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Title : Abitibi Royalties Corp 1q19 financials: All Razzle, No Dazzle
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Abitibi Royalties Corp 1q19 financials: All Razzle, No Dazzle

Abitibi Royalties (RZZ.v, a.k.a Razzle) reported its 1q19 financials this evening and...well, I just don't get why this company is so expensive. Its share count is tight for sure, with just 12.47m shares out. The balance sheet is tidy enough, as even though it runs a working cap deficit that's because it writes calls on its stock holdings and its $1.32m in cash is enough to do its thing. But the current share price, C$12.72, gives it a market cap of C$158.6m and that is really up there. For one thing, it implies a 4.7X book (and how many mining companies can command that these days, even royalty companies). For another, you start looking at its P+L and it's hardly a dazzle, this Razzle):

Operating profit is tiny, but the way it gets to a 21c/share net profit is via the change in value of its share investments and those are basically its holdings in Yamana (AUY) (YRI.to) and Agnico (AEM). Over the course of 1q19 those stocks went up and made Razzle look good, the company able to pimp its net earnings by $2.96m (but doing nothing for free cash flow, which was negative by just under half a million, despite the company in its recent NR blowing its horn about making a million in cash flow). But relying on the movements of stock prices to justify one's own is a double-edged sword because since 1q19 closed, AEM has dropped around $2.50 to date. That meas a million or so loss for Razzle coming up in 2q19 (if things stay that way). Even worse at AUY, down around 65c since then and that's a cool $2.3m lost to date. So, those investments that propped up the meagre cash royalty revenues to the tune of $2.9m in 1q19 have already lost more than that in 2q19. 

Razzle is a nice little biz model yeah, but hell's teeth it ain't worth C$159m.

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