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Research: Metals & Mining
Wheaton Precious Metals’ (WPM) Q122 results are scheduled for release on Thursday 5 May, after the market close in Toronto (approximately 22.30 London time). Ahead of their release, we have honed our estimates to reflect production and sales of silver from Penasquito (announced by Newmont on 22 April), likely gold production from Salobo, based on its copper output (announced by Vale on 19 April) and production of silver at Antamina (announced by Glencore on 28 April). We have also adjusted our forecasts for the remainder of the year for recent moves in metals prices.
Wheaton Precious Metals |
Fine tuning forecasts ahead of Q1 results |
Q122 preview note |
Metals & mining |
5 May 2022 |
Share price performance
Business description
Next events
Analyst
Wheaton Precious Metals is a research client of Edison Investment Research Limited |
Wheaton Precious Metals’ (WPM) Q122 results are scheduled for release on Thursday 5 May, after the market close in Toronto (approximately 22.30 London time). Ahead of their release, we have honed our estimates to reflect production and sales of silver from Penasquito (announced by Newmont on 22 April), likely gold production from Salobo, based on its copper output (announced by Vale on 19 April) and production of silver at Antamina (announced by Glencore on 28 April). We have also adjusted our forecasts for the remainder of the year for recent moves in metals prices.
Year end |
Revenue (US$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
1,096.2 |
503.2 |
112 |
42 |
40.9 |
0.9 |
12/21 |
1,201.7 |
592.1 |
132 |
57 |
34.7 |
1.2 |
12/22e |
1,334.7 |
661.9 |
147 |
62 |
31.2 |
1.4 |
12/23e |
1,556.9 |
830.2 |
184 |
74 |
24.9 |
1.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Focus on Salobo
Of the production from known assets, Salobo (which accounted for 28.6% of WPM’s sales in FY21) is the most significant. In this case, production of copper (Salobo’s main product) was 33.9kt in Q122, which was similar to both Q121 and Q421, with operations adversely affected by both planned and corrective maintenance in the mill liners and higher than average seasonal rainfall – albeit neither is expected to have any effect on overall FY22 production. Moreover, whereas Salobo began FY21 with a high level of inventory – with the result that sales exceeded production in Q121 – this appears unlikely to be repeated in Q122 as inventory has subsequently been depleted (as evidenced by the fact that sales closely approximated production in Q421).
Valuation: Barely changed at C$70.67/share
Notwithstanding our FY22 forecast adjustments, our valuation of WPM (which is based on a multiple of FY23 earnings) remains substantially unchanged. That is to say, in normal circumstances and assuming no material purchases of additional streams in the foreseeable future (which we think unlikely), we forecast a value per share for WPM of US$55.43 or C$70.67 or £44.19 in FY23 (cf C$71.34 previously), based on a multiple of earnings. In the meantime, WPM’s shares are trading on near-term financial ratios that are cheaper than those of its peers on at least 72% of common valuation measures if Edison forecasts are used or 55% if consensus forecasts are used. Note that, within this context, we regard it as significant that we forecast that WPM’s earnings, cash flows and dividends will all rise in FY23 cf FY22 (in line with production expectations), while the market appears to believe that they will remain broadly flat. Nevertheless, if WPM’s shares were to trade at the same level as the average of its peers, then we calculate that its year one share price should be US$57.69 (C$73.55 or £45.99), based on our forecasts for FY22. Alternatively, if precious metals return to favour and WPM to a premium rating, we believe a US$70.92 (C$90.41 or £56.54) per share valuation is possible.
