Maverix Metals Inc. T.MMX

Stiffel GMP Report

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Stiffel GMP has maintained MMX at a but and target price of $7.90. See below:

Equity Research

Maverix Metals

BUY

MMX-TSX

Last:	C$5.83
Target:	C$7.90

 

Stifel GMP: Q2 with higher GEOs sold and strong cash operating margin results in record CF

Q2 GEOs sold came in ahead of our estimate; record quarterly CF beat on higher revenue: Maverix reported record quarterly revenue of $11mm from 6,412 GEOs sold (5,871 GEOs in Q1) which beat our forecast of 5,329 GEOs. Compared to our estimates, higher GEOs sold came principally from the mines where our forecasts were deliberately more conservative given the COVID-related impacts in the quarter – that is La Colorada, San Jose and Hope Bay.
EPS of $0.02 was in line with our estimate/consensus as higher revenue was offset by higher depreciation. CFPS, before WC changes and including interest paid, came in at $0.06 vs consensus and our forecast of $0.04. The quarter saw record operating cash flow before WC of $8.5mm.
2020 guidance remains suspended, but it seems the pandemic impact on the revenue-generating assets in the company’s portfolio has been relatively modest (compared to our expectations). La Colorada and San Jose in Mexico had to temporarily suspend operations in Q2, but both mines have resumed mining activities. Hope Bay reduced operations and continues to operate the plant with ore feed mainly coming from stockpiles. The future of the Hope Bay mine still awaits closing of the acquisition of TMAC by Shandong Gold. We have been cautious of the near-term, but still believe in the longer-term value of this asset. Hope Bay in our view remains a significant Canadian mine with significant sunk capital giving access to a district-scale land package (recall, we value the Hope Bay royalty at a higher 8% discount rate with minimal production expectations in 2020-2022. Hope Bay accounts for 12% of our MMX NAV).
Post-Q2, our 2020 attributable GEO estimate has been modestly tweaked higher to 26k oz from 25k oz (vs MMX’s original guidance range of 27k to 30k GEOs). We believe MMX diversified portfolio still poised to deliver further growth. Over the mid-term, we see potential for attributable revenue GEOs growing to between 35-40k GEOs with significant longer-term optionality in the company’s portfolio.
MMX ended Q2 with over $46mm in cash and subsequent to the quarter repaid $16mm on its credit facility, which leaves $60mm undrawn and available for added liquidity.
Maintaining BUY and C$7.90 TP: Our target price is based on a blended 1.95x target P/NAV multiple and 23x P/CF (applied to average CFPS over the next three years (2020-2022) – or an equivalent 1.8x P/NAV multiple. MMX trades at a spot P/NAV of 1.3x (vs peer avg at 1.64x).

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Ingrid Rico Research Analyst [phone] [e-mail]