In an Oct. 15 research note, analyst Kerry Smith reported that Haywood initiated coverage on a recent entrant to the royalty/streaming space, Nomad Royalty Company Ltd. (NSR:TSX; NSRXF:OTCQX), with a Buy rating and a CA$2.25 per share 12-month target price. Nomad's stock is trading now at about CA$1.24 per share, at a discount to its peers, Smith noted.
"Given Nomad's growth profile, ability to source accretive deals, strong shareholder base and access to capital, we expect this discount to close over time as Nomad attains critical mass," added Smith.
Nomad is "starting out with a bang and wasting no time," the analyst wrote.
The analyst recapped what the Quebec-based company has accomplished in a short period of time. Since its founding in February 2020 by a trio of former Osisko Royalties employees with vast experience in the space, Nomad already has purchased eight royalties and streams, one gold loan and one commercial production payment. Subsequently, after going public in May 2020, it made three additional royalty transactions.
"Nomad's strategy is to acquire advanced stage or producing royalties and use their shares as primary consideration, allowing vendors to participate in the upside over time as Nomad's valuation increases," explained Smith.
Further, the company already started paying out a $0.02 per share annual dividend, paid quarterly; it made its first payment on Oct. 15, 2020. To maintain this dividend, Nomad is striving to get its general and administrative expense down to be the lowest in the sector.
Smith presented Nomad's other attractive elements. For one, the company has a "healthy mix" of both production- and development-stage assets, assuring it cash flow now and in the future. Of Nomad's 11 assets, which are located in Australia, Africa and North America, six are producing (Bonikro, Mercedes, RDM, South Arturo, Gualcamayo and Moss). From those, Nomad generated about US$13 million in Q2/20, achieving a cash flow margin of about 89%. One asset is on care and maintenance (Woodlawn), another is slated to commence production in late 2020-early 2021 (Blyvoor) and a third is in development (Robertson).
Also, Smith relayed, Nomad has "partners with deep pockets," specifically Orion Mine Finance, which owns 75.6% of Nomad's shares, and Yamana, which owns 12.7%.
These companies "provide support for Nomad through both equity ownership positions and collaboration on royalty acquisitions that should help it continue to grow and remain competitive against its peers in royalty transactions," Smith indicated.
As for the outlook for Nomad, Smith commented that it "has primary exposure to both silver and gold, two commodities which we believe are now in a bull market, and the company is positioned to grow revenue, cash flow and dividends over time."
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Disclosure:
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 Haywood Securities, Nomad Royalty Company Ltd., October 15, 2020
Analyst Certification: I, Kerry Smith, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
Important Disclosures
Of the companies included in the report the following Important Disclosures apply:
▪ Haywood Securities, Inc. has reviewed lead projects of Osisko Mining Corp. and Osisko Gold Royalties Ltd. and a portion of the expenses for this travel have been reimbursed by the issuer.
▪ Haywood Securities Inc. or one of its subsidiaries has managed or co-managed or participated as selling group in a public offering of securities for Nomad Royalty Company Ltd., Metalla Royalty & Streaming, Osisko Mining Corp. and Osisko Gold Royalties Ltd. in the past 12 months.
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