Maverix Metals Inc. (TSX: MMX), is a precious metals royalty and streaming company which offers a mining-related investment that provides exposure to metal price appreciation, and exploration and expansion potential. 

Why Should Investors Book Profit?

• Subdued financials: The company reported lower royalty revenue at USD 7.9 million against USD 8.6 million as a result its total revenue dropped to USD 13.6 million compared to USD 14.8 million in Q3 2020. Net income also declined to USD 2.8 million compared to USD 14.4 million. The lower results were mainly due to lower royalty revenue and higher cost of sales along elevated admin and project evaluation cost.

• Clocked lower cash flow from operating activities: In the reported period the company’s cash from operations fell to USD 9.27 million against USD 13.7 million in the previous corresponding period. We believe the lower cash generation was mainly due to lower royalty revenue and lower amount of gold sold.

• Higher average collection period: MMX is having a higher average Accounts Receivable day of 46.4 days, against the industry median of 30.8 days. A higher average collection period indicates that the organization is collecting its payments at a slower pace. This may create a difficulty for the company to have enough cash on hand to meet their financial obligations.

• Stretched valuations: MMX shares are available at an NTM Price/Cash Flow multiple of 12.6x compared to the industry (Metals & Mining) median of 2.2x, while on NTM EV/Sales multiple, it is trading at 8.4x compared to the industry median of 1.7x. This implies that the shares are overvalued against the industry. Higher valuations against an industry with weak financials draws a caution line.

Source: REFINITIV, Analysis by Kalkine Group 

Stock Recommendation

The company delivered subdued financial and operating results in Q3 2021, where its royalty revenue along total sales declined and clocked smaller net income at USD 2.8 million only compared to USD 14.4 million in pcp. The cash flows from operating activities also went down. Furthermore, the company is having a higher average collection period compared to an industry median, indicating a weak liquidity profile as well as it is collecting its payments at a slower pace. Additionally, the stock is trading at premium valuations against an industry on NTM basis. Higher valuations against an industry with weak financials draws a caution line over the mind of investors. Hence, considering the aforesaid rationales, we have given a “Sell” recommendation in the stock at the closing price of CAD 5.18 on January 7, 2022.

One-Year Technical Price Chart (as on January 7, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

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