Franco-Nevada Corp.

Franco-Nevada Corporation (NYSE: FNV) is a royalty and streaming firm focused on gold, with a broad portfolio of royalties and streams organized by commodity, area, income kind, and project stage. The Company has a portfolio of royalty, stream, and working interests in properties throughout South America, Central America, and Mexico, as well as the United States, Canada, Australia, Europe, and Africa, at varying levels of development from production to early exploration.

FNV Details

Latest News

• On April 14, 2022, EMX Royalty Corporation announced the completion of a CAD12.58 million (USUSD10 million) private placement with Franco-Nevada Corporation. The money was used to buy an (effective) extra net smelter royalty on the Caserones open-pit mine in northern Chile.
• For an estimated USD37.4 million, FNV agreed to purchase an effective 0.4582 percent NSR royalty on JX Nippon Mining and Metals Group's producing Caserones copper-molybdenum mine in the Atacama Region of northern Chile on April 14, 2022.

Key Takeaways from Q1 FY22 financial results

• FNV generated USD338.8 million in revenue in Q1 2022, up 9.7% from Q1 2021. Higher realized oil and gas prices from the company's Energy holdings, as well as revenue from the company's Vale Royalty assets, drove the company's growth.
• In Q1FY22, FNV’s net income increased to USD 182.0 million vs. USD 171.5 million in Q1FY21.
• Strong Financial Position:

1. No debt and USD1.7 billion in available capital as of March 31, 2022.
2. Generated USD230.6 million in operating cash flow for the quarter.

• Quarterly dividend of USD0.32/share.

Key Risk

• Regulatory Risk: FNV is a gold mining firm that is governed by several federal and state laws. As a result, tighter rules or non-compliance with needed legislation might have a negative impact on the company's profitability.
• Metal Price: The company is exposed to volatility in the underlying metal prices primarily gold, any adverse move in the underlying commodity could also dent the group’s overall performance.

Outlook

2022 Guidance (Q1FY22 Earnings)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

Source: REFINTIV, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation

Over the past three months, GPN's share price has corrected by only 9.25%. The stock is currently leaning towards the lower end of its 52-week range of USD 124.95 to USD 169.32. The current price is below both short-term (50-day) SMA and long-term (200-day) SMA with an RSI of 45.26. We have valued the stock using the EV/EBITDA multiple-based relative valuation method and arrived at a target price of USD 167.62. We believe that the company is trading at a high premium from its peer's average considering strong fundamentals, and a good cash position giving bullish estimates for the upcoming near future.

Considering the strong fundamentals, robust top-line results, associated risks, positive outlook, and current valuation, we give a "Hold" recommendation on the stock at the closing price of USD 140.44, up 0.56% as of June 17, 2022, as of 09:15 AM PDT.

1-Year Technical Chart, as of June 17, 2022, at 09:15 AM PDT. Data Source: REFINITIV, Analysis by Kalkine Group

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.