Paladin Energy Ltd

Key Takeaways from Annual Report of FY 2019: Paladin Energy Ltd (ASX: PDN) is primarily engaged in the development and operation of the uranium mines in Africa, together with the global exploration and evaluation activities in Africa and Canada. As on August 28, 2019, Paladin Energy Ltd has a market capitalisation of circa A$236.53 million. The company has recently released its annual report for FY 2019 in which its loss after tax from continuing operations amounted to US$42,992,000 as compared to 2018 figure of profit after tax of US$343,413,000. The company was having unrestricted cash and cash equivalents as at June 30, 2019, amounting to US$25,360,000. The following picture provides a brief overview of the cash flows for the year:


Cash Flows for the Year Ended June 30, 2019 (US$M) (Source: Company Reports)

With respect to financial position, it was added that the company’s unrestricted group cash and cash equivalents fell 35% and stood at US$25,360,000 and its net debt rose 32%, from US$80,739 at June 30, 2018, to US$106,835 at June 30, 2019. The company’s net loss after tax rose 113%, largely because of one-off gain on the extinguishment of debt in 2018 of US$483,721,000, which resulted from effectuation of Deed of Company Arrangement on February 1, 2018. It was added that the CEO named Scott Sullivan, during his first year, has led a fresh focus towards understanding PDN’s various uranium assets, broader uranium market and the essential systems, policies and procedures under which the company operates.

What To Expect From PDN: Inthe report, it was stated that when managing the capital, the management’s objective revolves around ensuring the adequate cash resources in order to meet PDN’s commitments and to maintain the optimal returns to the shareholders via ensuring the lowest cost of capital available to the entity. PDN utilises the combination of debt and equity in order to provide the cash resources required and the management reviews capital structure from time to time as appropriate. Considering the absence of the operating cash flow for majority of the year, the company is conscious of its budgeting and expenditure, which might prove beneficial over the long-term.

It was added that the company’s management of financial risk is aimed at ensuring that the net cash flows are sufficient enough to meet all the financial commitments as well as to maintain capacity to finance the corporate growth activities.

Stock Recommendation: The stock of Paladin Energy Ltd has witnessed the fall of 10% in the span of previous one month while, in the time frame of past six months, the stock has fallen 22.86%. As per ASX, the stock price has been trading slightly lower than the average of 52-week high and low levels of $0.220 and $0.110, respectively. Also, it was stated that the company is committed towards the goal of sustainable development, which is reflected in corporate values. Itwas mentioned that PDN is recognised as being uniquely placed within the lists of the uranium focussed companies, and the company might benefit from the expected increase in the uranium price. Paladin Energy’s unique position is mainly because of the 75% ownership of Langer Heinrich Mine in Namibia. Hence, in view of aforesaid facts coupled with current trading levels and decent outlook in long run on the back of growing uranium demand in Asia and European market, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.135 per share.  

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