Wheaton Precious Metals — Honing Q323 numbers

Wheaton Precious Metals (TSX: WPM)

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Research: Metals & Mining

Wheaton Precious Metals — Honing Q323 numbers

Wheaton Precious Metals’ (WPM’s) Q323 results are scheduled for 9 November. This note adjusts our forecasts – principally for Q3 – for metals prices ( 0.3% simple average for the quarter since our last note), Penasquito (returning to production from mid October, rather than end August), a new life of mine production profile at Constancia (in the aftermath of a site visit in late September) and production at Salobo, Sudbury and Voisey’s Bay (in the aftermath of Vale’s production and sales report on 17 October). We have also re-phased capital payments for Salobo III from FY23 to FY24 and FY25.

Lord Ashbourne

Written by

Lord Ashbourne

Director, Energy & Resources

Wheaton-Precious-Metals_resized

Metals & Mining

Wheaton Precious Metals

Honing Q323 numbers

Q323 results preview

Metals and mining

23 October 2023

Price

C$59.90

Market cap

C$27,123m

C$1.3717/US$, US$1.2135/£

Cash (US$m) at end-June
(excluding US$6.5m in lease liabilities)

828.8

Shares in issue

452.8m

Free float

100.0%

Code

WPM

Primary exchange

TSX

Secondary exchanges

LSE, NYSE

Share price performance

%

1m

3m

12m

Abs

(1.6)

2.2

37.3

Rel (local)

4.1

9.2

33.4

52-week high/low

C$69.72

C$42.13

Business description

Wheaton Precious Metals (WPM) is the world’s pre-eminent ostensibly precious metals streaming company, with over 30 high-quality precious metals streams and early deposit agreements over mines in Mexico, Canada, Brazil, Chile, the US, Argentina, Peru, Sweden, Greece, Portugal and Colombia.

Next events

Q323 results

9 November 2023

Q423/FY23 results

March 2024

Analyst

Lord Ashbourne

+44 (0)20 3077 5700

Wheaton Precious Metals is a research client of Edison Investment Research Limited

Wheaton Precious Metals’ (WPM’s) Q323 results are scheduled for 9 November. This note adjusts our forecasts – principally for Q3 – for metals prices (0.3% simple average for the quarter since our last note), Penasquito (returning to production from midOctober, rather than endAugust), a new life of mine production profile at Constancia (in the aftermath of a site visit in late September) and production at Salobo, Sudbury and Voisey’s Bay (in the aftermath of Vale’s production and sales report on 17 October). We have also re-phased capital payments for Salobo III from FY23 to FY24 and FY25.

Year end

Revenue
(US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/21

1,201.7

592.1

132

57

33.1

1.3

12/22

1,065.1

497.7

112

60

39.0

1.4

12/23e

969.8

468.7

111

60

39.4

1.4

12/24e

1,434.9

686.6

151

64

28.8

1.5

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.

Salobo hits it out of the park

Our detailed estimates for Q323 are shown in Exhibit 1, overleaf. By far the largest of the effects noted above is the production of 49.6kt of copper at Salobo in Q3, which is its highest since Q419, when it produced 51.9kt and delivered an attributable 74,716oz gold to WPM. According to the correlation between the two, this level of copper production implies gold production attributable to WPM of 70,728oz in Q3 (±3,201oz) and compares with our prior expectation of 54,472oz. It is also instrumental in ensuring that WPM will meet its production guidance of 600k–660k gold equivalent ounces for the year (cf Edison’s current forecast of 602,277oz).

Looking further afield

Our current production forecast for gold attributable to WPM from Salobo in Q423 is 61,642oz and our Q4 EPS forecast would obviously be subject to a potential upgrade in the event that Q423 is as strong as, or stronger than, Q323.

Valuation: Heading for C$70 per share

Using a capital asset pricing model (CAPM)-type method, whereby we discount cash flows at a nominal 9% per year, our ‘terminal’ valuation of WPM in FY26 is little changed at US$54.02 (C$74.09) per share, assuming zero subsequent longterm growth in real cash flows. Alternatively, assuming no purchases of additional streams (which we think unlikely), we calculate a value per share for WPM of US$57.71 or C$79.16 or £47.56 in FY26, based on a 30.4x historical multiple of contemporary earnings. In the meantime, WPM’s shares are trading on near-term financial ratios that are lower than those of its peers on at least 52% of common valuation measures if Edison forecasts are used. Stated alternatively, if WPM were to trade at the average multiples of its peers, we calculate that its share price should be US$45.89, or C$62.94 currently (based on Edison forecasts and average consensus multiples).

