Saturday, January 17, 2009

Silver Wheaton upgraded at UBS, their target is way too Low. SLW, SST.v

Silver Wheaton SLW is still in Cup and Handle formation and has a good chance to move Up from it with STO at BUY, RSI is positive.

Silver Wheaton upgraded at UBS
Posted: January 13, 2009, 9:16 AM by Jonathan Ratner

Silver Wheaton Corp. was upgraded to a “buy” at UBS as a result of a more optimistic view of the risks associated with its credit facilities (highly leveraged to Silver over its Debt - this was killing the company it will launch it Up with Silver close to 15USD. S.). Analyst Dan Rollins expects that it will be able to renegotiate its debt covenants and de-lever its balance sheet through silver stream acquisitions and/or the divestiture of equity investments.
“Last year was a disappointing one operationally for Silver Wheaton,” he told clients, noting that the company’s sales guidance was reduced throughout 2008 from 15 million ounces to 11.4 million. Sales were also below original expectations as a result of lower-than-anticipated production from the Luisman mine in Mexico and Yauliyacu in Peru.
However, while Vancouver-based Silver Wheaton struggled operationally, it did sign four more silver stream contracts in 2008, Mr. Rollins noted. This follows a much bigger deal in 2007 that saw the largest pure silver company in the world pay US$485-million in cash to acquire 25% of the life-of-mine silver produced from Goldcorp Inc.’s Penasquito project.
UBS estimates that Silver Wheaton sold 11.3 million ounces of payable silver in 2008 at an average gross operating margin of US$10.84 per ounce. Based on those figures, it forecasts 2008 fully diluted earnings per share will come in at US31¢ and operating cash flow of US43¢.
At the end of the year, UBS said Silver Wheaton likely had approximately US$14-million in cash and US$373-million in debt on the books.
Mr. Rollins values Silver Wheaton on a price to net asset value basis, which factors in UBS’s silver price forecast of US$8.95 per ounce in 2010. (What are they smoking there? S.)This yields a price target of US$7.50 per share, up from US$5.75 previously, and representing upside of nearly 35%.He also expects a reserve/resource update in 2009 and approval of a shareholders’ rights plan.
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