Equity

2012

Omega Protein Corporation 2013 2014 2015 2016 2017

2018

$ 55,998 $ 34,059 $ 17,267 $ 21,140 $ 66,659 $ 94,339 $ 1,165 $ 1,062 $ 3,430 $ 3,915 $ 144,519 $ 154,515 $ 10,789 $ 5,234 $ 127,640 $ 144,113 $ 7,986 $ 19,600 $ 4,362 $ 7,932 $ 295,296 $ 331,394

$ 8,409

$ 45,758

$ 109,391 $ 1,062 $ 3,982

$ 168,603 $ 14,222

$ 150,920 $ 50,568 $ 21,388 $ 405,700

$ 17,055

$ 37,039

$ 58,916 $ 58,224

$ 59,869

$ 61,578 $ 113,120 $ 116,117 $ 119,186 $ 1,062 $ 1,062 $ 1,062 $ 5,037 $ 5,176 $ 5,321

$ 194,498 $ 219,263 $ 246,063 $ 14,391

$ 14,789

$ 15,201 $ 158,727 $ 165,425 $ 171,545 $ 50,568 $ 50,568 $ 50,568 $ 21,388 $ 21,388 $ 21,388 $ 439,572 $ 471,432 $ 504,765

$ 69,822

$ 63,359

$ 122,362 $ 1,062 $ 5,471 $ 262,076 $ 15,632

$ 191,671 $ 50,568 $ 21,388 $ 541,334

$ 3,058 $ 3,112 $ 268 $ -­‐ $ 3,000 $ 5,380 $ 31,741 $ 29,145 $ 38,067 $ 37,637 $ 24,242 $ 21,130 $ 15,794 $ 19,351 $ 9,826 $ 4,117 $ 1,764 $ 1,929 $ 89,693 $ 84,164

$ 14,776 $ -­‐ $ 16,480

$ 40,962

$ 72,218

$ 40,770

$ 13,948

$ 2,516

$ 1,991 $ 131,443

$ 14,776 $ 14,776 $ 14,776 $ -­‐ $ -­‐ $ -­‐ $ 21,483

$ 22,075

$ 22,680 $ 50,064

$ 51,265

$ 52,512 $ 86,323

$ 88,115

$ 89,968 $ 40,545

$ 40,545

$ 40,545 $ 4,531 $ 4,118 $ 3,694

$ 2,516 $ 2,516 $ 2,516

$ 2,518 $ 2,588 $ 2,660 $ 136,433 $ 137,882 $ 139,383

$ 14,776 $ -­‐ $ 23,310

$ 53,812

$ 91,898

$ 40,545

$ 3,254 $ 2,516 $ 2,736 $ 140,948

$ -­‐ $ -­‐ $ -­‐ $ 195 $ 203 $ 208 $ 129,040 $ 136,428 $ 141,153 $ 86,292 $ 116,807 $ 139,524 $ (9,924) $ (6,208) $ (6,627) $ 205,603 $ 247,230 $ 274,258 $ 295,296 $ 331,394 $ 405,700

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

$ -­‐ $ 208 $ 141,153 $ 168,405 $ (6,627) $ 303,139 $ 439,572

$ -­‐ $ 208 $ 141,153 $ 198,816 $ (6,627) $ 333,550 $ 471,432

$ -­‐ $ -­‐ $ 208 $ 208 $ 141,153 $ 141,153 $ 230,648 $ 265,652 $ (6,627) $ (6,627) $ 365,382 $ 400,386 $ 504,765 $ 541,334

