Wheaton Precious Metals is the pre-eminent ostensibly precious metals streaming company, with 32 high-quality precious metals streaming and early deposit agreements relating to assets in Mexico, Peru, Canada, Brazil, Chile, the US, Argentina, Sweden, Greece, Portugal and Colombia.
Wheaton Precious Metals’ (WPM’s) Q121 results were characterised by record quarterly revenue, the repayment of the group’s revolving credit facility and a third successive increase in the quarterly dividend (to US$0.14/share). In a departure from recent trends, it was the silver division that led the way in terms of increased production and sales as the gold division lagged, principally as a result of lingering coronavirus induced disruptions at Salobo. Adjusted EPS of US$0.358 was consistent with our prior forecast and well within the range of analysts’ expectations of US$0.32–0.43/share. In the aftermath of the results, we have upgraded our adjusted EPS forecast for WPM for FY21 by 4.0%, albeit this largely reflects the recent strength in metals prices rather than expectations of production growth. Should our forecasts for the full year be borne out, we calculate that WPM will distribute more in dividends in FY21 than it earned in FY19.
Under normal circumstances, we believe that WPM could easily justify a valuation of US$62.07 (or C$78.03) per share, in FY23. If precious metals return to favour however, we believe that a valuation as high as US$84.17 (C$106.36) is achievable. In the meantime, it remains cheaper than the average valuations of its peers in a majority of cases. This follows the settlement reached between WPM and the CRA in December 2018 whereby income from WPM’s international subsidiaries will remain exempt from Canadian tax.