Currency in CAD
Last close As at 26/05/2023
CAD60.36
▲ −0.75 (−1.23%)
Market capitalisation
CAD27,333m
Wheaton’s Q322 results are scheduled for 3 November after the market closes in Toronto. Ahead of their release, we have updated our forecasts to reflect recent moves in precious metals prices, forex, Wheaton’s share price and Vale’s Q322 production report (released on 17 October), which gives an indication of possible gold production at Salobo.
Wheaton Precious Metals |
Honing Q322 forecasts |
Q322 results preview |
Metals and mining |
24 October 2022 |
Share price performance
Business description
Next events
Analyst
Wheaton Precious Metals is a research client of Edison Investment Research Limited |
Wheaton’s Q322 results are scheduled for 3 November after the market closes in Toronto. Ahead of their release, we have updated our forecasts to reflect recent moves in precious metals prices, forex, Wheaton’s share price and Vale’s Q322 production report (released on 17 October), which gives an indication of possible gold production at Salobo.
Year end |
Revenue (US$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
1,096.2 |
503.2 |
112 |
42 |
29.0 |
1.3 |
12/21 |
1,201.7 |
592.1 |
132 |
57 |
24.6 |
1.8 |
12/22e |
1,097.1 |
507.9 |
113 |
60 |
28.8 |
1.8 |
12/23e |
1,358.7 |
663.4 |
147 |
61 |
22.1 |
1.9 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Salobo copper production +17.2% q-o-q
Vale’s production report revealed an increase in copper production from Salobo from 29.6kt in Q222 to 34.7kt in Q322. Despite rising 17.2% relative to the prior quarter, however, this increase implies pro rata gold production attributable to Wheaton from Salobo of 40,009oz, which is 9.0% lower than our prior expectation of 43,988oz. Notwithstanding better plant performance overall, Vale cited ‘additional planned and corrective maintenance performed in 3Q22’, which it indicated will also now continue into Q422.
Gold price down 2.5% and silver price down 3.8%
We have reduced our Q322 gold price estimate from US$1,772/oz to US$1,727/oz and our silver price from US$20.00/oz to US$19.24/oz. We have also adjusted our forecasts for cobalt and palladium and into Q422.
Valuation: Discounting growth less than inflation
Using a CAPM-type method to value WPM and applying a nominal discount rate of 9.0% to cash flows implies a ‘terminal’ valuation for WPM at end-FY26 of US$55.31 (C$76.07) per share (NB after the sale of the Yauliyacu stream announced in August) assuming zero subsequent long-term growth in real cash flows and 4% inflation. Stated alternatively, we calculate that WPM’s current share price of C$44.60 discounts a long-term compound annual average growth rate in nominal cash flows per share of just 2.7% pa, which is lower than the average rate of US inflation since 1984. Otherwise, assuming no purchases of additional streams in the foreseeable future (which we think unlikely), we forecast a value per share for WPM of US$33.99, or C$46.75 or £30.12 in FY22, based on a 30.1x historical multiple of contemporary earnings and US$56.59, or C$77.84 or £50.14 in FY26. In the meantime, WPM’s shares are trading on near-term financial ratios that are cheaper than those of its peers on at least 63% of common valuation measures. If WPM’s shares were instead to trade at the average level of its peers, then we calculate that its FY22 share price should be US$38.30, or C$52.68 or £33.94 (based on Edison forecasts). Alternatively, if precious metals return to favour, then we believe that a near-term US$48.23 (C$66.35 or £42.73) per share valuation is possible.