21

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Appendix Cash Flows Statement ($ in thousands) Cash flows from operating activities: Net income Adjustments to Net Income from Op Act Depreciation and amortization Impairment of intangible assets Provisions for losses on receivables Share based compensation Deferred income taxes Changes in assets and liabilities: Receivables Inventories Prepaid expenses and other current assets Other assets Accounts payable Accrued liabilities Pension liability, net Other long-­‐term liabilities Net cash provided by operating activities Cash flows from investing activities: Proceeds from disposition of assets Land and building purchased in capital lease extinguishment Capital expenditures Net cash used in investing activities Cash flows from financing activities: Principal payments of long-­‐term debt Proceeds from Long-­‐Term Debt Principal payments of capital lease obligation Debt issuance costs Proceeds from stock options exercised Excess tax benefit of stock options exercised Net cash provided by (used in) financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash paid during the year for: Interest Income taxes Disposal of Assets and Plant Closure [Member] Cash Flows from Disposition of assets Loss (gain) on disposition of assets Loss (gain) on disposition of assets -­‐ InCon Cash flows from investing activities -­‐ Acquistions Wisconsin Specialty Protein [Member] Cyvex [Member] Bioriginal Other Acquistions Plant Closures Loss on plant closure Loss (gain) disposal of assets

22

2011

2012

Omega Protein Corporation 2013 2014 2015 2016 2017

2018

$ 34,157 $ 4,063 $ 30,515 $ 25,875 $ 33,206 $ 34,777 $ 36,241 $ 37,973 $ 16,430 $ 17,999 $ 21,056 $ 21,183 $ 129 $ 266 $ -­‐ $ 48 $ 48 $ 103 $ 36 $ 3,295 $ 3,721 $ 1,982 $ 1,688

$ 4,255 $ 2,272 $ 3,579 $ 3,579 $ (4,751) $ (494) $ (2,630) $ 10,181 $ (1,766) $ (26,855) $ 126 $ (616) $ (191) $ (3,850) $ (6,379) $ 4,092 $ 761 $ (779) $ 1,644 $ (95) $ 11,855 $ (5,250) $ (748) $ (735) $ (2,144) $ 816 $ 52 $ 165 $ 62,721 $ 26,735 $ 32,020

$ (24,618) $ (15,052) $ (67)

$ (8,988) $ 11,100 $ 11,817 $ (1,601) $ 62 $ 25,014

$ 2,339 $ 6,152 $ 470 $ -­‐

$ 22,407 $ -­‐ $ -­‐ $ 1,688 $ 3,579

$ 23,039 $ -­‐ $ -­‐ $ 1,688 $ 3,579

$ 23,697 $ -­‐ $ -­‐ $ 1,688 $ 3,579

$ 24,385 $ -­‐ $ -­‐ $ 1,688 $ 3,579

$ (12,466)

$ (3,728) $ (1,055) $ (169) $ 5,003 $ 9,103 $ -­‐ $ 527

$ 58,094

$ (1,645) $ (2,998) $ (139) $ (397) $ 592

$ 1,200 $ -­‐ $ 70 $ 59,766

$ (1,709) $ (3,069) $ (145) $ (413) $ 605

$ 1,247 $ -­‐ $ 72 $ 61,795

$ (1,781) $ (3,176) $ (151) $ (430) $ 630

$ 1,300 $ -­‐ $ 75 $ 64,093

$ -­‐

$ -­‐

$ -­‐

$ -­‐

$ (5,005) $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ (23,352) $ (25,064) $ (24,796) $ (38,000) $ (41,374)

$ (42,517)

$ (43,704)

$ (44,941)

$ (32,211) $ (18,731) $ (56,007) $ (38,000) $ (41,374)

$ (42,517)

$ (43,704)

$ (44,941)

$ (3,007) $ (2,994) $ (3,058) $ (14,776) $ 24,000 $ (474) $ (517) $ (309) $ -­‐ $ (389) $ -­‐ $ 2,879 $ 469 $ 4,009 $ 2,245

$ 1,699 $ 34 $ 1,406 $ 1,151

$ 1,097 $ (3,397) $ 2,048 $ 12,620 $ 31,607 $ 4,607 $ (21,939) $ (25,650) $ 19,784 $ 51,391 $ 55,998 $ 34,059 $ 51,391 $ 55,998 $ 34,059 $ 8,409

$ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ 8,646 $ 8,409 $ 17,055

$ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ 19,984 $ 17,055 $ 37,039

$ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ 21,877 $ 37,039 $ 58,916

$ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ -­‐ $ 10,906 $ 58,916 $ 69,822

$ 2,205 $ 1,991 $ 1,865 $ 12,257 $ 3,836 $ 8,107

$ 5,514 $ 2,096 $ (2,635) $ 174

245

$ (9,028) $ 181 $ (26,676) $ (46,388) $ (2,170) $ 2,055

$ 5,482

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Appendix Pro Forma Income Statement 2011 2012 2013 Revenue -­‐ Animal $ 235,615 $ 211,275 $ 213,159 Net Revenue -­‐ Human $ 15,300 $ 22,000 $ 31,057 Organic $ 1,828

$ 2,515

$ 3,040

Revenue from Acquistions $ 13,472 $ 19,485 $ 28,017 Revenue -­‐ Bioriginal [1] $ -­‐ $ -­‐ $ -­‐ Net Revenue $ 250,915 $ 233,275 $ 244,216 COS -­‐ Animal $ (186,342)

$ (173,670)

$ (136,390)

COS -­‐ Human $ (10,000) $ (17,000) $ (25,400) COS -­‐ Bioriginal $ -­‐ $ -­‐ $ -­‐ Net Cost of Sales $ (196,342)

$ (190,670)

$ (161,790)

Gross Prof -­‐ Animal $ 49,273 $ 37,605 $ 76,769 Gross Prof -­‐ Human $ 5,300

$ 5,000

$ 5,657

Gross Prof -­‐ Bioriginal $ -­‐ $ -­‐ $ -­‐ Net Profit $ 54,573 $ 42,605 $ 82,426 Operating Costs [2] Op Exp -­‐ Animal $ 2,804

$ 2,564

$ 2,744

Op Exp -­‐ Human $ 3,286

$ 3,795

$ 6,959

Op Exp -­‐ Bioriginal $ -­‐ $ -­‐ $ -­‐ One Time Exp (Benefits) [3] $ (24,323) $ 5,484

$ 7,042

Net Op Exp from Oper $ (18,233) $ 11,843 $ 16,745 EBIT -­‐ Animal $ 70,793 $ 29,686 $ 67,288 EBIT -­‐ Human $ 1,990

$ 1,096

$ (1,604) EBIT -­‐ Bioriginal Net EBIT $ 72,783 $ 30,782 $ 65,684 Interest Exp $ (2,109) $ (1,335) $ (1,658) Other Income (Exp) $ (365)

$ (333)

$ (376)

EBT (pre corp exp) $ 70,309 $ 29,114 $ 63,650 Corp Exp $ (18,424) $ (18,156) $ (17,671) Net EBT $ 51,885 $ 10,958 $ 45,979 Income Tax $ (17,728) $ (6,895) $ (15,464) Net Income $ 34,157 $ 4,063

$ 30,515 Non GAAP EPS $ 1.71

$ 0.20

$ 1.48

Diluted Weighted Shares Out 19,941

19,874

20,634

Comprehensive Income gain/(loss) [4] $ (2,996) $ 755 $ 3,716

Adjusted Net Income $ 31,161 $ 4,818

$ 34,231 Adjusted EPS $ 1.56

$ 0.24

$ 1.66

[1] [2] [3] [5]

- Segment Breakdown 2014 2015 2016 2017 $ 222,858 $ 228,429 $ 234,140 $ 239,994 $ 32,610 $ 34,240 $ 36,038 $ 38,020 $ 3,542

$ 4,066

$ 4,699

$ 5,453

$ 29,068 $ 30,174 $ 31,339 $ 32,567 $ 32,232 $ 100,450 $ 102,961 $ 105,535 $ 287,700 $ 363,120 $ 373,139 $ 383,549 $ (155,332)

$ (159,901)

$ (163,898)

$ (167,995)

$ (26,088) $ (27,285) $ (28,650) $ (30,036) $ (26,854) $ (83,690) $ (85,782) $ (87,927) $ (208,274)

