Stable metals prices should help 5N Plus, says Laurentian

Flat or up prices for things like bismuth, selenium, and cadmium should translate into results for 5N Plus (5N Plus Stock Quote, Chart, News: TSX:VNP), says Laurentian Bank Securities analyst Nick Agostino.

Next Tuesday, after market close, 5N Plus will report its Q1, 2017 results. Agostino expects the company will post EBITDA of (U.S.) $6.1-million on sales of $55.9-million, a topline the analyst notes would be down 13 per cent year over year, but up two per cent, quarter over quarter.

Agostino says he expects the improvement to be in-line with management’s stated expectations, but says there are a few things he will be watching closely.

“We look for colour on: 1) Status of commercial hedging programs with client contracts. 2) Update on 5N21 strategic plan regarding operational optimization and status of marginal businesses (contracts yielding <12% ROCE). 3) Status of mid-stream undifferentiated product portfolio and opportunities to further improve premiums on individual metals. 4) Status of value-add product portfolio and market opportunities,” says the analyst.

In a research update to clients today, Agostino maintained his “Buy” rating and one-year price target of $2.75 on 5N Plus, implying a return of 41.8 per cent at the time of publication.

Agostino thinks VNP will generate EBITDA of $25.5-million on revenue of $225.5-million in fiscal 2017. He expects these numbers will improve to EBITDA of $27.0-million on a topline of $236-million the following year.