Scotia Analyst: Yamana Gold's Value is Self-Evident

Yamana Gold Inc. (AUY) should likely benefit from the miseries of the current credit crunch, with its ability to buy up companies that are financially less secure, says Scotia Capital analyst Trevor Turnbull.

In a note to clients, he wrote:

Yamana’s core operations generate excess cash even under bearish scenarios. In an environment where cash and credit are prized above all else, Yamana’s value should be self-evident.

His three top reasons for owning Yamana stock:

• Yamana is trading at less than five times estimated 2009 cash flow of C$1.28 per share.
• One-year growth of 43% and two-year growth of 54% is fully financed by cash flow.
• Yamana can buy and fund opportunities arising from the seized financing environment. 

While Mr. Turnbull is incorporating new lower base metal price forecasts into his analysis of the company, he says Yamana should still be able to generate C$1.2-billion in net free cash flow through 2011.

Mr. Turnbull’s new target price for the stock is C$13 a share, down from C$16, based on multiple of two times his net asset valuation estimate and ten times his cash-flow-per-share estimate. The stock is trading at just under C$8 a share.