$ (270,875)

$ (278,331)

$ (285,958)

$ 67,526 $ 68,529 $ 70,242 $ 71,998 $ 6,522

$ 6,956

$ 7,388

$ 7,984

$ 5,378

$ 16,760 $ 17,179 $ 17,608 $ 79,426 $ 92,244 $ 94,809 $ 97,591

2018 $ 245,993 $ 40,225 $ 6,364

$ 33,861 $ 108,174 $ 394,392 $ (172,195)

$ (31,577) $ (90,125) $ (293,897)

$ 73,798 $ 8,648

$ 18,048 $ 100,495

$ 2,869

$ 6,848

$ 3,223

$ -­‐ $ 12,940 $ 64,657 $ (326)

$ 2,155

$ 66,486 $ (2,647) $ (559)

$ 63,280 $ (17,671) $ 45,609 $ (15,507) $ 30,102 $ 1.39

21,580

$ (3,172) $ 26,930 $ 1.25

$ 3,167

$ 7,241

$ 10,817 $ -­‐ $ 21,225 $ 70,631 $ 1,408

$ 7,231

$ 79,270 $ (2,295) $ (766)

$ 76,209 $ (17,671) $ 58,538 $ (19,903) $ 38,635 $ 1.79

21,580

$ (2,985) $ 35,651 $ 1.65

$ 2,941

$ 7,031

$ 10,045 $ -­‐ $ 20,016 $ 65,588 $ (75)

$ 6,715

$ 72,228 $ (2,647) $ (706)

$ 68,876 $ (17,671) $ 51,205 $ (17,410) $ 33,795 $ 1.57

21,580

$ (4,338) $ 29,457 $ 1.37

$ 3,014

$ 6,847

$ 10,296 $ -­‐ $ 20,157 $ 67,228 $ 541 $ 6,883

$ 74,651 $ (2,647) $ (725)

$ 71,279 $ (17,671) $ 53,609 $ (18,227) $ 35,382 $ 1.64

21,580

$ (4,380) $ 31,001 $ 1.44

$ 3,089

$ 7,034

$ 10,554 $ -­‐ $ 20,677 $ 68,909 $ 951 $ 7,055

$ 76,914 $ (2,647) $ (745)

$ 73,522 $ (17,671) $ 55,851 $ (18,989) $ 36,862 $ 1.71

21,580

$ (4,424) $ 32,438 $ 1.50

Acquistion occurred 9/30/14. $7,746 was attributed to Human in Q3, Which has been excluded and included into Bioriginal's revenue for 2014 Operating Costs include S/G & A and R&D Expenses for each reportable segment One Time Expenses include plant closures [2013] / Attorney investigation settlement [2011] Adjustments for foreign currency [bioriginal], energy swaps and pension payments

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

23

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Animal Nutrition Pro Forma With an increasing demand within the animal segment and fairly constant menhaden, Omega’s revenue per ton will continue to increase. It has a historical 5 year compounded annual growth rate of 10%. Some of that can be attributed to seasonality and increased catch / yield numbers. Therefore, we modeled for only 2.5% price increase for the next 4 years. At this we project revenue from animal nutrition to generate $247 million in sales in 2018.

Total Produc:on (tons) [R]

Revenue per ton [L]

Cost per ton [L]

$2,000 200,000

$1,000

100,000

METRIC TONS

$1,500

U$D Per Ton

Omega Protein’s annual revenues are highly dependent on pricing, annual fish catch, production yields and inventories. Inventory is generally carried over from one year to the next year and Omega Protein determines the level of inventory to be carried over based on existing contracts, prevailing market prices of the products and anticipated customer usage and demand during the off-season.

Thus, production volume does not necessarily correlate with sales volume in the same year and sales volumes will fluctuate from quarter to quarter. Omega Protein’s fish meal products have a usable life of approximately one year from date of production.

Omega Protein’s crude fish oil products do not lose efficacy unless exposed to oxygen and, therefore, their storage life typically is longer than that of fish meal.