Q122 and FY22 forecast refinements
In the light of the adjustments noted above, we have updated our quarterly estimates for FY22 as follows:
Exhibit 1: WPM FY22 forecast, by quarter*
US$000s |
Q122e |
Q222e |
Q322e |
Q422e |
Q122e |
Q222e |
Q322e |
Q422e |
FY22e |
FY22e |
Silver production (koz) |
5,900 |
5,900 |
5,900 |
5,900 |
5,972 |
5,900 |
5,900 |
5,900 |
23,671 |
23,598 |
Gold production (oz) |
95,097 |
95,097 |
91,474 |
95,097 |
88,678 |
95,097 |
91,474 |
95,097 |
370,345 |
376,763 |
Palladium production (koz) |
4,750 |
4,750 |
4,750 |
4,750 |
4,750 |
4,750 |
4,750 |
4,750 |
19,000 |
19,000 |
Cobalt production (klb) |
347 |
347 |
347 |
347 |
347 |
347 |
347 |
347 |
1,386 |
1,386 |
Silver sales (koz) |
5,900 |
5,900 |
5,900 |
5,900 |
5,865 |
5,900 |
5,900 |
5,900 |
23,564 |
23,598 |
Gold sales (oz) |
95,065 |
95,065 |
91,442 |
95,065 |
83,286 |
95,065 |
91,442 |
95,065 |
364,857 |
376,635 |
Palladium sales (oz) |
4,731 |
4,731 |
4,731 |
4,731 |
4,731 |
4,731 |
4,731 |
4,731 |
18,924 |
18,924 |
Cobalt sales (klb) |
347 |
347 |
347 |
347 |
321 |
347 |
347 |
347 |
1,361 |
1,386 |
Avg realised Ag price (US$/oz) |
23.95 |
24.64 |
24.64 |
24.64 |
24.04 |
23.50 |
23.00 |
23.00 |
23.38 |
24.47 |
Avg realised Au price (US$/oz) |
1,876 |
1,926 |
1,926 |
1,926 |
1,878 |
1,907 |
1,895 |
1,895 |
1,894 |
1,913 |
Avg realised Pd price (US$/oz) |
2,336 |
2,444 |
2,444 |
2,444 |
2,329 |
2,275 |
2,255 |
2,255 |
2,278 |
2,417 |
Avg realised Co price (US$/lb) |
33.66 |
37.14 |
37.14 |
37.14 |
33.78 |
37.07 |
37.06 |
37.06 |
36.29 |
36.27 |
Avg Ag cash cost (US$/oz) |
5.61 |
5.64 |
5.64 |
5.65 |
5.63 |
5.60 |
5.58 |
5.58 |
5.60 |
5.63 |
Avg Au cash cost (US$/oz) |
430 |
431 |
432 |
431 |
430 |
431 |
432 |
431 |
431 |
431 |
Avg Pd cash cost (US$/oz) |
421 |
440 |
440 |
440 |
419 |
409 |
406 |
406 |
410 |
435 |
Avg Co cash cost (US$/lb) |
6.06 |
6.68 |
6.68 |
6.68 |
6.08 |
6.67 |
6.67 |
6.67 |
6.53 |
6.53 |
Sales |
342,334 |
352,891 |
345,913 |
352,891 |
319,280 |
343,542 |
332,482 |
339,348 |
1,334,651 |
1,394,029 |
Cost of sales |
||||||||||
Cost of sales, excluding depletion |
78,054 |
78,613 |
77,164 |
78,696 |
72,819 |
78,188 |
76,599 |
78,131 |
305,736 |
312,528 |
Depletion |
75,262 |
75,262 |
71,552 |
75,262 |
70,699 |
75,262 |
71,552 |
75,262 |
292,775 |
297,337 |
Total cost of sales |
153,316 |
153,875 |
148,716 |
153,958 |
