Boss Energy Ltd

BOE Details

Boss Energy Ltd (ASX: BOE) holds certain uranium projects. The company has acquired the Honeymoon project from Uranium One Pty Ltd in December 2015. Honeymoon is a pure-play uranium mine situated in South Australia. BOE aims to place the Honeymoon Project as Australia’s next Uranium producer with a capacity of up to 3.3 million lbs per annum.

Quarterly Update (For the Quarter Ended 30 June 2021)

• The expected pre-tax NPV of Honeymoon stood at US$309 million, an increase of 35% from last year’s Feasibility Study with the forecast pre-tax IRR at 47% and EBITDA margin of 62%.
• The production capacity of Nameplate increased by 22.5% to 2.45Mlb of U3O8.
• All-In Costs were reduced by 11% to stood at US$31.86/lb and the All-In-Sustaining Costs declined by 16% to US$25.62/lb. Further, the cash costs fell 21% to US$18.46/lb.
• The anticipated capital cost of expanding production was US$80 million.
• The company holds the choice of feeding its strategic 1.25Mlb U3O8 inventory into its contract portfolio after the setting up of the Honeymoon project. The value of the inventory stood at US$75 million.
• The unrestricted cash and cash equivalents at end of 30 June 2021 stood at A$20.87 million compared to A$18.06 million in the previous quarter.

Key Data (Source: Company Report) 

Key Updates

• Key EPC Contractor Appointed: The company, on 16 September 2021, has appointed the EPC contractor for the electrical, instrumentation, and control system. This appointment is a step forward towards the re-start of the production at its mothballed Honeymoon uranium project situated in South Australia.
• Expand Exploration Activity: As per the release dated 2 September 2021, the company is fast-tracking the development of its exploration strategy. It is all set to commence a seismic reflection program, a step forward in its strategy to increase the inventory at its Honeymoon Uranium Project in South Australia. This program aims to detect possible uranium-bearing sediments within the known mineralised palaeo channels. The drilling activities are expected to commence in the coming quarter.

Outlook

The company is progressing as per the plan to start production at Honeymoon. It has fast-tracked development of its exploration strategy that has resulted in substantially increasing the global JORC resource at Honeymoon to 71.67Mlbs from 16.57Mlbs, an increase of around 433% since the acquisition of the project in December 2015.

The benefits of the expanded global JORC resource along with the advantage of extensive permits and extremely promising exploration upside reflect considerable possibility to enhance the production activities at Honeymoon’s beyond the EFS estimates.

Key Risk

Any delay in the commencement of the production at its Honeymoon project would adversely impact the business of the company. Further, it is exposed to key financial risks such as interest rate risk, liquidity risk, and credit risk.

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

Technical Analysis:

Daily Price Chart

Source: REFINITIV, Note: The Purple Color Line Reflects RSI (14-Period)

BOE prices broke the downward sloping trend line by an upside on 23^rd September 2021 and since then prices are sustaining above the breakout point indicating positive price movement. RSI (14-period) is trading near at ~51.86 further indicating that prices are trading in a bullish trajectory. Immediate support levels are AUD0.225 and AUD0.200 while immediate resistance are AUD 0.300 and AUD 0.320.

Stock Recommendation

The company has delivered 6-month and 9-month returns of ~+79.31% and ~+220.99%, respectively. The stock is trading above the average of the 52-week high price of $0.36 and the 52-week low price of $0.058.

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and the target price so arrived reflects a rise of low double-digit (in % terms). A slight discount has been applied to EV/Sales Multiple (NTM) (Peer Average), considering no receipts from customers in Q4FY21 as well as negative cash flows from operations in Q4FY21.

On the technical front, investors with a high-risk appetite might consider a ‘Speculative Buy’ position, incorporating the support and resistance as one of the tools while analysing the investment opportunity. The stock was analysed as per the current price of $0.253, (Time: 2:16 PM (GMT+10), Sydney, Australia), as of 27^th September 2021. 

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

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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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