We modeled for fish catch to remain fairly consistent with the catch from this year. Though yields will more than likely improve at a constant catch we did not model for this to account for seasonality and unpredictable weather that affects fish catch.

$500

$-­‐

2009

2010

2011

2012

2013

2014E

2015E

2016E

2017E

2018E

-­‐

Revenue Breakdown by Fish Catch

2011 Menhaden Catch Breakdown Fish Catch (Short Tons) 602,062 Implied Total Yield 34.5% Tot Prod (tons) 207,763 Volume Sold 223,969 Revenue per Ton $ 1,052 growth -­‐1.0% Cost per ton $ (832)

margin -­‐79.1%

2012

2013

2014

2015

2016

2017

2018

578,392 33.6% 194,197 202,177 $ 1,045 -­‐0.7% $ (859)

-­‐82.2%

485,626 39.2% 190,146 157,313 $ 1,355 29.7% $ (867)

-­‐64.0%

480,770 35.6% 171,154 161,246 $ 1,389 2.5% $ (968) -­‐69.7%

480,770 35.6% 171,154 161,246 $ 1,424

2.5% $ (997)

-­‐70.0%

480,770 35.6% 171,154 161,246 $ 1,459 2.5% $ (1,021)

-­‐70.0%

480,770 35.6% 171,154 161,246 $ 1,496 2.5% $ (1,047)

-­‐70.0%

480,770 35.6% 171,154 161,246 $ 1,533 2.5% $ (1,073) -­‐70.0%

211,275 -­‐10.3% $ (173,670) 37,605 17.8% 2,564

$ 5,355 29,686 14.1% 15,859 45,545

213,159 0.9% $ (136,390) 76,769 36.0% 2,744

$ 6,737 67,288 31.6% 17,946 85,234

$ 223,950 5.1% $ (156,093)

67,857 30.3% $ 2,883 $ -­‐ 64,974 29.0% $ 18,857 $ 83,831

$ 229,549 2.5% $ (160,684) 68,865

30.0% $ 2,955

$ -­‐ 65,910 28.7% $ 19,328 $ 85,238

$ 235,288

2.5% $ (164,701) 70,586 30.0% $ 3,029 $ -­‐ 67,557 28.7% $ 19,811 $ 87,369

$ 241,170

2.5% $ (168,819) 72,351 30.0% $ 3,105 $ -­‐ 69,246 28.7% $ 20,307 $ 89,553

$ 247,199 2.5% $ (173,039)

74,160 30.0% $ 3,182 $ -­‐ 70,978 28.7% $ 20,814 $ 91,792

Pro Forma Income Statement - Animal Nutrition ($ in thousands)

Revenue growth Cost of Sales Profit margin S/G & A | R&D Expenses One Time Expenses (benefit) EBIT margin Depreciation EBITDA 24

235,615 37.0% $ (186,342) 49,273 20.9% 2804 $ (24,324) 70,793 30.0% 15,098 85,891

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Human Nutrition Pro Forma Pro Forma Income Statement - Human Nutrition ($ in thousands) 2011 2012 2013 2014 2015 2016 2017 2018 Nutegrity organic growth Cyvex growth InCon growth Wisconsin Specialty Protein growth Revenue from Acquisitions net growth from acquistions Income Net Revenue growth Cost of Sales margin Gross Profit margin Operating Expenses One Time Expenses operating margin EBIT margin Depreciation EBITDA

$ 1,828 $ 4,150 $ 3,172 15% 127% -­‐24% $ 12,297

$ 13,150

$ 13,282 7% 1% $ 1,175 $ 4,700 $ 4,794 2% $ -­‐ $ -­‐ $ 9,810

$ 3,676 $ 4,203

$ 4,838 $ 5,596 16% 14% 15% 16% $ 13,547 $ 13,818 $ 14,094 $ 14,376 2% 2% 2% 2% $ 4,890 $ 4,988

$ 5,087 $ 5,189 2% 2% 2% 2% $ 10,497 $ 11,231 $ 12,018 $ 12,859 7% 7% 7% 7% $ 13,472

