In a July 7 report, analyst Michael Siperco reported that Velocity Trade Capital initiated coverage on a new royalty entrant, Nomad Royalty Company Ltd. (NSR:TSX; NSRXF:OTCQX), with an Outperform rating and a CA$2.25 target price. In comparison, Nomad is trading at about CA$1.41 per share.
"Nomad offers a pure play, precious metals royalty portfolio at a discount to peers, focused on near term cash flow and return, with rerate and growth potential that rivals producers in a higher margin, more diversified, lower risk investment," Siperco added.
The analyst presented the key points about Nomad.
One, the company, founded earlier this year, began with a "strong initial base of cash generating assets." Of its 10 assets, four are royalties, four are streams, one is a gold loan and one is a future contingent payment. Five assets are currently producing, and another two are expected to begin doing so in 2021.
"By YE2021, without additional transactions, we expect Nomad to be at about a 25,000 ounce per annum run rate, generating +US$30 million per year in free cash flow at spot metal prices," Siperco indicated.
Two, the company is expected to aggressively pursue further deals. Management is willing to consider a vast array of potential transactions in terms of jurisdiction, commodity type and structure, including partnerships, syndication, and perhaps even mergers and acquisitions.
"We see additional transactions, portfolio acquisitions and diversification driving dividend growth and multiple rerating over time, even as organic delivery/cash flow growth accelerates into 2021," commented Siperco.
Three, Nomad's top executives and co-founders, Vincent Metcalfe (CEO), Joseph de la Plante (chief investment officer) and Elif Levesque (chief financial officer), have had great success in the past, having expanded Osisko Royalties' portfolio to more than 100-plus from one, in about five years' time.
"We have a high degree of confidence in management's ability to source new transactions and effectively manage the growth of the company," Siperco noted.
Four, Nomad's management team is focused on cash flow and returning cash to shareholders. For instance, it is looking at instituting a dividend policy.
Five, Nomad offers investors low-risk leverage to metal prices and value.
"While a gold-silver bull market may lead to higher torque among producers, the upside from a lower risk, rapidly growing, production-focused new entrant should be highly attractive," Siperco purported.
Six, though Nomad is currently trading lower than the rest of the companies in the royalty and streaming sector, that is expected to change.
"We see additional transactions, portfolio acquisitions and diversification driving dividend growth and multiple rerating over time, even as organic delivery/cash flow growth accelerates into 2021," Serpico wrote.
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1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Velocity Trade Capital, Nomad Royalty Company Ltd., July 7, 2020
I, Michael Siperco, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. 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. I receive compensation from Velocity that is based upon various factors including Velocity total revenues, a portion of which are generated by Velocity Investment Banking activities.
Velocity has established and implemented written policies and procedures to minimize conflicts of interest between its Clients and Velocity and its Analysts. Velocity does not allow its Analyst or household family members to hold or trade in any security on which the Analyst writes research reports. Other than what is disclosed below, Velocity is not aware of any material conflict of interest between itself and its Analyst and the Firmís Clients. No employee, officer or director of Velocity is a director, officer or employee of the issuer or has received remuneration from the issuer, other than normal course investment advisory or trade execution services in the last 12 months. As with all employees of Velocity, a portion of the Analystís compensation may be derived from Investment Banking earnings. The Analyst does not receive any direct compensation from Investment Banking fees received from this issuer.
Is this an issuer related or industry associated research publication? Nomad Royalty Company (NSR CN) Issuer / initiation
Does the Analyst or any member of the Analyst's household have a financial interest in the securities of the subject issuer? No Is any partner, director, officer, employee or agent of the Velocity an officer, director or employee of the issuers, or serve in any advisory capacity to the issuers? No
Does Velocity or the Analyst have any actual material conflicts of interest with the issuers? No
Does Analyst have any material non-public information with respect to the issuers? No
Does Velocity and its affiliates, as of the close of the prior month, hold more than 1% of any class of the issuerís equity securities? No
During the last 12 months, has Velocity provide Investment Banking related services or Financial Advice to these issuers in the last 12 months? No
During the last 12 months, has Velocity managed or co-managed or participated in any public offering or private placement of securities of these issuers? No
During the last 12 months, has the Analyst had an onsite visit with the issuers? No
During the last 12 months, Has the Analyst or any Partner, Director or Officer been compensated for travel expenses incurred as a result of an onsite visit with the issuers? No
Has the Analyst received any compensation from the subject companies in the past 12 months? No
Is Velocity a market maker in the issuerís securities at the date of this report? No