Stocks’ Details
 

Paladin Energy Ltd

Successfully Raised $30.2 Mn Via a Placement:Paladin Energy Ltd (ASX: PDN) is involved in the development and operation of uranium mines in Africa, together with global exploration and evaluation activities in Africa and Canada. Recently, China Investment Corporation and its controlled entities ceased to be a substantial holder in the company, effective from September 19, 2019. In another update, with regard to the successful completion of a share placement to raise $30.2 Mn, the company on September 19, 2019, issued 224,812,641 fully paid ordinary shares at an issue price of A$0.115 per share with remaining 380,000,000 shares expected to be settled on September 25 with the shares to be issued on September 26, 2019. In conjunction with the placement, the company also offered eligible existing Australian and New Zealand shareholders with an opportunity to apply for up to $30,000 worth of new shares at the placement price of 11.5 cents through a share purchase plan to raise up to an additional $7 million.

Earlier, the company informed the market about the intention of its Non-Executive Chairman, Mr Rick Crabb, to retire from the Board, effective from December 31, 2019.

FY19 Key Highlights:Revenue from sales of uranium oxide in the period fell by 71% to US$21,491,000. Loss after tax attributable to members in the period was reported at US$30,345,000, as compared to profit of US$367,762,000 in the previous year. The net tangible assets per share at the end of the period was reported at US$0.04, as compared to US$0.06 in the previous year.


FY19 Key Financial Metrics (Source: Company Reports)

What to expect:Nuclear power growth remains focussed in Asian and Middle Eastern economies with important developments seen in China, India and Saudi Arabia over recent months. Development of new uranium supply is expected to help the company in improving its earnings, with forward uranium price indicators presently well below incentive prices.Long-term contracting levels have not recovered, further increasing forward uncommitted demand and ultimately improving the future prospects of uranium suppliers and developers. Moreover, positive nuclear sentiment is being observed in countries such as Taiwan and South Korea, due to growing population and energy demand, indicating a good sign for Uranium exploration companies.

Stock Recommendation:PDN’s share generated a negative YTD return of 27.27%. Its gross margin for FY19 stood at 21.1%, better than FY18. Moreover, its EV/Sales multiple on TTM basis stands at 11.9x, lower than the industry median of 39.4x. The stock made its 52-week low level of $0.110, indicating a decent opportunity for accumulation, underpinned by decent outlook in long run. Hence, considering the aforesaid facts and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.110, down 8.333% on September 23, 2019.

 

Flinders Mines Limited

Requirement of Raising Fund to Overcome the Challenges: Flinders Mines Limited (ASX: FMS) is involved in mineral exploration and development at its Pilbara Iron Ore Project (PIOP), situated in the Pilbara region of Western Australian. Recently, the company appointed leading banking and equities executive Mr James Gurry as independent Non-Executive Director. Mr. Gurry is a leading equity analyst with extensive research experience in the Iron Ore sector. He has served as a Director at Corporate & Investment Bank, and head of Natural Resources Equity Research with Deutsche Bank Equities Australia, and equity research with Credit Suisse Equities in both Sydney and London.

FY19 Key Highlights:Group’s net current asset surplus for the period was reported at $1.490 Mn. It incurred a net loss for the year at $5.470 Mn, with net operating cash outflows at $5.109 Mn. A twelve-month cash flow forecast shows that the Group will need to raise additional funds in order to repay the short-term loan provided by PIO Mines Pty Ltd (PIO), a subsidiary of its major shareholder TIO (NZ) Limited (TIO) and to meet working capital forecasts. The Group has negotiated an unsecured loan agreement with PIO of $5 Mn with the proceeds being used for working capital purposes. The terms of this loan include, a maturity date of 30 April 2020 or within 14 days of the closing of a capital raise with an interest rate of BBSW (Bank Bill Swap Rate) plus a 2% margin.

 

FY19 Income Statement (Source: Company Reports)

What to expect:As per the release, the group is committed to continue with no debt. The challenges for the company comprise three key ingredients, i.e., money, markets and infrastructure. Under money, PIOP requires considerable funding to develop the mine, processing and infrastructure, and the company does not have the balance sheet to secure debt and shareholders do not have the capacity to provide equity. Moreover, significant sales and marketing investment required to secure offtakes to underpin development. Under infrastructure, an integrated rail and port solution will cost around +$5 Bn.

Stock Recommendation:FMS’s share generated a positive YTD return of 36.11%. Its current ratio for FY19 stood at 3.22x, better than the industry median of 1.87x, which implies that the company is in a better position to address its short-term obligations. Its debt to equity ratio for FY19 stood at 0.05x, lower than the industry median of 0.11x.Hence, considering the aforesaid facts and current trading levels, we suggest investors to have a watch stance on the stock at the current market price of $0.054, up 10.204% on September 23, 2019.
 

Berkeley Energia Limited

Cash Balance at the End of June’19 Quarter Stood at $97 Mn:Berkeley Energia Limited (ASX: BKY) is involved in the mineral exploration and development. Recently FIL Limited and the entities, ceased to be a substantial holder in the company with final stake of 4.88%, effective from September 12, 2019.

June’19 Quarter Key Highlights:Subsequent to the end of quarter, Mr. Paul Atherley resigned as Managing Director and CEO to concentrate on his other investments in the resource sector. Mr. Robert Behets, Non-Executive Director, has now assumed the role of Acting Managing Director on an interim basis and will be assisted in Spain by Mr. Francisco Bellón, the Company’s Chief Operations Officer.

The Salamanca mine is being developed to the highest international standards and the Company's commitment to the environment remains a priority.

At the end of the quarter, the company maintained a strong financial position of $97 Mn in cash.


June’19 Quarter Key Highlights (Source: Company Reports)

What to expect:Company’s primary focus continues to be on progressing the approvals required to commence construction of the Salamanca mine and bring it into production. It is now in the process of setting up its head office in Madrid and will ultimately seek to recruit a suitably qualified Spanish National for the Managing Director and CEO role. Following on from the Company’s successful listing on the Spanish Stock Exchanges in 2018, these initiatives are aimed at further enhancing the Company’s strong engagement with its key stakeholders in Spain.

The company will continue to advance the recently announced battery and EV metals exploration strategy which includes an initial six-hole drill programme in licence areas, indicated to be prospective for the battery and EV metals lithium, cobalt, tin, tungsten and rare earth elements.

Stock Recommendation:BKY’s share generated positive YTD return of 62.50%. Its ROE for H1FY19 stood at 80.1%, better than the industry median of 5.3%, which implies that the company generated better return for its shareholders than its peer group. Its current ratio for H1FY19 stood at 6.04x, better than the industry median of 1.21x, indicating a better position for the company to address its short-term obligations than its peer group. The stock is trading below the average of its 52-week high and low level of $0.740 and $0.135, respectively. Hence, considering the aforesaid facts and current trading levels, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.260 on September 23, 2019.

 
Comparative Price Chart (Source: Thomson Reuters)

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