$ 17,850

$ 27,886 $ 28,934 $ 30,037 $ 31,200 $ 32,424 6346% 32% 56% 4% 4% 4% 4% Statement for Human Segment ($ in thousands) $ 15,300

$ 22,000

$ 31,057 $ 32,610 $ 34,240 $ 36,038 $ 38,020 750.0% 43.8% 41.2% 5% 5% 5% 6% $ (10,000) $ (17,000) $ (25,400) $ (26,088)

$ (27,285) $ (28,650)

$ (30,036)

-­‐65.4% -­‐77.3% -­‐81.8% -­‐80.0% -­‐79.7% -­‐79.5% -­‐79.0% $ 5,300 $ 5,000 $ 5,657 $ 6,522 $ 6,956

$ 7,388 $ 7,984 34.6% 22.7% 18.2% 20.0% 20.3% 20.5% 21.0% $ 3,286 $ 3,795 $ 6,959 $ 6,848 $ 7,031

$ 6,847 $ 7,034 $ 1 $ 129 $ 305 $ -­‐ $ -­‐ $ -­‐ $ -­‐ 21.5% 17.3% 22.4% 21.0% 20.5% 19.0% 18.5% $ 1,990 $ 1,096 $ (1,604) $ (326) $ (75)

$ 541

$ 951

13.0% 5.0% -­‐5.2% -­‐1.0% -­‐0.2% 1.5% 2.5% 648 1,315 2,369 2,487

2,612 2,749 2,900 2,638 2,411 765 $ 2,161 $ 2,537

$ 3,290 $ 3,851

$ 6,509 16% $ 14,664 2% $ 5,293 2% $ 13,759 7% $ 33,716 4% $ 40,225 6% $ (31,577)

-­‐78.5% $ 8,648 21.5% $ 7,241 $ -­‐ 18.0% $ 1,408 3.5% 3,068 $ 4,476

Bioriginal Pro Forma With the acquisition Bioriginal now accounts for 27% of sales.

Therefore, we felt the need to separate its value from the other two segments and report it as a stand alone subsidiary under Omega Corporation. Besides generating strong sales numbers the firm operates at higher margins than Omega’s current nutrition segment and significantly increases the firms EBITDA as well.

Bioriginal Pro Forma Income Statement Bioriginal Sales as Subsidiary of Omega ($ in thousands) 2013 2014 2015 2016 2017 2018 Revenue 98,000 $ 32,232 $ 100,450

$ 102,961 $ 105,535 $ 108,174

growth 2% 2% 2% 2% COS 81,649 $ 26,854 $ 83,690 $ 85,782

$ 87,927 $ 90,125 S/G & A 9,800 $ 3,223 $ 10,045 $ 10,296

$ 10,554 $ 10,817 EBIT op margin Interest Exp Other Exp EBT Income Tax Net Income profit margin Depreciation EBITDA EPS for OME

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

6,551 7% -­‐1,478 -­‐734 4,339 -­‐1,251 3,088 3% 822 7,373

$ 2,155 $ 6,715 7% $ (486) $ -­‐ $ (241) $ (752) $ 1,427 $ 5,962 $ (485) $ (2,027)

$ 942 $ 3,935 4% $ 270 $ 843 $ 2,425 $ 7,557

$ 6,883

7% $ -­‐ $ (771)

