Higher Gold Prices to Support Top-line: Maverix Metals Inc. (TSX: MMX) acquires and manages metal purchase agreements and royalties on operating mines and projects producing precious or other metals.

In response to the COVID-19 pandemic, the company withdrew its FY20 attributable gold equivalent ounce guidance. The company anticipates some of its assets to be impacted by the COVID-19 outbreak.

FY19 Financial Highlights: MMX came up with its full-year results, wherein the company reported total revenue of CAD 44.73 million, as compared to CAD 34.05 million in FY18. The company reported a loss from operation at CAD 5.76 million, as compared to a profit of CAD 7.48 million in FY18. The rise in administrative expenses, higher share-based compensation coupled with an inclusion of a mammoth royalty interest impairment of CAD18.90 million has resulted in the operating loss. Net loss of the year stood at CAD 10.18 million, as compared to a profit of CAD 2.71 million in the previous financial period. However, adjusted net income came in at CAD 9.22 million, as compared to CAD 3.48 million in FY18. The company exited the year with a cash balance and total assets of CAD 6.27 million and CAD 409.3 million, respectively. During FY19, capital investments stood at CAD 100.6 million, higher than CAD 27.89 million in the previous financial period.

FY19 Income Statement Highlights (Source: Company Reports) 

Valuation Methodology (Illustrative): Price/Cash-Flow based Valuation 

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of MMX is trading at CAD 5.76 with a market capitalization of CAD 689.8 million. The stock has generated a healthy return of ~26% during the last one month. The company has increased its liquidity to ~US$ 13.3 million in Q4FY19 from US$ 630,000 in Q4FY18. The company reported a significant jump in its annual cash flow, on account of organic growth from the current portfolio. The company has not reported any impact of COVID-19 in any of the mining operations in which it has a royalty or stream. Besides, higher average price realization for gold is encouraging sign for the company. The company has derived tremendous growth within the gold sales segment, and we believe the current rise in gold price would support its top line. However, we believe COVID-19 outbreak could hurt some of its assets. We have valued the stock using P/CF-based relative valuation method. We have taken peers like Sandstorm Gold Ltd (TSX: SSL), Osisko Gold Royalties Ltd (TSX: OR), Franco-Nevada Corp (TSX: FNV) etc. and arrived at a target price offering a double-digit upside (in % terms). Hence, we recommend a ‘Speculative Buy’ on the stock at the closing market price of CAD 5.76 as on April 16, 2020.

MMX Daily Price Chart (Source: Thomson Reuters)

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