Updated Q323 and FY23 forecasts

In the light of the changes to our assumptions described on page 1 of this report, our detailed forecasts for FY23, by quarter, are now as follows:

Exhibit 1: WPM FY23 forecast, by quarter*

US$000s
(unless otherwise stated)

Q123

Q223

Q323e
(prior)

Q323e

Q423e
(prior)

Q423e

FY23e

FY23e
(prior)

Silver production (koz)

4,927

4,417

4,222

3,257

5,732

4,562

17,163

19,299

Gold production (oz)

73,037

85,083

85,790

103,240

94,482

96,414

357,773

338,392

Palladium production (koz)

3,705

3,880

3,871

3,871

3,871

3,871

15,327

15,327

Cobalt production (klb)

124

152

204

204

204

204

683

683

Silver sales (koz)

3,749

4,437

3,391

2,624

5,344

3,026

13,836

16,921

Gold sales (oz)

62,605

75,294

79,999

81,078

94,462

96,393

315,370

312,359

Palladium sales (oz)

2,946

3,392

3,483

3,483

3,856

3,856

13,676

13,676

Cobalt sales (klb)

323

265

204

204

204

204

995

995

Avg realised Ag price (US$/oz)

22.85

24.13

23.25

23.56

22.74

22.99

23.43

23.23

Avg realised Au price (US$/oz)

1,904

1,986

1,927

1,926

1,914

1,950

1,943

1,933

Avg realised Pd price (US$/oz)

1,607

1,438

1,285

1,253

1,301

1,115

1,336

1,397

Avg realised Co price (US$/lb)

15.04

13.23

15.16

15.16

15.16

15.16

14.60

14.60

Avg Ag cash cost (US$/oz)

5.07

5.01

5.35

5.50

5.14

5.48

5.22

5.13

Avg Au cash cost (US$/oz)

496

461

442

442

440

440

456

456

Avg Pd cash cost (US$/oz)

294

261

231

226

234

201

242

253

Avg Co cash cost (US$/lb)

3.30

3.20

2.73

2.73

2.73

2.73

3.04

3.04

Sales

214,465

264,972

240,578

225,432

310,420

264,911

969,780

1,030,435

Cost of sales

Cost of sales, excluding depletion

51,964

58,642

54,835

51,599

70,469

60,327

222,532

235,910

Depletion

45,000

54,474

50,779

46,872

65,258

55,795

202,141

215,511

Total cost of sales

96,964

113,116

105,614

98,470

135,727

116,122

424,673

451,421

Earnings from operations

117,501

151,856

134,964

126,961

174,694

148,788

545,107

579,015

Expenses and other income

– General and administrative**

18,874

16,640

17,875

16,436

17,525

18,799

70,750

70,914

– Foreign exchange (gain)/loss

0

0

– Net interest paid/(received)

1,378

1,352

1,454

1,454

1,454

1,454

5,639

5,639

– Other (income)/expense

(7,387)

(8,811)

(8,431)

(8,431)

(7,352)

(8,659)

(33,288)

(31,981)

Total expenses and other income

12,865

9,182

10,898

9,460

11,627

11,594

43,100

44,571

Earnings before income taxes

104,636

142,675

124,066

117,502

163,066

137,194

502,007

534,443

Income tax expense/(recovery)

205

91

250

250

250

250

796

796

Marginal tax rate (%)

0.2

0.1

0.2

0.2

0.2

0.2

0.2

0.1

Net earnings

104,431

142,584

123,816

117,252

162,816

136,944

501,211

533,647

Average no. shares in issue (000s)

452,370

452,892

452,892

452,892

452,892

452,892

452,762

452,762

Basic EPS (US$)

0.231

0.315

0.273

0.259

0.360

0.302

1.11

1.18

Diluted EPS (US$)

0.230

0.314

0.273

0.259

0.359

0.302

1.11

1.18

DPS (US$)

0.15

0.15

0.15

0.15

0.15

0.15

0.60

0.60

Source: WPM accounts, Edison Investment Research. Note: *Excluding impairments, impairment reversals and exceptional items (except where indicated). **Forecasts now include stock-based compensation costs. Totals may not add up owing to rounding.

Our updated adjusted basic EPS forecast of US$1.11 per share for FY23 compares with the market consensus, as follows:

Exhibit 2: WPM FY23 consensus EPS forecasts (US$/share), by quarter

Q123

Q223

Q323e

Q423e

Sum Q1–Q423e

FY23e

Edison forecasts

0.231

0.315

0.259

0.302

1.107

1.110

Mean consensus

0.231

0.315

0.283

0.326

1.155

1.129

High consensus

0.231

0.315

0.410

0.400

1.356

1.350

Low consensus

0.231

0.315

0.240

0.270

1.056

1.030

Source: Refinitiv, Edison Investment Research. Note: As at 20 October 2023.

Exhibit 3: Financial summary

$000s

 

2020

2021

2022

2023e

2024e

2025e

Dec

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,096,224

1,201,665

1,065,053

969,780

1,434,872

1,583,451

Cost of Sales

(266,763)

(287,947)

(267,621)

(222,532)

(323,013)

(349,297)

Gross Profit

829,461

913,718

797,432

747,248

1,111,859

1,234,154

EBITDA

 

 

763,763

852,733

735,245

676,498

1,041,109

1,163,404

Operating profit (before amort. and excepts.)