$ 6,112

$ (2,078) $ 4,034

4% $ 864 $ 7,746

$ 7,055 7% $ -­‐ $ (790) $ 6,264 $ (2,130) $ 4,134 4% $ 885 $ 7,940

$ 7,231 7% $ -­‐ $ (810) $ 6,421 $ (2,183) $ 4,238 4% $ 907

$ 8,138

$ 0.04 $ 0.18 $ 0.19 $ 0.19

$ 0.20

25

NYSE: OME | February 26, 2015| Price: $11 | Fair Value: $13 Appendix 2009 Revenue -­‐ Animal Revenue -­‐ Human Organic growth Acquistions Revenue -­‐ Bioriginal [1] Net Revenue COS -­‐ Animal -­‐95.5% COS -­‐ Human -­‐54.5% COS -­‐ Bioriginal Net Cost of Sales -­‐95.2% Gross Prof -­‐ Animal 4.5% Gross Prof -­‐ Human 45.5% Gross Prof -­‐ Bioriginal Net Profit 4.8% Operating Costs [2] Op Exp -­‐ Animal Op Exp -­‐ Human Op Exp -­‐ Bioriginal One Time Exp (Benefits) [3] Net Op Exp for continuing oper 7.2% EBIT -­‐ Animal EBIT -­‐ Human EBIT -­‐ Bioriginal [4] Net EBIT -­‐2.4% Interest Exp -­‐2.6% Other Income (Exp) -­‐0.4% EBT (pre corp exp) -­‐5.4% Corp Exp Net EBT Income Tax -­‐34.9% Net Income -­‐3.5% Non GAAP EPS Growth Adjusted EPS Growth

2010 -­‐0.5% 63.6% 44.6%

2011 37.0% 750.0% 14.9% 6345.9%

-­‐0.1% -­‐71.9% -­‐55.6%

44.4% -­‐79.1% -­‐65.4%

-­‐71.7% 28.1% 44.4%

-­‐78.3% 20.9% 34.6%

28.3%

21.7%

10.4%

17.9% -­‐1.4% -­‐0.2% 16.2%

-­‐35.4% 10.5% -­‐395.3%

Multiple Comparisons Animal End Market Comps Tyson OME ADM CAG foods P/E 9.4 14 17 36 P/S 0.87 0.37 0.39 0.83 P/B 0.89 1.55 1.7 2.64 EV / EBITDA 3.8 9.24 10 9.9

P/E Model EV/EBITDA Model SOTP P/S Model Geomean / Prob Expected Return Total Return Annualized Return 26

Common Size Pro Forma 2012 2013 2014 2015 -­‐10.3% 0.9% 4.5% 2.5% 43.8% 41.2% 5.0% 5.0% 37.6% 20.9% 16.5% 14.8% 44.6% 43.8% 3.8% 3.8% 211.6% -­‐7.0% 4.7% 17.8% 26.2% -­‐82.2% -­‐64.0% -­‐69.7% -­‐70.0% -­‐77.3% -­‐81.8% -­‐80.0% -­‐79.7% -­‐83.3% -­‐83.3% -­‐81.7% -­‐66.2% -­‐72.4% -­‐74.6% 17.8% 36.0% 30.3% 30.0% 22.7% 18.2% 20.0% 20.3% 16.7% 16.7% 18.3% 33.8% 27.6% 25.4%

1.2% 21.5%

1.2% 17.3%

1.3% 22.4%

-­‐9.7% -­‐7.3% 30.0% 13.0%

2.4% 5.1% 14.1% 5.0%

2.9% 6.9% 31.6% -­‐5.2%

29.0% -­‐0.8% -­‐0.1% 28.0% -­‐7.3% 20.7% -­‐34.2% 13.6% 77.6%

13.2% -­‐0.6% -­‐0.1% 12.5% -­‐7.8% 4.7% -­‐62.9% 1.7% -­‐88.1% -­‐84%

26.9% -­‐0.7% -­‐0.2% 26.1% -­‐7.2% 18.8% -­‐33.6% 12.5% 623.4% 584%

1.3% 21.0% 10.0% 0.0% 4.5% 29.0% -­‐1.0% 6.7% 23.1% -­‐0.9% -­‐0.2% 22.0% -­‐6.1% 15.9% -­‐32.0% 10.8% -­‐2.8% -­‐22%

1.3% 20.5% 10.0% 0.0% 5.5% 28.7% -­‐0.2% 6.7% 19.9% -­‐0.7% -­‐0.2% 19.0% -­‐4.9% 14.1% -­‐32.0% 9.6% 12.3% 9%

