M Partners, a Toronto-based independent investment bank, is out Wednesday with its top picks list for 2022.
The seven stocks on the list are the firm’s highest conviction ideas for the year ahead. This is the first time since 2015 that the company has provided a top stocks list for an upcoming year, according to a company spokesman.
Highlights of their investment case for each of the stocks are included below. Investors are encouraged to use the list as only a starting point for further research.
B2Gold Corp. (BTO-T, price target $11)
“We expect BTO to continue to post production beats, robust cashflow (15% FCF yield), and pay the highest dividend in the industry (~4%). BTO should end the year with a cash balance of US$650M+ and holds an undrawn US$600M credit facility.
“BTO is currently trading at 0.75x P/NAV compared to peers at 0.97x and 3.8x 2022E cashflow compared to peers at 5.8x.”
Magna Gold Corp. (MGR-X, $1.70 target)
“Magna is quickly ramping production at the San Francisco Mine to 80 Koz/yr as well as progressing through a 30,000m drill program to extend the mine life (MRE Q2/22). We expect MGR to release a PEA on its Margarita Silver project by PDAC this year.
“MGR is trading at a significant discount to its peers and should re-rate quickly as management proves its ability to turn around the San Francisco Mine and begin to develop its other properties. Magna currently trades at a discount of 50% to its peer group of gold producers (0.3x NAV vs. peers at 0.6x NAV). We have a BUY recommendation and a $1.70/share target price on MGR, valuing the combination of all assets at $198M or $2.18/share and applying a 0.7x project NAV multiple plus corporate adjustments.”
Osino Resources Corp. (OSI-X, $2.80 target)
“OSI is aggressively progressing towards its Twin Hills PFS which we expect to produce an average annual production of 150 Koz (up 50%+ from the PEA). OSI will wrap up permitting and move towards project financing following the PFS in Q2/22.
“OSI currently trades at 0.3x NAV compared to peers at 0.5x, despite OSI being in a good jurisdiction, moving rapidly towards construction, and management having a proven track record of success in Namibia.”
Opsens Inc. (OPS-T, $4 target)
“Opsens is making major strides towards commercializing its transcatheter aortic valve replacement (TAVR) guidewire, the SavvyWire. The TAVR market is expected to grow at a 15% CAGR through 2025 (with a TAM of $8B+) given the time/cost savings and efficacy benefits vs. traditional surgical procedures. The SavvyWire is the only guidewire for aortic valve replacement that can provide continuous pressure measurement and as such we assume it will achieve 10% market share by 2025 (generating $43M in sales). OPS recently completed a 20-patient clinical trial and has filed for approvals with Health Canada and the U.S. FDA. We are expecting Health Canada approval by H1/22, U.S. FDA approval in Q3/22 and European CE certification subsequently.
“Edwards Lifesciences (EW:NYSE) is the largest aortic valve manufacturer in the world but does not produce a TAVR guidewire. Of the major manufacturers that do produce guidewires – Boston Scientific and Medtronic, neither has a wire that can be used to perform continuous pressure measurement. We believe this gap in the market presents a massive opportunity for Opsens to carve out market share or get acquired by a large-cap medical device company.”
Playmaker Capital Inc. (PMKR-X, $1.25 target)
“PMKR is rolling up digital sports media companies at accretive multiples, creating an ecosystem of assets that are becoming increasingly important to sports betting operators that are trying to acquire customers. PMKR deployed US$85M on acquisitions in 2021 and we expect this rapid pace of acquisitions to continue due to the fragmented nature of the digital sports media industry. Playmaker’s media platforms are also growing organically through higher viewership, strong direct brand partnerships and improved monetization (+85% TTM YoY organic growth). PMKR’s acquired assets fit strategically into its ecosystem, creating synergies and complementary products. Each asset has a centre of excellence that is transferable to other assets in the ecosystem. PMKR’s best-in-class profitability (41% adjusted EBITDA margin in Q3/21) sets it apart from true gambling operators and will help fund its acquisition strategy.
“Playmaker Capital currently trades at 3.4x 2023E sales and 10.1x 2023E adjusted EBITDA compared to its peers at 2.8x sales and 11.4x EBITDA. We think that PMKR’s superior margins, organic growth and track record of strategic acquisitions should warrant a premium multiple.”
Quarterhill Inc. (QTRH-T, $4 target)
“Quarterhill recently announced that it is undergoing a corporate rebranding to become a pure play intelligent transportation systems (ITS) company. This included appointing Bret Kidd as CEO (previously CEO of ETC) and conducting a strategic review of WiLAN. We think that the Mr. Kidd’s operational experience within ITS will support the rebranding of QTRH as an ITS company, from its current status as a holding company (that trades at a discount to its holdings). Furthermore, we believe WiLAN was the biggest pain-point in the QTRH story given its extremely lumpy financials; the sale of WiLAN should help QTRH re-rate to ITS multiples (12-15x) and provide even more liquidity to deploy in ITS M&A. We also think that the magnitude of the ETC acquisition will be highlighted in Q4/21 financials, where ITS will represent 80% of QTRH’s revenue; further supporting the re-rating.
“QTRH currently has over $80M in cash after closing its $57.5M convertible debenture offering and has two potential large cash windfalls coming in the next six months: the Apple trial (US$109M) and the sale of WiLAN ($200M+). Therefore, QTRH has plenty of excess liquidity to execute on its ITS acquisition strategy of allocating $400M to ITS M&A by 2025 (deployed $159M so far).
“We are expecting the ITS segment to grow revenue +25% in 2022 and WiLAN to bounce back from a weak 2021. QTRH currently trades at 9.4x 2022E EBITDA compared to patent licensing peers at 9.7x and ITS peers at 10.3x.”
Goodness Growth Holdings Inc. (GDNS-CSE, $4.50 target)
“GDNS has multiple upcoming regulatory catalysts including NY whole flower sales in Q4/21, NM adult-use sales in Q2/22 and MN flower sales in Q2/22. GDNS has various capex efforts in place to effectively position itself for these regulatory changes.
“We estimate that GDNS has a cash balance of over US$25M after accounting for the sale of its AZ dispensary license and assets for US$15M. Goodness Growth currently trades at 10.2x 2022E EBITDA and 2.5x 2022E sales, a slight premium to MSO peers that trade at 7.3x 2022E EBITDA and 2.2x 2022E sales. We think that Goodness Growth’s superior sales growth (we expect 112% YoY in 2022) and positioning in key states with regulatory changes on the horizon warrant the premium multiple.”