Nomad Royalty Co Ltd (TSX: NSR) is a royalty mining company. The company mines for silver, gold, and other base metals. The portfolio includes Woodlawn property, Blyvoor property, Gualcamayo property, Suruca property, and other properties.

Why Should Investors Book Profit? 

• The company announces friendly acquisition by Sandstorm Gold: Sandstorm Gold Ltd. has signed a formal arrangement agreement under which it would acquire all of Nomad's issued and outstanding shares in an all-share deal valued at approximately CAD 755 million. The consideration implies a value of approximately CAD 11.57 per NSR Share.

• Degraded Financials: The company's revenue increased slightly to USD 27.2 million for the fiscal year ending December 31, 2021, compared to USD 26.8 million in FY 2020. Furthermore, its operational expenditures were higher during the same time, resulting in a net loss of USD 1.4 million, compared to a net profit of USD 20.1 million in pcp.

• Lower cash from operations: In FY 2021, the company yielded lower cash from operations at USD 12.7 million, compared to USD 20.3 million in pcp.

• Higher Cash Cycle days: The company is holding higher Cash Cycle (Days) compared to the industry, implying the company takes more days to convert its inventory to cash. In FY 2021, its Cash Cycle was at 75.0 days compared to an industry median of 64.0 days.

• Trading above the upper band of Bollinger Band: Recently, the stock witnessed a healthy rally on the daily price chart and has moved above the Bollinger band, indicating that the company is possibly overbought and due for a price correction or consolidation.

  Source: REFINITIV, Analysis by Kalkine Group 

Stock recommendation

Despite some revenue growth, the company failed to show stronger financial results in FY 2021 and clocked a net loss of USD 1.4 million. As a result of weaker financials, the company's cash from operations also decreased. The Company recently announced that Sandstorm Gold Ltd. has executed a formal arrangement agreement under which it would purchase all of Nomad's issued and outstanding shares in an all-share transaction for a payment of approximately CAD 11.57 per NSR share.

Moreover, the stock price is hovering near the same price. Additionally, the technical indicator suggests that stock is perhaps overbought and due for a price correction or a consolidation. Therefore, based on the above rationales we recommend a “Sell” rating on the stock at the last closing price of CAD 10.95 on May 3, 2022.

One-Year Technical Price Chart (as on May 3, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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