Nesbitt Resumes Coverage at Market Perform GOLDCORP INC. (G-TSX; GG-NYSE) Geoff Stanley
Rating: Market Perform
Price: $31.00
Target: $39.00
2006E EPS: $1.63 á
2007E EPS: $1.47 á
2008E EPS: $1.13
Price & Target in CDN$, all other values in US$
Title: Resuming Coverage at Market Perform
Event: We are resuming coverage of Goldcorp, following an extended period of restriction, with a Market Perform rating and a target price of $39.00 per share.
Impact: Neutral.
Forecasts: We have updated our forecasts for the successful early warrant exercise, the updated Los Filos feasibility study, the completion of the acquisition of the Eleanor project, the recent quarterly result, and a change to our medium-term base metals forecasts. For 2006, we expect the company to produce 2.2 million ounces of gold at a total cash cost of negative $41/oz. Earnings should reflect production growth, except for later years where we expect some increases in costs (lower copper prices) to flatten earnings and cash flow.
Valuation: Our asset valuation (0% discount rate and $500/oz long term) stands at $18.59, and sees the share price at a 48% premium. Based on the current spot gold price of $578/oz, our NAV increases to $22.22, and the NAV premium falls to 22%, which compares to its peer group average of 5%.
Recommendation: We expect solid earnings per share growth over the coming quarters. The strategic initiatives the company takes in order to de-leverage the balance sheet including likely asset sales and/or swaps offer opportunities to add value. A period of poor sector performance has seen Goldcorp’s valuation improve and we rate the stock Market Perform with a target price of $39 per share.