Wheaton Precious Metals - Q3 results and update

Despite relatively conservative precious metals price assumptions, underlying earnings for Q3 were within US$2.0m, or 2.7%, of our forecasts. Both Wheaton’s gold and silver divisions outperformed our production expectations. However, a 1.6Moz under-sale of silver relative to production resulted in an ‘inventory’ build and a deferment of sales. In addition, there was a 14.5% quarter-on-quarter increase in general & administrative expenses (albeit entirely attributable to differences in accrued performance share units’ costs), as a result of which underlying EPS was 16c (in line with consensus) compared with our forecast of 17c (which assumed no inventory and no stock-based general & administrative effects). Nevertheless, our FY19e EPS forecasts remain almost unchanged at 57c, while our FY20e forecasts exist within a wide range depending on the metal prices assumed, from 80c (at spot prices) to 130c (at our higher long-term prices) and, in particular, the gold/silver price ratio assumed.