Paladin Energy Ltd

Quarterly Rebalance of S&P/ASX Indices: Recently, S&P Dow Jones Indices had announced March 2019 Quarterly Rebalance of the S&P/ASX Indices in which Paladin Energy Ltd (ASX: PDN) had been added to S&P/ASX 300 Index which has been made effective at the open on March 18, 2019. The company has also been added in All Ordinaries which had also become effective at the open on March 18, 2019. This might augur well for the technical demand for the shares of PDN since the demand for the shares from ETF’s might increase in the upcoming period.

In the Toronto Canada Roadshow Presentation, the company was optimistic about the demand in the Uranium market. It added that China happens to be a key driver of demand. China National Nuclear Corp (or CNNC) is planning for the deployment in overseas uranium mines so that supply for an anticipated increase in China’s nuclear power generation can be secured. Coming to the highlights for six months ended December 2018, the company witnessed the sales of 742,423 U₃O₈ involving an average selling price amounting to US$28.96/lb. The Company’s unrestricted cash and cash equivalents witnessed the fall of 16% to US$32,965,000 at 31 December 2018 from US$39,166,000 at 30 June 2018 and the net debt witnessed the rise of 15% i.e. from US$80,739,000 at 30 June 2018 to US$92,969,000 at 31 December 2018.


Net debt (Source: Company Reports)

What to Expect From PDN: Paladin Energy would be starting a PFS for restart of the Langer Heinrich uranium mine in Namibia (Langer Heinrich) after the completed concept study identified multiple options for the reduction of operating costs, improvement of process reliability and potentially recover a saleable vanadium product. There are expectations that PFS would be costing US$6.2 million and would be financed with the help of existing cash resources.

Stock Recommendation: It can be said that PDN is possessing decent liquidity levels as its current ratio stood at 12.85x at the end of December 2018 which happens to be significantly higher than the industry median of 1.26x providing sufficient headroom for the growth to the company. However, the company’s stock has delivered the return of -13.16% in the span of previous 6 months while, in the time frame of previous three months, the stock posted -10.81% return. Also, the company’s stock is trading slightly towards the 52-week higher level. Considering the above-factors, we maintain our “Speculative Buy” rating on the stock at the current market price of A$0.170 per share (up 3.03% on 18 March 2019).
 

Northern Minerals Limited

Strengthens balance sheet with $20m placement:Northern Minerals Limited (ASX: NTU) has made an announcement that they entered into multiple subscription agreements with multiple sophisticated investors for placement of 400,000,000 fully paid ordinary shares in NTU involving an issue price amounting to A$0.05 per share in order to garner A$20 million (before costs). The funds garnered with the help of the issue of shares would be used for the working capital purposes and for the exploration. The company’s Board is contemplating the possible Entitlement Offer on 1-for-15 basis involving a price amounting to A$0.05 per share. The net loss of NTU for the half year ended 31 December 2018 amounted to $17.85 million while, in the same period of the previous year, it was $9.63 million and was primarily because of the substantial change in the activities for period in relation to the development of pilot plant at Browns Range and commencement of the testing phase.


1HFY19 Results of Operations (Source: Company Reports)

The company’s total revenue and other income witnessed a rise and stood at $8.91 million in the half year to December 2018 while, in the same period of the previous year, it was $3.57 million. This rise was because of recognition of increased research and development (or R&D) rebates and government grants over the period in which the costs are incurred in which they are intended to compensate.

Stock Recommendation: The company’s stock is quite volatile, as in the span of previous three months, NTU’s stock delivered the return of 19.67% and, in the previous one month, the stock’s return was 58.70%. Talking from the valuations perspective, the company’s stock seems slightly overvalued as its P/B ratio stood at 2.8x which is higher than the industry median (Metals & Mining) of 1.5x. Also, the company’s current ratio stood at 0.91x which is lower than the industry median of 1.57x which might be a concern for the market players.

Because of the above-mentioned factors, we advise to market-players that they should avoid the stock at the current market price of A$0.074 per share and wait for the further growth catalysts that can support the price movement ahead.   

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