143,518 |
153,450 |
148,151 |
153,393 |
598,511 |
609,865 |
Earnings from operations |
189,018 |
199,016 |
197,197 |
198,933 |
175,762 |
190,092 |
184,332 |
185,955 |
736,140 |
784,164 |
Expenses and other income |
||||||||||
– General and administrative** |
18,781 |
16,965 |
16,965 |
16,965 |
19,405 |
15,840 |
16,965 |
16,965 |
69,175 |
69,678 |
– Foreign exchange (gain)/loss |
0 |
0 |
||||||||
– Net interest paid/(received) |
1,292 |
1,257 |
1,260 |
1,246 |
1,292 |
1,262 |
1,266 |
1,255 |
5,076 |
5,055 |
– Other (income)/expense |
0 |
0 |
||||||||
Total expenses and other income |
20,073 |
18,222 |
18,226 |
18,212 |
20,696 |
17,102 |
18,232 |
18,221 |
74,251 |
74,733 |
Earnings before income taxes |
168,945 |
180,794 |
178,972 |
180,721 |
155,066 |
172,990 |
166,100 |
167,734 |
661,889 |
709,432 |
Income tax expense/(recovery) |
250 |
250 |
250 |
250 |
250 |
250 |
250 |
250 |
1,000 |
1,000 |
Marginal tax rate (%) |
0.1 |
0.1 |
0.1 |
0.1 |
0.2 |
0.1 |
0.2 |
0.1 |
0.2 |
0.1 |
Net earnings |
168,695 |
180,544 |
178,722 |
180,471 |
154,816 |
172,740 |
165,850 |
167,484 |
660,889 |
708,432 |
Average no. shares in issue (000s) |
450,864 |
450,864 |
450,864 |
450,864 |
450,864 |
450,864 |
450,864 |
450,864 |
450,864 |
450,864 |
Basic EPS (US$) |
0.374 |
0.400 |
0.396 |
0.400 |
0.343 |
0.383 |
0.368 |
0.371 |
1.47 |
1.57 |
Diluted EPS (US$) |
0.364 |
0.390 |
0.386 |
0.389 |
0.334 |
0.373 |
0.358 |
0.361 |
1.43 |
1.53 |
DPS (US$) |
0.15 |
0.16 |
0.17 |
0.17 |
0.15 |
0.15 |
0.17 |
0.16 |
0.62 |
0.65 |
Source: Edison Investment Research. Note: *Excluding impairments, impairment reversals and exceptional items. **Forecasts now include stock-based compensation costs. Totals may not add up owing to rounding.
Our updated forecasts for the year (and its constituent quarters) now compare to those of the market as follows:
Exhibit 2: WPM FY22 consensus EPS forecasts (US$/share), by quarter
Q122e |
Q222e |
Q322e |
Q422e |
Sum Q1–Q422e |
FY22e |
FY23e |
|
Edison forecasts |
0.343 |
0.383 |
0.368 |
0.371 |
1.465 |
1.466 |
1.839 |
Mean consensus |
0.347 |
0.368 |
0.368 |
0.379 |
1.462 |
1.441 |
1.451 |
High consensus |
0.379 |
0.400 |
0.389 |
0.431 |
1.599 |
1.577 |
1.798 |
Low consensus |
0.326 |
0.336 |
0.347 |
0.336 |
1.345 |
1.199 |
1.241 |
Source: Refinitiv, Edison Investment Research. Note: Consensus priced as at 4 May 2022.
