Paladin Energy Ltd

PDN Details

Sound financials and Debt reduction: Paladin Energy Ltd (ASX: PDN) reported a stellar set of numbers for FY18 with Net profit after tax attributable to members surging 180% to $367.76 Mn. The profit comes against the loss of $457.78 Mn posted by the company in FY17. The company has witnessed significant debt reduction during the year from US$739 Mn to US$ 115 Mn. Further, the cash resource available with the company is enough to fuel the ongoing process. Underlying EBITDA came in low for the company primarily due to decline in the realized uranium sales price and uranium sales volume by 10% and 16% respectively. We expect that the strong financial position of the company with a 273% rise in cash and cash equivalents to the US $39,166,000 and net debt reduction by 88% would enhance growth going forward.


Underlying EBITDA (Source: Company Reports)

On the other hand, the company has the ability to grow organically through a restart of LHM and KM along with the strong portfolio of exploration and development assets.

Stock Performance: Meanwhile, the stock has generated negative YTD return of 2.56% and recent price movement has contracted with the price moving in the range of $0.21 and $0.18. The stock has respected its support level of $0.18 from quite some time, indicating a good opportunity for the investors to take a fresh position for the better risk-reward ratio. The group’s operating margin has also improved and is expected to witness more strength going forward. We recommend "Speculative Buy" on the stock at the current market price of $0.180 expecting that the company would continue to register healthy topline and bottom-line numbers despite certain headwinds.
 

PDN Daily Chart (Source: Thomson Reuters)
 

Energy Resources of Australia Limited

ERA Details

Focus on Cash to drive growth:Energy Resources of Australia Limited (ASX: ERA) posted 1% decline in the revenue from ordinary activities in 1H FY18 at $169.64 Mn against $171.22 Mn in 1 HFY17. The company posted net loss after tax of $78.32 Mn in the last fiscal compared to the loss of $9.58 Mn in 1H FY17. The loss for the company increased due to non-cash impairment charge of $90 Mn after tax to the Jabiluka Underdeveloped Property. However, net profit before tax and impairment was recorded at $14 Mn in the 1H FY18 against the loss of $10 Mn in the 1H 2017. Cash resource for the company has increased in the 1H FY18 with total cash resource of $459 Mn as at 30 June 2018. Total cash flow generated for the first half was $13 Mn. Further, the company was able to maintain the premium price on Uranium, achieving average realized price of US$ 47.56 per pound representing a premium of US$26 per pound to the spot price. Besides this, the company will continue to expect uranium production for the full year to be within the range of 1,600 tonnes to 2,000 tonnes. Hence, we expect that operational efficiency, focus on cash generation and premium price command on Uranium would be the growth driving factors for the company in the later half of the year or thereafter.
 

Cash Generation Trend (Source: Company Reports)

Stock Performance: ERA had a lackluster performance on the bourses this year, generating negative YTD return of 55.93%. However, the stock has not gone below its crucial support level of $0.369 over past six months, suggesting that near term weakness would not impact the company’s ability to add value to the shareholders. At current price, the stock presents a decent risk reward ratio for the shareholders. The group’s gross margin and EBITDA margin have started falling in the positive zone. We recommend a “Speculative Buy” on the stock at the current market price of $0.375 expecting rebound from the current levels with changing dynamics.
 

ERA Daily Chart (Source: Thomson Reuters)
 

Berkeley Energia Limited

BKY Details

Focused on increasing operational efficiencies: Berkeley Energia Limited (ASX: BKY) is the only listed mining company in Spain and has been focused on taking up detailed project review to ensure optimal utilization of capital and controlled operating cost. The company is determined to cut the initial capital expenditure required to start production in the mine by approximately 69 Mn. The company plans to achieve this target by augmenting plant capacities, outsourcing peripheral infrastructure and cutting on the initial throughput for production from the Retortillo deposit. As at June 2018, the company had cash and cash equivalent of $100.84 Mn. Moreover, Uranium production cuts and growing demand in the second half of the FY18 would work in favor of the company as it owns 2.75 Mn pounds of U3O8 under contract for the first six years of production, in addition, to further 1.25 Mn of optimal volume at an average price above US$42, compared to the current spot price of $22 per pound.

Capital Expenditure reduction target, strong Uranium market fundamentals and strong support from stakeholders would work in favor of the company going forward.

Stock Performance:The stock has generated a negative YTD return of 29.05%. The stock can, however, see a turnaround from the current levels as it has not breached the crucial support level of $0.68. Momentum indicators and average price movement do not present any alarming situation indicating a decent case for the investors to enter the stock at current levels. Based on aforesaid facts, we give a “Speculative Buy" recommendation on the stock at the current market price of $0.730.
 

BKY Daily Chart (Source: Thomson Reuters)
 

Alligator Energy Limited

AGE Details

Benefit from recent drilling activity: Alligator Energy Limited (ASX: AGE) has recently commenced drilling of TCC4 uranium prospects in Arnhem Land, NT. The prospect is most advanced untested undercover Uranium target having a large strongly coherent geochemical pathfinder anomaly, substantial SAM geophysical anomaly and favorable stratigraphy of the Cahill formation. By looking at overall scenario, AGE stands to get benefit from the rise in demand of Uranium in the coming months as the recent production cuts at Cameco’s McArthur River Mine in Canada and Kazatomprom’s operations in Kazakhstan are expected to bring down the uranium stocks through 2018. Further, there are also a number of significant nuclear utilities across the globe which would need to replace their existing long-term uranium supply contracts in the next 1-2 years. Meanwhile, the stock has mirrored the broader sector performance generating negative YTD return of 15.84%. The stock has seen minimum activity but that might change as the company might benefit from the Uranium demand-supply deficit scenario. We believe that the investors should keep a watch on the stock at the current market price of $0.008 (down by 11.111% on September 06, 2018).
 

AGE Daily Chart (Source: Thomson Reuters)

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