Markets

Analyst Actions: Credit Suisse Keeps Outperform Rating, $49 Target on Silver Wheaton

SLW reported 4Q12 FD EPS of C$0.50. "Results compare to our estimate of C$0.50 (consensus of C$0.49). Compared to our EPS, higher attributable silver-equivalent sales (9.1Moz vs. our 8.5Moz) were offset by higher average cash costs ($4.12/oz vs. our $4.05/oz) and higher DD&A expense."

View: In-line. "Attributable silver-equivalent production of 8.5Moz was in-line, while silver-equivalent sales exceeded production on inventory drawdown from 3Q12 levels. At end-2012, payable silver-equivalent ounces produced but not yet sold was 3.8Moz compared to 5.2Moz at end-3Q12. SLW reiterated its FY13 silver-equivalent production target of 33.5Moz, including 145Koz of gold and 2017 silver-equivalent production target of 53Moz, including 180Koz of gold."

Catalysts: Balance sheet positioned for liquidity. "With cash of $778Mln and an undrawn $1,000Mln credit facility, SLW remains uniquely positioned for additional stream agreements and continues to engage in discussion seeking deals. We estimate SLW will exit 1Q13 with a cash balance of $600Mln ($1.6Bln in liquidity). There was no update on the status of the Canada Revenue Agency tax audit (2005-2010), though SLW is hopeful of a conclusion sometime in 2013."

Valuation: Maintain Outperform. "Our TP of C$49 is based on an equal weighting of 1.2x our cash-adjusted NAVPS (C$34.58) and 20x FY13 CFPS ($2.70) under a metal price scenario of $32/oz silver and $1,675/oz gold. Recent underperformance in the shares vs. silver price (YTD: -7%) provides a compelling entry point in the shares given our view that SLW warrants a premium valuation due to its above average growth profile, fixed-cost structure, and strong liquidity position. Our primary concern remains adverse changes to the SLW tax structure, which is not factored into our valuation."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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