UPDATE: May 21, 2021- Earlier this week, Triple Flag announced that it had priced its IPO at the mid-range of expectations. The company will offer 19,230,770 shares at a price of US$13.00 per share for gross proceeds of US$250 million.
Upon closing, the company will have a market cap of $2.05B - which is exactly what we looked at last week. We quite like this valuation as it looks reasonably valued compared to competitors like Franco-Nevada (FNV), Wheaton Precious Metals (WPM) and Osisko Gold Royalties (OR).
For those looking for exposure to precious metals, Triple Flag looks like a legitimate option for investors. Now, we don't know how the company will fare as a publicly traded company, but it has a solid management team and will become the fourth-largest streaming company on the TSX Index (trails only the three listed above).
As mentioned previously, it is rare that such an established mining stock goes public. It is one we'll be keeping an eye on, and think it has plenty of potential given its aggressive growth profile.
The IPO is expected to close on Wednesday, May 26, 2021. Of note, we are a little late to the game here as even though the IPO is only going to close next week, the stock began trading yesterday, May 20, 2021. Although it doesn't happen often, stocks are able to begin trading before closing of the IPO.
In the two days since it began trading, it closed the day Friday at exactly its IPO price. This isn't all that surprising considering the company priced at the mid-range of expectations. Despite a relatively tame open, we still think it is one worth keeping an eye on.
May 12, 2021 - It is not too often we see established mining companies file to list on the TSX Index. Typically there are a slew of exploration and development companies that list on the junior exchanges. Earlier this week, Triple Flag Precious Metals filed to list on the TSX Index under the symbol TFGM and TFPM.U. As is typical, the ".U" issue will be traded in USD.
The company is looking to issue 19,230,770 common shares, expected to be priced between US$11.50-US$14.50, for gross proceeds of between US$221,153,855 and US$278,846,165. Approximately US$250 million should it price at the mid-range.
Triple Flag is a gold-focused streaming and royalty company - our favourite kind of miner. Triple Flag has 75 assets, including 9 streams and 66 royalties. These investments are tied to mining assets at various stages of the mine life cycle, including 15 producing mines and 60 development and exploration stage projects.
It is also worth noting the company plans to pay a dividend of US$0.0475 per share paid quarterly (US$0.19 per share annually). That would give it a modest yield of 1.46% at the mid-range of pricing.
In 2020, the company generated $84M in free cash flow, up by 115% over 2019 and is expected to see strong growth again in 2021.
The company certainly has an impressive growth profile. In the first quarter of Fiscal 2021 it acquired 34 royalties and gold equivalent ounces (GEO) increased by 68% YoY.
Overall, I really like what I am seeing out of this company. Including the over-allotment, the company will have 158,018,775 common shares outstanding. Assuming it prices at the mid-range, this gives it a market cap of ~US$2.05 billion.
This gives it a valuation of 20 times cash flows, 25 times earnings, 1.57 times book value and an EV/EBITDA of 18.8. Of note, the company currently has $274M in debt and the bulk of the proceeds from the IPO will be used to pay down this debt. Post-IPO, debt is expected to be $43M.
In comparison, below is a quick snapshot of Franco-Nevada's valuation as compared to other notable streamers. As you can see, Triple Flag is reasonably priced. In fact, it has a lower P/E, P/B and P/FCF than any of these companies. While not listed here, it also has the lowest EV/EBITDA of this group with the exception of SAND which has a EV/EBITDA of 17.7.
All things considered, we are quite liking Triple Flag's valuation - especially if it comes at or below the mid-range. Given how cheap it looks in comparison and the expected growth profile, we believe it likely will price at the high end of expectations.
Even if it prices at the higher end, it still looks cheaper than the streamers currently listed on the TSX Index. This is one to watch, especially if you are looking to get exposure to gold/silver.
A final note - this is the second time the company tried to IPO. It filed its preliminary prospectus back in late 2019, but then pulled the plug in December of that year. Worth noting that at the time, it was seeking to raise $360M at $15-$18 per share.