Analyst says Vox Royalty Corp.’s (TSXV:VOX) database has allowed it to acquire new royalties from non-traditional vendors at a significant discount to peers
Capital Ideas Media | November 11, 2020 | SmallCapPower: The resource royalty business has proven to be lucrative, especially for companies such as Franco-Nevada Corporation, which has generated compounded average annual investor returns of more than 21% during the past 13 years.
(Originally published on Capital Ideas Media on September 15, 2020)
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These royalty companies lend money to resource developers in return for a percentage of future production. They can also purchase existing royalties, in which they consider undervalued. It has proven to be an attractive financing option for resource juniors that want to avoid excessive shareholder dilution.
One of newest entrants into the royalty space, Vox Royalty Corp. (TSXV:VOX), has already accumulated a portfolio of 42 royalties.
Red Cloud Securities analyst Derek Macpherson, who recently initiated coverage on the stock with a “Buy” rating and a C$4.75 per share target price, said Vox is doing it different and is disrupting the royalty space by using the Company’s proprietary royalty database (that overlays more than 7,000 known royalties with established mining claims and resources), coupled with digital claim maps to uncover and acquire existing royalties, which has allowed it to acquire new royalties from non-traditional vendors at a significant discount to peers.
Mr. Macpherson believes that Vox is set to outperform other new entrants to the royalty space through its “innovative and lower-cost approach” to making acquisitions.
The Red Cloud Securities analyst contends that new royalty companies have historically outperformed their larger peers, as each acquisition materially adds cash flow growth and improves the share price.
Vox currently has three producing royalties (with that number expected to grow to five in 2021), resulting in an estimated 56% year-over-year revenue growth.
By 2023, Mr. Macpherson expects Vox to generate US$6.9 million in revenue, 447% higher than his 2021 estimate.
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