Paladin Energy Limited

PDN Details

Issue of Shares: Paladin Energy Limited (ASX: PDN) is engaged in the development and operation of uranium mines in Canada, Australia, Africa and operates the main project, the Langer Heinrich mine (75%) in Namibia. On 3 September 2021, PDN issued 95,078 shares at $0.63 per share under an Employee Performance Rights Plan due to the exercise of options.

FY21 Result Highlights:

• Revenue Growth: The company posted a revenue of US$2.985 million in FY21, compared to nil revenue in FY20.
• An Increase in Net loss After Tax: The company reported an increase in net loss from continuing operations to US$58.3 million in FY21 from US$46.1 million in FY20 due to a non-cash revaluation of subsidiary loans.  
• Capital Raise: PDN conducted an equity raise of US$218.7 million via a fully underwritten entitlement offer and institutional placement in FY21 to redeem the debt of US$115 million Senior Notes fully.
• Liquidity Position: PDN held US$30.66 million of cash and cash equivalents and had no corporate debt as of 30 June 2021.

Revenue & Net Loss After Tax from FY20 to FY21; (Analysis by Kalkine Group)

Key Risks:

• Volatility in Uranium Prices: The company faces changes in uranium prices and experienced suspension of Operations at the Langer Heinrich project in 2018 due to low uranium prices.
• Regulatory Risks: PDN faces delays in regulatory approvals and changes in the legal framework governing the industry.

Outlook:

• PDN forecasts US$12.2 million of increased cash expenditure in FY22 due to investment in exploration and the forecasted impact of the forex changes.
• PDN expects cash receivables within US$3 million to sponsor the Langer Heinrich maintenance and care activities.
• PDN is advancing on the Restart Plan (recommencing production and portfolio of exploration assets) for its Langer Heinrich mine project with the recent capital proceeds.
• In FY21, PDN undertook the optimisation of pit design, tailings management and appointed contractors.

Technical Note: PDN prices are trading in a bullish momentum with good volume support. Stock prices broke the downward sloping trend line and stock is sustaining above the breakout level from past 5 days. RSI (14-period) is hovering at ~78.52 further indicating the stock is trading in a strong momentum. Prices are also trading above 21-period SMA moving averages which also support our bullish stance.

Investors can consider exiting from the stock if the Resistance levels mentioned as per the technical analysis have been achieved and are subject to the factors discussed above.

Stock Recommendation: The stock of PDN gave a positive return of 325.82% in the past nine months and a positive return of 560.75% in the past year. The stock is currently trading towards its 52-weeks’ high level of $1.000. On a TTM basis, the stock of PDN is trading at a price to book value multiple of 6.7x, lower than the industry (Uranium) median of 8.4x, and thus seems undervalued. Considering the company’s debt-free balance sheet, improved financial results in FY21, continued progress on the restart plan for the Langer Heinrich Mine, valuation on a TTM basis, technical level mentioned above and associated risks, investors with high-risk appetite can consider ‘Speculative Buy’ position on the stock at the current market price of $0.933, as on 14 September 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia. However, the risk levels are extremely high in view of volatility in Uranium prices and regulatory risks.

Source:  REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Boss Energy Limited

BOE Details

Update on the Honeymoon Uranium Project: Boss Energy Limited (ASX: BOE) engages in the exploration and development of tenements for uranium. BOE operates and owns the Honeymoon Uranium Project in Australia. On 6 September 2021, BOE announced advancing on the process design, completing site layouts and vendor arrangements for the Honeymoon project.

The company expects to complete the FEED (Front End Engineering Design) stage in the March 2022 quarter. Henceforth, BOE will make the Final Investment Decision (FID) and initiate a detailed design.

Trading on the US OTCQB Market:

• On 16 August 2021, BOE informed that its shares will trade on the OTCQB Venture Market (OTCQB) compared to the previous trading on the Pink® Market under “BQSSF”.
• This upgrade is due to the increasing international investor demand for equity in BOE and MCAP Securities LLP, US, to make a market in the company’s shares.

Q4FY21 Results:

• Capital Raise Commitments: BOE obtained firm commitments for raising $60 million via a share placement at 14 cents per share. The company used the net proceeds to buy 1.25 million pounds of uranium from the spot market during Q4FY21.
• Improved Feasibility Results: The company reported a pre-tax NPV of US$308.75 million, an increase of 35% YoY from the improved feasibility study undertaken as of 30 June 2021.
• Liquidity Status: The company held $20.87 million of unrestricted cash and cash equivalents as of 30 June 2021 versus $18.06 million as of 30 March 2021.

Cash & Cash Equivalents from Q3FY21 to Q4FY21; (Analysis by Kalkine Group)

Key Risks: The company faces changes in uranium prices and volatility in energy markets. BOE faces the exploration related risks and COVID-19 uncertainty prevailing.  

Outlook:

• The project feasibility study concluded robust findings (higher yearly production, significantly reduced costs, and increased overall financial returns).
• BOE anticipates a robust outlook given the strengthening energy markets and higher uranium prices. However, the current spot and term price indicator levels do not support the restart of idled mines or the development of advanced uranium projects. Though the mine is ready to come into production, BOE will start production when prices support a sustainable and profitable production level.
• Boss will progress on the exploration activities to increase the mineral resource and mine life at the regional and near-mine targets at the Honeymoon project.
• BOE will release FY21 results on 27 September 2021 and conduct an AGM on 18 November 2021.

Technical Note: BOE prices broke the horizontal trend line breakout of AUD 0.207 level and the prices are sustaining above the breakout level from past two weeks. Prices are also getting support of good volumes that further indicates active buying participation in the stock. RSI (14-period) is hovering at ~72.843 on a daily chart that indicates the stock is trading in a strong momentum. Prices are also trading above its 21-period SMA that support our bullish stance. Immediate support level are AUD 0.265 and AUD 0.254 while Immediate resistance levels are AUD 0.314 and AUD 0.347.

Investors can consider exiting from the stock if the Resistance levels mentioned as per the technical analysis have been achieved and are subject to the factors discussed above.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of BOE gave a positive return of 218.18% in the past nine months and a positive return of 237.34% in the past year. The stock is currently trading above the 52-weeks’ average price level band of $0.058 - $0.303. The stock has been valued using an Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ average, considering no revenue from operations & net loss in 1HFY21, and negative cash flows from operations in Q4FY21, and the risks associated with the exploration activities, prevailing COVID-19 situation, and uranium prices. For the purpose of valuation, few peers like Strike Energy Limited (ASX: STX), Warrego Energy Limited (ASX: WGO), Carnarvon Petroleum Limited (ASX: CVN) have been considered. Considering the high current ratio and nil debt in 1HFY21, robust technical and financial results from the revised feasibility study at the Honeymoon project, technical levels mentioned above, valuation, and associated risks investors with high-risk appetite can consider ‘Speculative Buy’ position on the stock at the current market price of $0.280, down by 6.667%, as on 14 September 2021. However, the risk levels are extremely high in view of the negative cashflows and net losses.

BOE Daily Technical Chart, Data Source: REFINITIV  

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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