2016 2.5% 5.3% 15.6% 3.9% 2.5% 2.8% -­‐70.0% -­‐79.5% -­‐83.3% -­‐74.6% 30.0% 20.5% 16.7% 25.4%

2017 2.5% 5.5% 16.1% 3.9% 2.5% 2.8% -­‐70.0% -­‐79.0% -­‐83.3% -­‐74.6% 30.0% 21.0% 16.7% 25.4%

2018 2.5% 5.8% 16.7% 4.0% 2.5% 2.8% -­‐70.0% -­‐78.5% -­‐83.3% -­‐74.5% 30.0% 21.5% 16.7% 25.5%

1.3% 19.0% 10.0% 0.0% 5.4% 28.7% 1.5% 6.7% 20.0% -­‐0.7% -­‐0.2% 19.1% -­‐4.7% 14.4% -­‐32.0% 9.8% 4.7% 5%

1.3% 18.5% 10.0% 0.0% 5.4% 28.7% 2.5% 6.7% 20.1% -­‐0.7% -­‐0.2% 19.2% -­‐4.6% 14.6% -­‐32.0% 9.9% 4.2% 5%

1.3% 18.0% 10.0% 0.0% 5.4% 28.7% 3.5% 6.7% 20.1% -­‐0.6% -­‐0.2% 19.3% -­‐4.5% 14.8% -­‐32.0% 10.1% 4.8% 10%

Human End Market Comps HAIN 45 -­‐ 2.54 3.87 23

LWAY 2.79 7.02 46

STKL 59 0.61 2.27 13.19

Price Target Probability bear base bull weight $ 16.3 $ 18.3 $ 23.6 25% $ 15.4 $ 18.6 $ 22.1 25% $ 15.9 $ 19.7 $ 24.8 25% $ 15.4 $ 19.5 $ 27.5 25% $ 15.7 $ 19.0 $ 24.4 100% bear base bull 43% 72% 122% 11% 18% 31%

Processed foods & Packaging Industry Avg 15 2.73 3.21 10

Matrix bear $ 4.1

$ 3.9

$ 4.0

$ 3.9

$ 15.7

Healthy Food Manufacturing / Processing Avg 52 1.98 4.39 27.4

base $ 4.6

$ 4.7

$ 4.9

$ 4.9

$ 19.0

bull $ 5.9

$ 5.5

$ 6.2

$ 6.9

$ 24.5

Muma College of Business - Student Managed Investment Fund

Recommendation: BUY | Target Price: $19 | Expected Return: 18% Analyst Biographies

Haomin Chen is a finance major at the USF. She is also pursuing a minor in accounting. A native of Yantai, China, Chen speaks three languages fluently – Chinese, English, and German. She is also learning French and Spanish.

Before coming to the United States two years ago for college, Chen spent a year in Germany studying the German language and literature. Chen was a pianist in the University Orchestra at Beijing International Studies University, where she earned a bachelor’s degree in German language and literature.

Contact Info: hchen8@mail.usf.edu A native of Denver, Colo., Daniel Dorman spent most of his childhood in Bradenton, Fla. Now a resident of St. Petersburg, Dorman is a senior at USF majoring in finance and management. Dorman is passionate about equity investment and has maintained a paper portfolio for more than two years. Prior to entering the Applied Securities Analysis program, Dorman spent a year as a department manager for Barnes & Noble College, the book retailer’s collegiate division.

Contact Info: dsd1@mail.usf.edu

Matt Errico moved to Tampa from New Jersey to pursue a finance degree at USF because he wanted to study at a large metropolitan university. He earned an associate degree in business administration from Raritan Valley Community College in Branchburg, N.J., before transferring to USF. While pursuing that degree, Errico worked full-time as a construction supervisor at Hilpert Construction, a family-owned firm specializing in luxury remodels. He helped rebuild homes destroyed by Hurricane Sandy.

Contact Info: merrico@mail.usf.edu

Analysts: Haomin Chen, Daniel Dorman, and Matt Errico

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