In a Sept. 23 research note, analyst Puneet Singh reported that iA Securities initiated coverage on Nomad Royalty Company Ltd. (NSR:TSX; NSRXF:OTCQX) with a Buy rating and a CA$2.30 per share target price. In comparison, Nomad is trading at about CA$1.24 per share.
Singh explained why Nomad offers a ground floor investment opportunity for potentially immense rewards.
First, the business model of this Quebec-headquartered company is "high margin, safe and proven at providing returns," the analyst indicated. Royalty firms offer safer gold exposure because they lack the capital and cost risks of traditional mining businesses.
"Over time, most royalty firms have been able to return in excess of 25% CAGR since their inception," Singh noted.
Second, producing or near producing assets already comprise the bulk of Nomad's net asset value (NAV). Producing assets account for 32% of NAV and include the Mercedes/South Arturo silver stream, the gold prepay loan, the Bonikro gold stream and the Riacho dos Machados royalty. Another 46% of NAV consists of near-term production assets, which include the Blyvoor gold stream and the Woodlawn silver stream. Those are scheduled to ramp up in 2021-2022.
"By 2022, we estimate that Nomad will produce about 32,000 ounces of gold equivalent (i.e.,) up 87% on 2020E," Singh wrote.
Third, Nomad has been "aggressively looking for new deals to add, from the onset," indicated Singh. Since going public in May, Nomad announced three deals. They are a 1% net smelter returns (NSR) royalty on the Troilus mine in Québec, a 1–3% NSR royalty on the operating Moss gold mine in Arizona and a 1–2.25% NSR royalty on the Robertson deposit in Nevada's Cortez Trend.
"We would expect Nomad to continue to remain active trying to source new deals," Singh commented.
Fourth, Nomad has the benefit of a management team that is experienced and adept at initiating, executing and closing royalty/streaming transactions. The company's three co-founders previously worked at Osisko Royalties and while there, expanded the entity from a single non-smelter returns royalty to where it is today.
"Given management's track record and what they've done at Nomad so far, we think the team is well equipped and well versed to be competitive in a growing field of peers," noted Singh.
He concluded his report with the recommendation that investors buy into Nomad now before it re-rates higher. History shows that those who bought a royalty company in its early days, Singh added, always got an excellent return on their investment. Already Nomad has initiated an annual dividend of C$0.02 per share.
"As assets are added, diversification increases, and float (in top shareholders' best interest) and liquidity expand, Nomad will rerate higher," he purported.
Read what other experts are saying about:
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.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Nomad Royalty. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.
Disclosures from iA Securities, Nomad Royalty Company Ltd., Initiating Coverage, September 23, 2020
Conflicts of Interest: The research analyst and or associates who prepared this report are compensated based upon (among other factors) the overall profitability of iA Securities, which may include the profitability of investment banking and related services. In the normal course of its business, iA Securities may provide financial advisory services for the issuers mentioned in this report. iA Securities may buy from or sell to customers the securities of issuers mentioned in this report on a principal basis.
Analyst's Certification: Each iA Securities research analyst whose name appears on the front page of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst's personal views about the issuer and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.
Analyst Trading: iA Securities permits analysts to own and trade in the securities and or the derivatives of the issuer under their research coverage, subject to the following restrictions. No trades can be executed in anticipation of coverage for a period of 30 days prior to the issuance of the report and 5 days after the dissemination of the report to our clients. For a change in recommendation, no trading is allowed for a period of 24 hours after the dissemination of such information to our clients. A transaction against an analyst's recommendation can only be executed for a reason unrelated to the outlook of the stock for the issuer and with the prior approval of the Director of Research and the Chief Compliance Officer.
