TD Action Notes Summary Silver Wheaton Corp. (SLW-N, SLW-T) US$19.93 | C$26.56
Q4/16 Beat; Five-year Outlook in Line
Recommendation:
12-Month Target Price: US$30.00
12-Month Dividend (Est.): US$0.28
12-Month Total Return: 51.9%
Event Yesterday evening, Silver Wheaton announced its Q4/16 operating and financial results. Q4/16 adjusted EPS of $0.19 was above consensus of $0.16 and our estimate of $0.15, due to higher production and sales. Q4/16 CFPS of $0.38 was above our estimate of $0.33.
Impact: SLIGHTLY POSITIVE
Q4/16 production of 15.2 Moz AgEq (7.6 Moz Ag and 107 koz Au) was above our forecast of 13.7 Moz AgEq due to higher gold production from Solobo, Minto, and 777. Silver-equivalent sales of 15.2 Moz were above our forecast of 13 Moz.
2016 production of 56 Moz AgEq (30 Moz Ag and 354 koz Au) was above the company's guidance of 55 Moz AgEq (30 Moz Ag and 335 koz Au).
2017 guidance of 52 Moz AgEq (28 Moz Ag and 340 koz Au) is largely in line with our previous estimate of 52.6 Moz AgEq (29.4 Moz Ag and 329 koz Au).
Five-year guidance (2017-2021) of 29 Moz Ag and 340 koz Au are largely in line with our previous estimate of 29 Moz Ag and 332 koz Au.
We estimate that the company has remaining liquidity of ~$931mm (based on Q4/16 ending cash of $124mm and $1,193mm drawn on its $2bln credit facility).
Based on our TD price deck, we model a 2017E Net Debt/EBITDA ratio of 1.06x (2018E Net Debt/EBITDA ratio of 0.25x). At spot metal prices ($1,245/oz Au and $17.50/oz Ag), we model the company generating positive FCF of $599mm in 2017 and $579mm in 2018.
We have updated our model to account for the company’s Q4/16 operating and financial results and five-year guidance. Net of these and other minor changes our corporate NAV5% increases to $12.07/share (from $11.88/share).
TD Investment Conclusion
We believe that Silver Wheaton has a strong management team and a high-quality portfolio of streams that is generally based on low-cost assets in politically secure jurisdictions with long reserves lives offering exploration and production upside. We are maintaining our BUY recommendation and $30.00 target price