Franco Nevada Corp Down 1.5% as Credit Suisse Previews Today's Q1
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 quarter."
EPS revisions - Incorporating Gold Wheaton into the fold: "With the closing of the Gold Wheaton ( GWL ) 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 acquisition."
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."