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Douglas O’Langhlin Michael Freeland Tatiya Chattanapanich.

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Presentation on theme: "Douglas O’Langhlin Michael Freeland Tatiya Chattanapanich."— Presentation transcript:

1 Douglas O’Langhlin Michael Freeland Tatiya Chattanapanich

2 Agenda  Our recommendation: Hold  Business Description  Industry Overview and Competitive Positioning  Investment Summary  Valuation  Investment Risks  Q&A

3 Business Description Founding and History  Silver Wheaton was founded in 2004, and was previously controlled by Goldcorp  In 2008, Goldcorp divested its ownership in Silver Wheaton completely and sold its stake Management  The company has 28 full time employees in 2013  The current CEO, Randy Smallwood, has been in place since 2011

4 Business Description  Silver Wheaton is the largest precious metal streaming company in the world  The company engages in a stream of precious metal from a mine at a fixed cost, in exchange for an upfront payment.  Silver Wheaton has 19 active streams  Most contracts are for life of mine or 25 years long high quality assets

5 Operating Mines (19) Development Projects (5)

6

7 Precious Metal Production

8 Industry CompanyMarket Cap (millions of $'s)Type of CompanyMetal Focus Silver Wheaton8,998.80StreamingSilver focus Franco-Nevada7598.6Streaming/RoyaltyGold focus Sandstorm Gold675StreamingGold focus Royal Rold4200.8Streaming/RoyaltyGold focus First Majestic1266.4MiningSilver focus Hecla Mining1062.3MiningSilver focus Pan American2190.7MiningSilver focus Gold Corp20218.8MiningGold focus Barrick Gold23642.8MiningGold focus

9 SWOT Analysis Strengths  Silver Wheaton has no operating costs, and low fixed costs  Profit is booked in the Cayman Islands, subject to no tax Weaknesses  Increased Gold streaming, which weakens margins  Silver Wheaton has very little controlling power over the mine Opportunities  They have another 1 billion in revolving credit, and strong cash flow for acquisitions  Attractive to companies who can’t get more debt, and don’t want to issue equity Threats  If the price of Silver and Gold falls, the Silver Wheaton’s top line will suffer  Threat of new entrants and existing competitors

10 Valuation  Discounted cash flow Intrinsic value of 14.40-37.18  Assumptions Residual growth Terminal value Production estimates

11 Five year production growth

12 Valuation  Comparable Model: $15.04-$21.63 Price to book value per share Price to cash flow per share EV/EBITDA

13 Valuation  Price Target Range: $18.34- $25.79  Market Price: $22.78

14 Margins Fixed cost will stay relatively low If the price of silver significantly increase or decreased, the margins would do the same

15 Cash Flows

16 Investment Risks  Silver Prices  New Market Entrants  No control over mining operations  Dependence on Key Management  Litigation  Information from streaming partners

17 Silver Price Estimates

18 Conclusion  Recommendation: Hold Strong business model with low fixed costs Organic production growth and future acquisition Significant silver price headwinds Steady increase in dividends

19 Q&A

20 Appendix

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