Silver Wheaton Corp. (SLW.TO)
OUTPERFORM [V]
R. Profiti
CP: C$ 23.72
TP: C$ 38
CAP: C$ 8.6b
1 416 352 4563
1Q13 Largely In-Line; Amended Dividend Policy Has Smoothing Impact
SLW reported 1Q13 FD EPS of C$0.37. EPS results compares to our estimate/consensus of C$0.39. Compared to our EPS, lower attributable silver-equivalent sales of (6.9Moz vs. our 8.2Moz) was offset by lower average cash costs (C$4.08/oz vs. our C$4.17/oz) and lower DD&A (C$3.52/oz vs. our C$5.57/oz).
View: Largely in-line quarter impacted by timing issues. Attributable silver-equivalent production of 8.0Moz was 7% below our estimate of 8.6Moz, largely due to expectedly weaker production at Penasquito. At end-1Q13, payable silver-equivalent ounces produced but not yet sold was 4.1Moz compared to 3.8Moz at end-4Q12. SLW reiterated its FY13 silver-equivalent production target of 33.5Moz, including 25.8Moz of silver and 145Koz of gold.
Catalysts: Amended dividend policy has smoothing impact. SLW amended its dividend policy whereby quarterly dividends will now be equal to 20% of the average of the previous four quarters' operating cash flow (from 20% of the previous quarter only). Following the upfront payment to Vale for the Salobo and Sudbury gold interests, SLW ended 1Q13 with cash of C$76Mln, plus additional liquidity of C$1Bln from a revolving credit facility (undrawn as of end-1Q13; C$500Mln drawn to partially repay bridge facility subsequent qtr end).
Valuation: Maintain Outperform. Our TP of C$38 is based on an equal weighting of 1.1x our cash-adjusted NAVPS (C$27.61) and 23x FY13/14 CFPS (C$1.82) under the Credit Suisse 1-Yr target silver/gold price scenario of $28.70/1580 per ounce. There was no update on the status of the Canada Revenue Agency tax audit (2005-2010). 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.
