In a Dec. 14 research note, analyst Carey MacRury reported that Canaccord Genuity increased its target price on Wheaton Precious Metals Corp. (WPM:TSX; WPM:NYSE) to CA$41 per share from CA$38.50 (current share price is about CA$25.54). This change was made to reflect the company's just-announced tax settlement, which MacRury described as "a significant win" for the miner-streamer.
The outcome of the agreement, simply put, is that offshore streams are not taxable in Canada, MacRury noted. For Wheaton specifically, the settlement "removes a meaningful overhang on its shares that dates back to 2012," the analyst indicated. Also, it "alleviates additional pressure on the company balance sheet were it to owe back taxes and penalties."
MacRury presented the key points of Wheaton's agreement with the Canada Revenue Agency (CRA). Wheaton must now include the Canadian income capital raising costs it incurs to finance offshore transactions. It must increase the service fee it charges its international subsidiaries, which has been and remains taxable in Canada, to 30% from 20%, and do so retroactively as well. The CRA will reverse all transfer pricing penalties and adjust interest per the settlement terms. The impact of these conditions on Wheaton will be "minor," the analyst wrote.
Wheaton's tax agreement sets a precedent for, and benefits other, Canada-based streaming companies, MacRury highlighted. Primarily, they will not have to make adjustments to pay taxes to Canada on foreign income. "As a result, we believe the offshore streaming model will retain its competitiveness as a source of project funding versus traditional equity or debt funding," MacRury commented.
Canaccord Genuity reiterated its Buy recommendation on Wheaton.
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Disclosures from Canaccord Genuity, Wheaton Precious Metals Corp., Flash Update, December 14, 2018
Analyst Certification: Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Required Company-Specific Disclosures (as of date of this publication):
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking services from Wheaton Precious Metals Corp. in the next three months.
An analyst has visited the material operations of Wheaton Precious Metals Corp.. Partial payment was received for the related travel costs.
Disclosures are available here.