CIBC Comments Oct 13
Ivanhoe Mines Ltd. We continue to value the stock based on a 1x P/NAV multiple. The NAV is calculated on a 10% real discount rate and assuming 100% equity dilution for raising capital (no debt is assumed, to keep the maximum level of conservatism or implied maximum level of dilution). Since we allow for significant dilution and try to model the assets on a conservative basis, with lower-than-guided input parameters and a relatively high 10% discount rate, we believe a 1x NAV multiple is acceptable. Our revised price target is C$3.20, from C$4.00/share. We remain convinced of the quality of Ivanhoes portfolio of assets and managements ability to do innovative deals to reduce the overall need for equity financing, as seen recently with the Zijin (2899-HK) deal on Kamoa. We believe the valuation of Ivanhoe bears little resemblance to the true value and that this could be unlocked through the planned asset split. We maintain our Sector Outperformer rating.