Updated Q3, Q4 and FY22 estimates
In the light of the changes noted previously, as well as recent moves in forex rates and WPM’s share price, our updated estimates for WPM for Q3, Q4 and FY22 are as follows:
Exhibit 1: WPM FY22 forecasts, by quarter*
US$000s |
Q122 |
Q222 |
Q322e (prior) |
Q322e |
Q422e (prior) |
Q422e |
FY22e (current) |
FY22e (prior) |
Silver production (koz) |
6,206 |
6,537 |
5,532 |
5,532 |
5,532 |
5,532 |
23,806 |
23,806 |
Gold production (oz) |
79,087 |
68,365 |
76,266 |
72,286 |
90,264 |
85,393 |
305,131 |
313,981 |
Palladium production (koz) |
4,488 |
3,899 |
4,325 |
4,325 |
4,750 |
4,750 |
17,462 |
17,462 |
Cobalt production (klb) |
234 |
136 |
241 |
241 |
347 |
347 |
958 |
958 |
Silver sales (koz) |
5,553 |
5,848 |
4,868 |
4,868 |
5,392 |
5,392 |
21,661 |
21,661 |
Gold sales (oz) |
77,901 |
84,337 |
70,750 |
67,057 |
90,232 |
85,361 |
314,656 |
323,219 |
Palladium sales (oz) |
4,075 |
3,378 |
3,515 |
3,515 |
4,731 |
4,731 |
15,699 |
15,699 |
Cobalt sales (klb) |
511 |
225 |
207 |
207 |
347 |
347 |
1,289 |
1,289 |
Avg realised Ag price (US$/oz) |
24.19 |
22.27 |
20.00 |
19.24 |
20.44 |
19.63 |
21.42 |
21.80 |
Avg realised Au price (US$/oz) |
1,870 |
1,872 |
1,772 |
1,727 |
1,791 |
1,659 |
1,783 |
1,827 |
Avg realised Pd price (US$/oz) |
2,339 |
2,132 |
2,160 |
2,080 |
2,263 |
2,045 |
2,148 |
2,232 |
Avg realised Co price (US$/lb) |
34.61 |
34.01 |
22.93 |
23.62 |
21.52 |
23.36 |
29.73 |
29.13 |
Avg Ag cash cost (US$/oz) |
5.10 |
5.61 |
5.43 |
5.40 |
5.49 |
5.46 |
5.39 |
5.41 |
Avg Au cash cost (US$/oz) |
477 |
465 |
453 |
454 |
447 |
446 |
460 |
460 |
Avg Pd cash cost (US$/oz) |
394 |
408 |
389 |
374 |
407 |
368 |
385 |
400 |
Avg Co cash cost (US$/lb) |
5.76 |
6.86 |
4.13 |
4.25 |
3.87 |
4.20 |
5.29 |
5.18 |
Sales |
307,244 |
302,922 |
235,064 |
221,664 |
289,980 |
265,220 |
1,097,050 |
1,135,210 |
Cost of sales |
||||||||
Cost of sales, excluding depletion |
69,994 |
74,943 |
60,719 |
58,923 |
73,222 |
70,699 |
274,558 |
278,877 |
Depletion |
57,402 |
65,682 |
54,688 |
53,455 |
68,580 |
66,953 |
243,492 |
246,352 |
Total cost of sales |
127,396 |
140,625 |
115,407 |
112,378 |
141,802 |
137,652 |
518,050 |
525,229 |
Earnings from operations |
179,848 |
162,297 |
119,657 |
109,286 |
148,178 |
127,568 |
579,000 |
609,981 |
Expenses and other income |
||||||||
– General and administrative** |
20,118 |
12,453 |
16,264 |
15,772 |
17,265 |
17,255 |
65,598 |
66,099 |
– Foreign exchange (gain)/loss |
0 |
0 |
||||||
– Net interest paid/(received) |
1,422 |
1,389 |
1,357 |
1,357 |
1,357 |
1,357 |
5,525 |
5,525 |
– Other (income)/expense |
229 |
-974 |
-527 |
-527 |
-559 |
-547 |
-1,819 |
-1,831 |
Total expenses and other income |
21,769 |
12,868 |
17,094 |
16,602 |
18,063 |
18,064 |
69,304 |
69,793 |
Earnings before income taxes |
158,079 |
149,429 |
102,563 |
92,684 |
130,115 |
109,504 |
509,697 |
540,187 |
Income tax expense/(recovery) |
72 |
144 |
250 |
250 |
250 |
250 |
716 |
716 |
Marginal tax rate (%) |
0.0 |
0.1 |
0.2 |
0.3 |
0.2 |
0.2 |
0.1 |
0.1 |
Net earnings |
158,007 |
149,285 |
102,313 |
92,434 |
129,865 |
109,254 |
508,981 |
539,471 |
Average no. shares in issue (000s) |
450,915 |
451,524 |
451,524 |
451,524 |
451,524 |
451,524 |
451,372 |
451,372 |
Basic EPS (US$) |
0.350 |
0.331 |
0.227 |
0.205 |
0.288 |
0.242 |
1.13 |
1.20 |
Diluted EPS (US$) |
0.350 |
0.330 |
0.220 |
0.199 |
0.280 |
0.235 |
1.10 |
1.16 |
DPS (US$) |
0.15 |
0.15 |
0.15 |
0.15 |
0.15 |
0.15 |
0.60 |
0.60 |
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 basic EPS forecast of US$1.13/share for FY22 (cf US$1.20/share previously) is 5.8% below the consensus forecast of US$1.20/share (source: Refinitiv, 24 October 2022). In this context, it is worth noting that our gold and silver price forecasts for the remainder of the year are now US$1,653/oz and US$19.42/oz, respectively, which are those prevailing at the time of writing (cf US$1,791/oz and US$20.44/oz previously).
