{"id":18556,"date":"2023-06-05T19:00:16","date_gmt":"2023-06-05T23:00:16","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/royal-gold-bank-of-america-downgrade-today-seems-unwarranted-nasdaqrgld\/"},"modified":"2023-06-05T19:00:18","modified_gmt":"2023-06-05T23:00:18","slug":"royal-gold-bank-of-america-downgrade-today-seems-unwarranted-nasdaqrgld","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=18556","title":{"rendered":"Royal Gold: Bank of America Downgrade Today Seems Unwarranted (NASDAQ:RGLD)"},"content":{"rendered":"
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Introduction<\/span><\/h2>\n

Denver-based Royal Gold, Inc.<\/strong> (NASDAQ:RGLD<\/span>) is one of the reliable streamers I have regularly covered on Seeking Alpha since September 2018.<\/p>\n

This article covers the earnings Q1 2023 released on May 3, 2023 and all the following new information. This article <\/span>updates my preceding article on RGLD, published on April 24, 2023.<\/span><\/p>\n

RGLD has a solid asset portfolio with six principle-producing mines and 182 properties as of March 31, 2023. The Map below is from the June Presentation.<\/p>\n

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\"Map\"<\/span>
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RGLD Map Assets Presentation (RGLD June Presentation)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

1 – 1Q23 Results Snapshot and recent activity<\/strong><\/h3>\n

Royal Gold posted a net income of $63.88 million, or $0.97 per diluted share, compared to $65.68 million, or $1.00 per basic and diluted share, in the first quarter of 2022. The adjusted earnings per share were $0.96 in the first quarter 2022.<\/p>\n

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RGLD Company Overview 1Q23 <\/span>(RGLD Presentation)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

During the first quarter, Royal Gold posted total revenue of $170.39 million, comprised of stream revenue of $115.00 million and royalty revenue of $55.4 million at an average gold price of $1,890 per ounce, an average silver price of $22.55 per ounce and an average copper price of $4.05 per pound.<\/p>\n

Gold equivalent production was weak for 1Q23 at 92.2K GEOs.<\/strong> Production was 39.7K Au ounces, 859.2K Ag ounces, and 3.6 Moz of copper.<\/p>\n

Royal Gold still has an excellent debt profile with net debt of $370 million and $634 million in liquidity.<\/p>\n

2 – Investment Thesis<\/strong><\/h3>\n

Royal Gold is an excellent long-term investment with significant liquidity at about $643 million after funding three large projects. The company pays a quarterly dividend of $0.375 per share in 1Q23 or a yield of 1.23%, which aligns with its peers FNV and WPM.<\/p>\n

The long-term growth potential is clear.<\/p>\n

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RGLD Recent Transactions (RGLD Presentation)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

CEO Bill Heissenbuttel said in the conference call:<\/p>\n

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Our portfolio performed well, and we saw continued progress at several assets in the portfolio that should provide interesting news flow in the near to medium term.<\/p>\n<\/blockquote>\n

I do not own RGLD because I already own Franco-Nevada Corporation (FNV), Wheaton Precious Metals Corp. (WPM), and Sandstorm Gold Ltd. (SAND), but I consider it one of the strongest with Franco Nevada and Wheaton Precious Metals.<\/p>\n

Note:<\/strong> Bank of America downgraded RGLD today to Underperform from Neutral with a $130 price target, trimmed from $149, citing heightened operational and execution concerns around key assets in the streaming company’s portfolio.<\/p>\n

I find the downgrade quite surprising and harsh. Mount Milligan production issues have been largely factored into the price already, especially if the BofA commodities team calls for the gold price to average $2,200\/oz later this year.<\/p>\n

I recommend short-term trading LIFO, 40%-50% of your long-term position, due to the volatility of the streams & royalties industry. This dual strategy has been encouraged in my marketplace, “The Gold and Oil Corner,” I believe it is the best way to maximize your gain over a long period while reducing the risk of a sudden downturn.<\/p>\n

