Franco-Nevada Corporation

FNV Details

Franco-Nevada Corporation (NYSE: FNV) is a gold royalty and streaming corporation with a diverse portfolio of royalties and streams organized by commodity, area, revenue kind, and project stage. The Company owns a portfolio of royalty, stream, and working interests in properties in South America, Central America, and Mexico and the United States, Canada, Australia, Europe, and Africa, that range from production to early exploration. It makes money through various contracts, including net smelter return royalties, streams, net profits interests, net royalty interests, working interests, and other sorts of agreements.

Latest News:

• Dividend Declaration: During Q1FY22, the company declared a quarterly dividend of USD 0.32 per common share, paid on March 31, 2022, to shareholders of record on September 15, 2021. Total dividend in Q1FY22 included USD 50.1 million in cash and USD 12.1 million in common shares under Dividend Reinvestment Plan.

Q1FY22 Results:

• Growth in Topline: The company reported a growth of 9.68% in revenues to USD 338.8 million in Q1FY22 (ended March 31, 2022) compared to USD 308.9 million in Q1FY21, driven by higher realized oil and gas prices from energy assets and revenue from Vale royalty.
• Increase in Net Income: In Q1FY22, FNV’s net income increased to USD 182.0 million vs. USD 171.5 million in Q1FY21.
• Healthy Balance Sheet: As of March 31, 2022, the company had a cash balance (including short-term investments) of USD 722.70 million with no outstanding debt.

Key Risk:

• Regulatory Risk: FNV operates as a gold mining company, which is subject to several federal and state regulations. Therefore, the issuance of stricter regulations or non-compliance with required laws could adversely affect the company's profitability.

Outlook:

2022 Guidance (Q1FY22 Earnings Release, May 04, 2022)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:

FNV's stock price has increased 12.52% in the past three months and is currently trading close to the mid-point of its 52-week range of USD 124.95 to USD 169.32. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 180.45.

Considering the growth in the stock price, debt-free balance sheet, robust dividend yield, current valuation, and associated risks. We recommend a "Buy" rating on the stock at the current price of USD 150.53, down 0.65% as of May 06, 2022, 11:18 AM PDT.

Three-Year Technical Price Chart (as on May 06, 2022, at 11:18 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.