In today’s daily we have covered stock research on Paladin (Expensive). To view Top 20 Dividend Stocks click here

S&P 500 was up 3.54 points or 0.18% on Friday and closed at 1923.57. The Dow and the S&P 500 edged up to end at record highs on Friday, wrapping up four straight months of gains. U.S. consumer spending fell for the first time in a year in April, but the decline probably will not change expectations for a rebound in growth this quarter. The CBOE VIX equity volatility index was down 1.5% and hovering near its 2014 low.

In Tokyo the Nikkei 225 slipped 0.3% on Friday but rose 1.2% over the week and 2.3% in May as a whole, its first monthly gain this year. The strength of global stocks encouraged heavy selling of gold. The metal is currently trading at $1,251 an ounce. Netflix Inc. rallied 30 percent for the largest May gain in the S&P 500 and TripAdvisor Inc. climbed 20 percent in May. The MSCI Emerging Markets Index surged 3.3 percent in the month of May for its biggest gain since October. 


S&P 500 Daily Chart (Source – Thomson Reuters)
 
S&P ASX 200was down by 27.0 points or 0.49% on Friday and closed at 5492.5 points. A report that found coal seam gas posed no threat to drinking water has allowed NSW government to lift a ban on coal seam gas near Sydney. This is a boost for companies such as AGL and BHP. Hong Kong’s Cheung Kong Group has struck a deal to acquire gas distributor Envestra in a $2.37 billion deal.Iron Ore price fell on Friday by 4.1% to US$ 91.80, their lowest since September 2012. CBA announced its change in interests of the substantial holding of Aristocrat Leisure Limited representing a voting power of 11.17%.
 


S&P ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 



Stock of the Day – Paladin (PDN)
 
Paladin Energy Limited (Paladin), is engaged in the development and operation of uranium mines in Africa, together with global exploration and evaluation activities in Africa, Australia and Canada.  The Company’s project includes Langer Heinrich Mine, Kayelekera Mine, Aurora Project, Manyingee Project, Oobagooma Project, Valhalla, Skal & Odin Deposits, Bigrlyi Deposit and Angela Deposit. In March 2014, Newmont Mining Corp sold its 5.4% equity interest in Paladin Energy Ltd through a block sale agreement with UBS Australia.


Paladin demand estimate (Source – Company Reports)

Despite reporting a March 2014 quarter loss of US$20.5m, Paladin’s cash balance deteriorated only US$1.5m due to favorable working capital moves. Post quarter end cash was assisted by the release of US$20m from escrow relating to Langer Heinrich sell down. Chinese approvals remain the key hurdle for the completion of this deal, expected by the end of 4Q2014. Paladin achieved an average realized price of US$37.90/lb, only a 5% premium to the average uranium spot price in March 2014 Quarter.


Globally diverse project pipeline (Source – Company Reports)

The greatest risk with investing in Paladin is the Uranium price which has been highly depressed in the recent years. Paladin operates mining and processing facilities in Namibia and Malawi which inherently have technical and operational risk. The decline in the Paladin share price is due to both company specific ( production performance, corporate cost level and refinancing concerns) and market issues (Fukushima induced decline in Uranium price) in our view. 


PDN Daily Chart (Source – Thomson Reuters)

The uranium industry was turned on its head with the disaster at Fukushima in 2011. Since then the bulk of Japan’s reactor fleet has remained offline and with that demand has slumped directly impacting the uranium price. The industry appears to be getting back on its feet with a number of reactors under construction now more than pre Fukushima. However the near term outlook is likely to be driven by the timing of Japanese restarts until which time it is likely the Uranium price will remain at depressed levels. We believe the stock is slightly expensive at its current price and would review the stock at a later date.
 
  

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