Exhibit 3: Financial summary
US$'000s |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
||
Dec |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||||
Revenue |
|
|
891,557 |
843,215 |
794,012 |
861,332 |
1,096,224 |
1,201,665 |
1,334,651 |
1,556,926 |
1,568,980 |
Cost of Sales |
(254,434) |
(243,801) |
(245,794) |
(258,559) |
(266,763) |
(287,947) |
(305,736) |
(343,021) |
(340,757) |
||
Gross Profit |
637,123 |
599,414 |
548,218 |
602,773 |
829,461 |
913,718 |
1,028,915 |
1,213,906 |
1,228,223 |
||
EBITDA |
|
|
602,684 |
564,741 |
496,568 |
548,266 |
763,763 |
852,733 |
959,740 |
1,144,730 |
1,159,048 |
Operating Profit (before amort. and except.) |
|
|
293,982 |
302,361 |
244,281 |
291,440 |
519,874 |
597,940 |
666,965 |
829,449 |
821,495 |
Exceptionals |
(71,000) |
(228,680) |
245,715 |
(156,608) |
4,469 |
162,806 |
0 |
0 |
0 |
||
Other |
(4,982) |
8,129 |
(5,826) |
217 |
387 |
190 |
0 |
0 |
0 |
||
Operating Profit |
218,000 |
81,810 |
484,170 |
135,049 |
524,730 |
760,936 |
666,965 |
829,449 |
821,495 |
||
Net Interest |
(24,193) |
(24,993) |
(41,187) |
(48,730) |
(16,715) |
(5,817) |
(5,076) |
760 |
750 |
||
Profit Before Tax (norm) |
|
|
269,789 |
277,368 |
203,094 |
242,710 |
503,159 |
592,123 |
661,889 |
830,209 |
822,245 |
Profit Before Tax (FRS 3) |
|
|
193,807 |
56,817 |
442,983 |
86,319 |
508,015 |
755,119 |
661,889 |
830,209 |
822,245 |
Tax |
1,330 |
886 |
(15,868) |
(181) |
(211) |
(234) |
(1,000) |
(1,000) |
(1,000) |
||
Profit After Tax (norm) |
266,137 |
286,383 |
181,400 |
242,746 |
503,335 |
592,079 |
660,889 |
829,209 |
821,245 |
||
Profit After Tax (FRS 3) |
195,137 |
57,703 |
427,115 |
86,138 |
507,804 |
754,885 |
660,889 |
829,209 |
821,245 |
||
Average Number of Shares Outstanding (m) |
430.5 |
442.0 |
443.4 |
446.0 |
448.7 |
450.1 |
450.9 |
450.9 |
450.9 |
||
EPS - normalised (c) |
|
|
62 |
63 |
48 |
54 |
112 |
132 |
147 |
184 |
182 |
EPS - normalised and fully diluted (c) |
|
|
62 |
63 |
48 |
54 |
112 |
131 |
143 |
179 |
177 |
EPS - (IFRS) (c) |
|
|
45 |
13 |
96 |
19 |
113 |
168 |
147 |
184 |
182 |
Dividend per share (c) |
21 |
33 |
36 |
36 |
42 |
57 |
62 |
74 |
77 |
||
Gross Margin (%) |
71.5 |
71.1 |
69.0 |
70.0 |
75.7 |
76.0 |
77.1 |
78.0 |
78.3 |
||
EBITDA Margin (%) |
67.6 |
67.0 |
62.5 |
63.7 |
69.7 |
71.0 |
71.9 |
73.5 |
73.9 |
||
Operating Margin (before GW and except.) (%) |
33.0 |
35.9 |
30.8 |
33.8 |
47.4 |
49.8 |
50.0 |
53.3 |
52.4 |
||
BALANCE SHEET |
|||||||||||
Fixed Assets |
|
|
6,025,227 |
5,579,898 |
6,390,342 |
6,123,255 |
5,755,441 |
6,046,427 |
6,256,902 |
6,761,871 |
6,674,818 |
Intangible Assets |
5,948,443 |
5,454,106 |
6,196,187 |
5,768,883 |
5,521,632 |
5,940,538 |
6,151,013 |
6,655,982 |
6,568,929 |
||
Tangible Assets |
12,163 |
30,060 |
29,402 |
44,615 |
33,931 |
44,412 |
44,412 |
44,412 |
44,412 |
||
Investments |
64,621 |
95,732 |
164,753 |
309,757 |
199,878 |
61,477 |
61,477 |
61,477 |
61,477 |
||
Current Assets |
|
|
128,092 |
103,415 |
79,704 |
154,752 |
201,831 |
249,724 |
435,453 |
431,691 |
993,125 |
Stocks |
1,481 |
1,700 |
1,541 |
43,628 |
3,265 |
12,102 |
3,140 |
