On Friday, CIBC (TSX:CM) initiated coverage on Aya Gold & Silver Inc (AYA:CN) (OTC: MYAGF) shares, assigning an Outperformer rating and setting a price target of C$24.00. The firm highlighted the company's potential in the context of a consolidating silver market, where mergers and acquisitions have heightened the scarcity of investable silver producers.
Aya Gold & Silver was recognized for its growth trajectory as a silver producer. The industry is currently experiencing a wave of acquisitions, often at premium multiples. Single-asset silver producers with significant upside potential are especially sought after, and recent deals in the sector have been made at around 1.8 times price to net asset value (P/NAV) multiples.
CIBC's analysis pointed out the historical trend of primary silver producers fetching higher valuation multiples compared to their gold counterparts. On average, silver producers have enjoyed a 42% premium on NAV and a 64% premium on cash flow relative to gold producers. This trend underscores the rarity and value of companies like Aya in the market.
The Outperformer rating and the C$24 stock price target are based on a 1.4x P/NAV and a 15x forward price to cash flow (P/CF) target multiple. At the time of the coverage initiation, Aya's shares were trading at 0.7x P/NAV, indicating significant room for growth according to the firm's metrics.
The coverage by CIBC reflects a positive outlook for Aya Gold & Silver as the company stands out in a sector that is undergoing significant consolidation, with primary silver producers becoming increasingly rare and valuable.
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