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Wheaton Precious Metals
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== Summary == Wheaton Precious Metals (WPM) has an exceptional business model that provides it with all of the characteristics investors look for in precious metal mining companies (eg exploration blue-sky, production upside and operational gearing) with few of the commonly attendant risks (eg cost, capex, tax and regulatory regimes). Q122 results at the start of this year were closely in line with Edison Investment Research's prior forecasts, while recent mineral stream acquisitions have given it a rising production profile. {| class="wikitable" |+Key financials<ref>Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.</ref> |Year end |Revenue (US$m) |PBT* (US$m) |EPS* (c) |DPS (c) |P/E (x) |Yield (%) |- |12/20 |1,096.2 |503.2 |112 |42 |34.1 |1.1 |- |12/21 |1,201.7 |592.1 |132 |57 |28.9 |1.5 |- |12/22e |1,249.3 |636.7 |141 |61 |27.1 |1.6 |- |12/23e |1,518.5 |777.7 |172 |70 |22.2 |1.8 |} === New stream acquisitions add value === Since December 2021, WPM has invested US$930m in four mineral streams (Goose, Curipamba, Marathon and Blackwater), which Edison Investment Research estimates will increase the company's production profile by an average 101.9koz gold equivalent in the period FY25–31 (at Edison prices), with the possibility of adding a further 5.9koz gold pa for a US$50m investment via a non-binding agreement that it has with Rio2 regarding the Fenix project in Chile. As a result, Edison Investment Research projects that WPM’s production profile will increase from 710.2koz AuE in FY22 to 935.4koz AuE in FY26 (at standardised prices), with additional upside potential available from projects such as Pascua-Lama, Navidad and Toroparu. Within this context, WPM has also recently published its third annual sustainability report outlining how it will achieve net zero carbon emissions by 2050, alongside other long-established goals. === Valuation: >US$50/share coming into focus === For the first time, Edison Investment Research has used a CAPM-type method to value WPM. In this case, applying a nominal discount rate of 9.0% to cash flows implies a ‘terminal’ valuation for the company at end-FY26 of US$59.98 (C$77.83) per share assuming zero subsequent long-term growth in real cash flows. Alternatively, Edison calculates that WPM’s current share price of C$49.54 discounts a long-term compound annual average growth rate in nominal cash flows per share of just 3.2%, which is lower even than average inflation in the past nine years. Otherwise, under normal circumstances and assuming no material purchases of additional streams in the foreseeable future (which Edison Investment Research thinks unlikely), Edison Investment Research forecasts a value per share for WPM of US$51.85 or C$67.29 or £42.60 in FY22, based on a 30.1x multiple of earnings, or US$62.02 or C$80.47 or £50.96 in FY26. In the meantime, WPM’s shares are trading on near-term financial ratios that are cheaper than those of its peers on at least 72% of common valuation measures if Edison forecasts are used or 61% if consensus forecasts are used. If WPM’s shares were therefore to trade at the same level as the average of its peers, then Edison calculates that its year one share price should be US$49.74 (C$64.55 or £40.87), based on its forecasts for FY22. Alternatively, if precious metals return to favour, then Edison believes that a near-term US$66.34 (C$86.08 or £54.51) per share valuation is possible.
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