In an Oct. 12 research note, analyst Rene Cartier reported that BMO Capital Markets initiated coverage on Nomad Royalty Company Ltd. (NSR:TSX; NSRXF:OTCQX) with a Market Perform rating and CA$1.70 per share target price. Nomad's stock is currently trading at about CA$1.27 per share.
Cartier described Nomad. It is a Montreal-headquartered precious metals-focused royalty and streaming company with a growing portfolio of assets, in North America, South America, Africa and Australia. Nomad was formed through a reverse takeover transaction and vend-in of two royalty and stream portfolios from Orion Finance and Yamana Gold. Those two companies own significant Nomad interests today.
Nomad emerged with assets that are producing and generating cash flow and another one slated to come online this year. Subsequently, its management team made additional royalty/streaming acquisitions in more favorable jurisdictions to diversify its holdings.
The company plans to actively expand its asset portfolio, mostly focusing on smaller deals and capitalizing on its credit facility and refinancing in the market through equity. It remains open to larger transactions, too, for which it would pursue "teaming up and syndicating deals with peers or alternative groups" to carry those out, Cartier explained.
Financially, Nomad had about $12 million in cash on its balance sheet and no debt as of June 30, 2020. Today, in addition to cash, it has a $50 million revolving credit facility, which it could increase to $75 million.
The analyst highlighted that Nomad's management team members are experienced and have strong track records in the royalty/streaming space. Each of the three co-founders, Vincent Metcalfe, Joseph de la Plante and Elif Levesque, previously worked for Osisko Royalties. One of management's goals is to decrease its annual general and administrative expense to somewhere in the $4–5 million range.
"Management are not planning to take a cash salary for the first year, thereby aligning the success of their equity holdings along with other shareholders," noted Cartier.
He also pointed out that Nomad, despite being a young company, pays, on a quarterly basis, the highest annual dividend ($0.02 per share) among its peer group. This is one way the company can return cash to shareholders, which is one of its goals.
Finally, Cartier wrote that BMO believes that Nomad's stock is trading in line with its most comparable peers, which indicates that its portfolio is already significantly derisked.
However, he added, that "establishing a performance track record, improving trading liquidity and portfolio diversification, and enhancing asset visibility will be of significance for Nomad Royalty."
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Disclosures from BMO Capital Markets, Nomad Royalty Company, October 12, 2020
I, Rene Cartier, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to Nomad Royalty Company within the past 12 months.
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to Nomad Royalty Company within the past 12 months.
Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to Nomad Royalty Company within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Nomad Royalty Company within the past 12 months.
Disclosure 6A: Nomad Royalty Company is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services
Disclosure 18: A redacted draft of this report was previously shown to Nomad Royalty Company (for fact checking purposes) and changes were made to the report before publication.