Barclays Capital: Overweight rating and $17 price target for Stillwater Mining Company
According to Barclays Capital:
Stillwater Mining 27 February 2013
And Now…Back To Palladium
Following 4Q’12 results, we maintain our Overweight rating on shares of SWC. This morning, SWC closed out a painfully long Q4 earnings season by reporting betterthan- expected Q4 operating results (operating EPS of $0.11 vs our estimate of $0.02 and Consensus of $0.07), driven by better-than-expected unit costs.
Looking ahead, SWC’s 2013 and beyond operating targets are unchanged vs the id-January update (see next pages for brief highlights), and so too are our views towards the company. We maintain our view that SWC represents the best bottoms up vehicle to participate in what we believe will continue to be a surprisingly positive top-down story in terms of a prolonged deficit in the global palladium market.
And Now…Back To Palladium: While company-specific operating, project development, and capital allocation risks remain, in our view these risks have dissipated in conjunction with a series of better-than-expected quarterly results, more details behind project development plans, and the presence of an activist shareholder that (if nothing else) mitigates the risk of additional large-scale transactions (a risk we believed was fairly low prior to the activist). As the company-specific risks continue to diminish, in our view the main driver for the shares will be underlying palladium (and, to a lesser extent, platinum) prices, both of which appear poised to continue to surprise to the upside in our view, as dwindling Russian government stockpile sales, plus significant South African mine supply constraints (and cost pressures), both suggest to us a supply-driven multi-year deficit is just starting to emerge.
Estimate Revisions and Valuation: We are lowering our full-year 2013 estimate from $0.42 to $0.27, due to higher non-cash imputed interest assumptions (no impact on NAV) and tax rate. SWC shares are trading at 0.9x our NAV estimate, vs. the current NA precious metal-peer group average of 1.3x NAV. Our $17 price target is based on 1.1x our NAV estimate.
I think they're analysis of the quarter and outlook are right on point with reality. I think the last 2 sentences of their report are the most substantial...
"SWC shares are trading at 0.9x our NAV estimate, vs. the current NA precious metal-peer group average of 1.3x NAV. Our $17 price target is based on 1.1x our NAV estimate."
That shows you the discount accredited (in my opinion) to the poor management team decisions. As Barclays says, with the activist shareholder threat, the company-specific risks are diminishing, which will ultimately represent a higher multiple on NAV.