Credit Suisse has raised estimates but kept a Neutral rating and
US$38 target price on Franco Nevada Corporation (FNV.TO) ahead of
its Q1/11 results after market close on May 12th, 2011: with a
conference call to be held tomorrow Friday at 10:00AM EST.
Q1/11 adj EPS estimate of $0.19: "We are forecasting Q1/11 adj
EPS of $0.19, slightly above the consensus estimate of $0.18 (range
$0.15 - $0.22) with forecasted total revenues of $65.2M for the
EPS revisions - Incorporating Gold Wheaton into the fold: "With
the closing of the Gold Wheaton (
) transaction we are revising our 2011/2012FY EPS forecasts upward
to $1.09/$1.22 (from $0.88/$0.92) as well as introducing our 2013FY
EPS estimate of $1.41. The increase to our estimates are primarily
the result of incorporating the GWL royalty streams into the
revenue mix, but partially offset by higher G&A expectations as
result of increased corporate activity surrounding the GWL
Growth drivers in 2011: "Royalties are expected to increase in
2011 as GWL royalties are integrated, higher realized commodity
prices drive top line revenue, royalties come online at Tasiast and
Palmarejo increases production."
Investment Thesis: "We expect gold prices to remain strong, with
exploration updates and project advancement to drive the story. We
believe cost inflation will continue to rise across the mining
industry, which will spark renewed interest in FNV's business model
which has minimal exposure to rising costs. FNV will also likely
benefit as a leveraged alternative to the ETF. However, we believe
the stock is currently fairly valued."
Valuation: "After incorporating GWL royalty streams into our
model we are revising our DCF upward to $27.81/sh (from $27.43/sh).
We apply a blended Target P/NAV multiple of 1.29x and add back net
cash $0.86/sh (from $1.87/sh) at par to arrive at our $38.00 target
price. FNV will report on May 12th and will host a conference call
the following day."
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