In a research note on Feb. 20, analyst Andrew Kaip reported that BMO Capital Markets upgraded Osisko Gold Royalties Ltd. (OR:TSX; OR:NYSE) because it continues to successfully emerge from a transition year.
Now rating it Outperform, BMO increased its target price on Osisko to CA$17 per share from CA$13, representing a 24% projected return as the stock is trading at around CA$14.70 per share. "While we are still watching the Renard stream, an improved outlook is beginning to develop, which should further derisk Osisko," Kaip wrote.
The company achieved an earnings beat in Q4/18. Adjusted earnings per share was $0.08, "solidly above" BMO and consensus' estimate of $0.02, driven by lower expenses, noted Kaip.
Operating cash flow before working capital adjustments was $21 million, lower than BMO's projection of $23 million. Free cash flow was $39.5 million, higher than BMO's forecast of $30M, in large part from higher-than-expected royalty and stream investments.
Osisko delivered 20,000 ounces (20 Koz) of gold equivalent (Au eq) in Q4/18 and 80.6 Koz Au eq in full-year 2018, the latter meeting company guidance of 77.5–82.5 Koz Au eq. The mining firm guided to 2019 deliveries of 85–95 Koz Au eq, which Kaip said was "a bit light relative to our expectations of 100 Koz Au eq."
At year-end 2018, Osisko had $174.3 million in cash, $397.1 million in equity investments and $353 million in debt.
Kaip concluded that "improving visibility of Osisko's asset base along with the proceeds from the Brucejack stream through 2018 have been a positive catalyst for shares."
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Disclosures from BMO Capital Markets, Osisko Gold Royalties, Feb. 20, 2019
IMPORTANT DISCLOSURES
Analyst's Certification
I, Andrew Kaip, 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 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Osisko Gold Royalties and Pretium Resources
Disclosure 6C: Osisko Gold Royalties and Pretium Resources are clients (or were clients) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of Sandstorm Gold.
Disclosure 16: A research analyst has extensively viewed the material operations of Pretium Resources.
Disclosure 17: Pretium Resources has paid or reimbursed some or all of the research analyst's travel expenses.
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