 

 

519,874

597,940

503,293

474,357

685,058

804,870

Exceptionals

4,469

162,806

164,214

(8,096)

0

0

Other

387

190

7,680

33,288

0

0

Operating Profit

524,730

760,936

675,187

499,549

685,058

804,870

Net Interest

(16,715)

(5,817)

(5,586)

(5,639)

1,520

1,409

Profit Before Tax (norm)

 

 

503,159

592,123

497,707

468,718

686,578

806,279

Profit Before Tax (FRS 3)

 

 

508,015

755,119

669,601

493,911

686,578

806,279

Tax

(211)

(234)

(475)

(796)

(1,000)

(1,000)

Profit After Tax (norm)

503,335

592,079

504,912

501,211

685,578

805,279

Profit After Tax (FRS 3)

507,804

754,885

669,126

493,115

685,578

805,279

Average Number of Shares Outstanding (m)

448.7

450.1

451.6

452.8

452.9

452.9

EPS - normalised (c)

 

 

112

132

112

111

151

178

EPS - normalised and fully diluted (c)

 

 

112

131

112

111

151

178

EPS - (IFRS) (c)

 

 

113

168

148

109

151

178

Dividend per share (c)

42

57

60

60

64

75

Gross Margin (%)

75.7

76.0

74.9

77.1

77.5

77.9

EBITDA Margin (%)

69.7

71.0

69.0

69.8

72.6

73.5

Operating Margin (before GW and except.) (%)

47.4

49.8

47.3

48.9

47.7

50.8

BALANCE SHEET

Fixed Assets

 

 

5,755,441

6,046,427

6,039,813

6,133,330

6,593,717

6,821,622

Intangible Assets

5,521,632

5,940,538

5,753,111

5,838,517

6,298,904

6,526,809

Tangible Assets

33,931

44,412

30,607

32,377

32,377

32,377

Investments

199,878

61,477

256,095

262,436

262,436

262,436

Current Assets

 

 

201,831

249,724

720,093

854,229

795,767

1,034,311

Stocks

3,265

12,102

13,817

2,282

3,376

3,726

Debtors

5,883

11,577

10,187

5,314

7,862

8,676

Cash

192,683

226,045

696,089

846,634

784,529

1,021,909

Other

0

0

0

0

0

0

Current Liabilities

 

 

(31,169)

(29,691)

(30,717)

(28,816)

(33,634)

(34,894)

Creditors

(30,396)

(28,878)

(29,899)

(27,998)

(32,816)

(34,076)

Short term borrowings

(773)

(813)

(818)

(818)

(818)

(818)

Long Term Liabilities

 

 

(211,532)

(16,343)

(11,514)

(11,514)

(11,514)

(11,514)

Long term borrowings

(197,864)

(2,060)

(1,152)

(1,152)

(1,152)

(1,152)

Other long term liabilities

(13,668)

(14,283)

(10,362)

(10,362)

(10,362)

(10,362)

Net Assets

 

 

5,714,571

6,250,117

6,717,675

6,947,229

7,344,337

7,809,525

CASH FLOW

Operating Cash Flow

 

 

784,843

851,686

749,429

726,128

1,042,284

1,163,501

Net Interest

(16,715)

(5,817)

(5,586)

(5,639)

1,520

1,409

Tax

(2,686)

(503)

34

(796)

(1,000)

(1,000)

Capex

149,648

(404,437)

(44,750)

(297,492)

(816,439)

(586,439)

Acquisitions/disposals

0

0

0

0

0

0

Financing

22,396

7,992

10,171

0

0

0

Dividends

(167,212)

(218,052)

(237,097)

(271,657)

(288,470)

(340,090)

Net Cash Flow

770,274

230,869

472,201

150,545

(62,105)

237,380

Opening net debt/(cash)

 

 

774,766

5,954

(223,172)

(694,119)

(844,664)

(782,559)

Other

(1,462)

(1,743)

(1,254)

(0)

0

(0)

Closing net debt/(cash)

 

 

5,954

(223,172)

(694,119)

(844,664)

(782,559)

(1,019,939)

Source: Company sources, Edison Investment Research


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This report has been commissioned by Wheaton Precious Metals and prepared and issued by Edison, in consideration of a fee payable by Wheaton Precious Metals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

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Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

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This report has been commissioned by Wheaton Precious Metals and prepared and issued by Edison, in consideration of a fee payable by Wheaton Precious Metals. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

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London │ New York │ Frankfurt

20 Red Lion Street

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Datatec — Solid H124 performance supports FY24 outlook

For H124, Datatec reported 15% y-o-y revenue growth, gross margin expansion, EBITDA growth of 39% and adjusted EBITDA growth of 2%. Underlying EPS increased 336% to 9.6c. After incurring restructuring charges and elevated share-based compensation in FY23, H124 provided a cleaner set of numbers. Supply chain issues eased during H1 allowing Datatec to reduce its order backlog by 21% from the end of FY23. The company is seeing strong demand for cyber security and networking solutions, and while challenges still persist in Latin America, it expects FY24 performance to improve versus FY23 for all divisions.

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