3 – Stock Performance<\/strong><\/h3>\n

Royal Gold, Inc. has dropped significantly since February 2023 after the Fed turned hawkish again and signaled more increases to fight stubborn inflationary pressures. However, gold strengthened significantly after April and trades at over $1,950 per ounce.<\/p>\n

Royal Gold is up 5% on a one-year basis, which is in line with its peers, excluding SAND, which continues to underperform, and OR, which outperforms the group.<\/p>\n

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Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

Royal Gold Inc: Balance Sheet And Production History Ending In 1Q23 – The Raw Numbers<\/h2>\n

<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n<\/colgroup>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Royal Gold<\/strong><\/td>\n1Q22<\/strong><\/td>\n2Q22<\/strong><\/td>\n3Q22<\/strong><\/td>\n4Q22<\/strong><\/td>\n1Q23<\/strong><\/td>\n<\/tr>\n
Total Revenues in $ Million<\/td>\n162.36<\/td>\n146.44<\/td>\n131.43<\/td>\n162.98<\/td>\n170.39<\/td>\n<\/tr>\n
Net Income in $ Million<\/td>\n65.68<\/td>\n71.14<\/td>\n45.79<\/td>\n56.37<\/td>\n63.88<\/td>\n<\/tr>\n
EBITDA $ Million<\/td>\n130.15<\/td>\n110.82<\/td>\n103.46<\/td>\n124.54<\/td>\n135.45<\/td>\n<\/tr>\n
EPS diluted in $\/share<\/td>\n\n

1.00<\/p>\n<\/td>\n

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1.08<\/p>\n<\/td>\n

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0.70<\/p>\n<\/td>\n

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0.86<\/p>\n<\/td>\n

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0.97<\/p>\n<\/td>\n<\/tr>\n

Operating cash flow in $ Million<\/td>\n101.13<\/td>\n120.20<\/td>\n94.99<\/td>\n101.03<\/td>\n108.66<\/td>\n<\/tr>\n
Capital Expenditure in $ Million<\/td>\n37.80<\/td>\n0.04<\/td>\n677.99<\/td>\n206.33<\/td>\n0.00<\/td>\n<\/tr>\n
Free Cash Flow in $ Million<\/td>\n63.33<\/td>\n120.16<\/td>\n-583.00<\/td>\n-105.30<\/td>\n108.66<\/td>\n<\/tr>\n
Total cash in $ Million<\/td>\n\n

183.71<\/p>\n<\/td>\n

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280.62<\/p>\n<\/td>\n

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122.24<\/p>\n<\/td>\n

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118.59<\/p>\n<\/td>\n

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126.82<\/p>\n<\/td>\n<\/tr>\n

Long-term debt in $ Million<\/td>\n0<\/td>\n0<\/td>\n446.33<\/td>\n571.57<\/td>\n496.82<\/td>\n<\/tr>\n
Dividend per share in $<\/td>\n0.35<\/td>\n0.35<\/td>\n0.35<\/td>\n0.375<\/td>\n0.375<\/td>\n<\/tr>\n
Shares outstanding (diluted) in Million<\/td>\n65.65<\/td>\n65.68<\/td>\n65.66<\/td>\n65.66<\/td>\n65.71<\/td>\n<\/tr>\n
Gold Production<\/strong><\/td>\n1Q22<\/strong><\/td>\n2Q22<\/strong><\/td>\n3Q22<\/strong><\/td>\n4Q22<\/strong><\/td>\n1Q23<\/strong><\/td>\n<\/tr>\n
Gold Equivalent ounce Production K Geo<\/td>\n86.5<\/td>\n78.3<\/td>\n76.0<\/td>\n94.3<\/td>\n92,0<\/td>\n<\/tr>\n
Gold price realized $\/ GEO<\/td>\n1,877<\/td>\n1,871<\/td>\n1,729<\/td>\n1,726<\/td>\n1,869<\/td>\n<\/tr>\n<\/table>\n

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