Exhibit 2: WPM FY22 consensus EPS forecasts (US$/share), by quarter
Q122 |
Q222e |
Q322e |
Q422e |
Sum Q1–Q422e |
FY22e |
|
Edison forecasts |
0.350 |
0.331 |
0.205 |
0.242 |
1.128 |
1.13 |
Mean consensus |
0.35 |
0.33 |
0.24 |
0.28 |
1.20 |
1.20 |
High consensus |
0.35 |
0.33 |
0.35 |
0.39 |
1.42 |
1.47 |
Low consensus |
0.35 |
0.33 |
0.19 |
0.22 |
1.09 |
1.07 |
Source: Refinitiv, Edison Investment Research. Note: As at 24 October 2022.
At the same time, we note that our FY23 EPS forecast of US$1.48/share is based on expected gold and silver prices of US$1,749/oz and US$24.55/oz, respectively. In the event of precious metals prices remaining at current levels for the whole of FY23, then we estimate that this figure would instead moderate to approximately US$1.14/share.
Exhibit 3: Financial summary
US$'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 |
1,097,050 |
1,358,674 |
1,395,273 |
Cost of Sales |
(254,434) |
(243,801) |
(245,794) |
(258,559) |
(266,763) |
(287,947) |
(274,558) |
(323,933) |
(321,189) |
||
Gross Profit |
637,123 |
599,414 |
548,218 |
602,773 |
829,461 |
913,718 |
822,492 |
1,034,742 |
1,074,084 |
||
EBITDA |
|
|
602,684 |
564,741 |
496,568 |
548,266 |
763,763 |
852,733 |
756,894 |
969,144 |
1,008,486 |
Operating Profit (before amort. and except.) |
|
|
293,982 |
302,361 |
244,281 |
291,440 |
519,874 |
597,940 |
513,402 |
662,558 |
668,980 |
Exceptionals |
(71,000) |
(228,680) |
245,715 |
(156,608) |
4,469 |
162,806 |
751 |
0 |
0 |
||
Other |
(4,982) |
8,129 |
(5,826) |
217 |
387 |
190 |
1,819 |
0 |
0 |
||
Operating Profit |
218,000 |
81,810 |
484,170 |
135,049 |
524,730 |
760,936 |
515,973 |
662,558 |
668,980 |
||
Net Interest |
(24,193) |
(24,993) |
(41,187) |
(48,730) |
(16,715) |
(5,817) |
(5,525) |
881 |
432 |
||
Profit Before Tax (norm) |
|
|
269,789 |
277,368 |
203,094 |
242,710 |
503,159 |
592,123 |
507,877 |
663,440 |
669,411 |
Profit Before Tax (FRS 3) |
|
|
193,807 |
56,817 |
442,983 |
86,319 |
508,015 |
755,119 |
510,448 |
663,440 |
669,411 |
Tax |
1,330 |
886 |
(15,868) |
(181) |
(211) |
(234) |
(716) |
(1,000) |
(1,000) |
||
Profit After Tax (norm) |
266,137 |
286,383 |
181,400 |
242,746 |
503,335 |
592,079 |
508,981 |
662,440 |
668,411 |
||
Profit After Tax (FRS 3) |
195,137 |
57,703 |
427,115 |
86,138 |
507,804 |
754,885 |
509,732 |
662,440 |
668,411 |
||
Average Number of Shares Outstanding (m) |
430.5 |
442.0 |
443.4 |
446.0 |
448.7 |
450.1 |
451.4 |
451.5 |
451.5 |
||
EPS - normalised (c) |
|
|
62 |
63 |
48 |
54 |
112 |
132 |
113 |
147 |
148 |
EPS - normalised and fully diluted (c) |
|
|
62 |
63 |
48 |
54 |
112 |
131 |
110 |
143 |
144 |
EPS - (IFRS) (c) |
|
|
45 |
13 |
96 |
19 |
113 |
168 |
113 |
147 |
148 |
Dividend per share (c) |
21 |
33 |
36 |
36 |
42 |
57 |
60 |
61 |
66 |
||
Gross Margin (%) |
71.5 |
71.1 |
69.0 |
70.0 |
75.7 |
76.0 |
75.0 |
76.2 |
77.0 |