3,663 |
3,692 |
||
Debtors |
2,316 |
3,194 |
2,396 |
7,138 |
5,883 |
11,577 |
7,313 |
8,531 |
8,597 |
||
Cash |
124,295 |
98,521 |
75,767 |
103,986 |
192,683 |
226,045 |
424,999 |
419,497 |
980,837 |
||
Current Liabilities |
|
|
(19,057) |
(12,143) |
(28,841) |
(64,700) |
(31,169) |
(29,691) |
(45,911) |
(49,588) |
(49,365) |
Creditors |
(19,057) |
(12,143) |
(28,841) |
(63,976) |
(30,396) |
(28,878) |
(45,098) |
(48,775) |
(48,552) |
||
Short term borrowings |
0 |
0 |
0 |
(724) |
(773) |
(813) |
(813) |
(813) |
(813) |
||
Long Term Liabilities |
|
|
(1,194,274) |
(771,506) |
(1,269,289) |
(887,387) |
(211,532) |
(16,343) |
(16,343) |
(16,343) |
(16,343) |
Long term borrowings |
(1,193,000) |
(770,000) |
(1,264,000) |
(878,028) |
(197,864) |
(2,060) |
(2,060) |
(2,060) |
(2,060) |
||
Other long term liabilities |
(1,274) |
(1,506) |
(5,289) |
(9,359) |
(13,668) |
(14,283) |
(14,283) |
(14,283) |
(14,283) |
||
Net Assets |
|
|
4,939,988 |
4,899,664 |
5,171,916 |
5,325,920 |
5,714,571 |
6,250,117 |
6,630,101 |
7,127,631 |
7,602,235 |
CASH FLOW |
|||||||||||
Operating Cash Flow |
|
|
608,503 |
564,187 |
518,680 |
548,301 |
784,843 |
851,686 |
989,185 |
1,146,667 |
1,158,730 |
Net Interest |
(24,193) |
(24,993) |
(41,187) |
(41,242) |
(16,715) |
(5,817) |
(5,076) |
760 |
750 |
||
Tax |
28 |
(326) |
0 |
(5,380) |
(2,686) |
(503) |
(1,000) |
(1,000) |
(1,000) |
||
Capex |
(805,472) |
(19,633) |
(861,406) |
10,571 |
149,648 |
(404,437) |
(503,250) |
(820,250) |
(250,500) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Financing |
595,140 |
1,236 |
1,279 |
37,198 |
22,396 |
7,992 |
0 |
(0) |
0 |
||
Dividends |
(78,708) |
(121,934) |
(132,915) |
(129,986) |
(167,212) |
(218,052) |
(280,905) |
(331,679) |
(346,640) |
||
Net Cash Flow |
295,298 |
398,537 |
(515,549) |
419,462 |
770,274 |
230,869 |
198,954 |
(5,503) |
561,340 |
||
Opening net debt/(cash) |
|
|
1,362,703 |
1,068,705 |
671,479 |
1,188,233 |
774,766 |
5,954 |
(223,172) |
(422,126) |
(416,624) |
Other |
(1,300) |
(1,311) |
(1,205) |
(5,995) |
(1,462) |
(1,743) |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
1,068,705 |
671,479 |
1,188,233 |
774,766 |
5,954 |
(223,172) |
(422,126) |
(416,624) |
(977,964) |
Source: Company sources, Edison Investment Research
|
|
Research: Healthcare
Arovella’s Q322 trading update confirms the progress of its development pipeline, with an emphasis on its lead asset, ALA-101. With the selection of a contract manufacturing organisation (CMO; production of the plasmid and lentiviral vector for ALA-101 began in January 2022) and signed service agreement with Q-Gen Cell Therapeutics (to manufacture CAR-iNKT cells), the company is progressing towards clinical development. Separately, Arovella secured a US patent for the oral spray formulation of anagrelide, which is under development and should expand the market opportunity for the drug and supplement its existing patents in Europe, Japan and Australia. At the end of Q322, cash stood at A$8.1m, benefiting from funding activity during the quarter.
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