||
EBITDA Margin (%) |
67.6 |
67.0 |
62.5 |
63.7 |
69.7 |
71.0 |
69.0 |
71.3 |
72.3 |
||
Operating Margin (before GW and except.) (%) |
33.0 |
35.9 |
30.8 |
33.8 |
47.4 |
49.8 |
46.8 |
48.8 |
47.9 |
||
BALANCE SHEET |
|||||||||||
Fixed Assets |
|
|
6,025,227 |
5,579,898 |
6,390,342 |
6,123,255 |
5,755,441 |
6,046,427 |
6,046,366 |
6,684,232 |
6,743,826 |
Intangible Assets |
5,948,443 |
5,454,106 |
6,196,187 |
5,768,883 |
5,521,632 |
5,940,538 |
5,940,477 |
6,578,343 |
6,637,937 |
||
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 |
501,087 |
253,313 |
562,315 |
Stocks |
1,481 |
1,700 |
1,541 |
43,628 |
3,265 |
12,102 |
2,581 |
3,197 |
3,283 |
||
Debtors |
2,316 |
3,194 |
2,396 |
7,138 |
5,883 |
11,577 |
6,011 |
7,445 |
7,645 |
||
Cash |
124,295 |
98,521 |
75,767 |
103,986 |
192,683 |
226,045 |
492,495 |
242,671 |
551,387 |
||
Current Liabilities |
|
|
(19,057) |
(12,143) |
(28,841) |
(64,700) |
(31,169) |
(29,691) |
(42,836) |
(47,706) |
(47,435) |
Creditors |
(19,057) |
(12,143) |
(28,841) |
(63,976) |
(30,396) |
(28,878) |
(42,023) |
(46,893) |
(46,622) |
||
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 |
6,488,275 |
6,873,496 |
7,242,363 |
CASH FLOW |
|||||||||||
Operating Cash Flow |
|
|
608,503 |
564,187 |
518,680 |
548,301 |
784,843 |
851,686 |
786,944 |
971,964 |
1,007,929 |
Net Interest |
(24,193) |
(24,993) |
(41,187) |
(41,242) |
(16,715) |
(5,817) |
(5,525) |
881 |
432 |
||
Tax |
28 |
(326) |
0 |
(5,380) |
(2,686) |
(503) |
(716) |
(1,000) |
(1,000) |
||
Capex |
(805,472) |
(19,633) |
(861,406) |
10,571 |
149,648 |
(404,437) |
(243,431) |
(944,451) |
(399,100) |
||
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) |
(270,823) |
(277,218) |
(299,544) |
||
Net Cash Flow |
295,298 |
398,537 |
(515,549) |
419,462 |
770,274 |
230,869 |
266,450 |
(249,823) |
308,715 |
||
Opening net debt/(cash) |
|
|
1,362,703 |
1,068,705 |
671,479 |
1,188,233 |
774,766 |
5,954 |
(223,172) |
(489,622) |
(239,798) |
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) |
(489,622) |
(239,798) |
(548,514) |
Source: company sources, Edison Investment Research
|
|
During NB Private Equity Partners’ (NBPE) capital markets day (CMD) on 5 October 2022, its management team highlighted that, despite the recent tough macro conditions, NBPE’s track record remains strong, as its direct co-investments delivered a gross IRR and multiple of invested capital (MOIC) at 18.5% pa and 2.6x over the five years to end-August 2022, respectively. With a sustained strong deal flow generated by the Neuberger Berman (NB) Private Markets platform (in which NBPE can invest on a case-by-case basis) and liquidity of US$281m at end-September 2022 (c 21% of current investment portfolio), NBPE is well-placed to seize new opportunities as they arise.
Get access to the very latest content matched to your personal investment style.