Stocks’ Details 

Paladin Energy Ltd

Q1FY21 Quarterly Update: Paladin Energy Ltd (ASX: PDN) is engaged in exploration and evaluation activities. It also develops and operates the Langer Heinrich Mine in Namibia, where it owns a 75% stake. The market capitalisation of the company as on 11 January 2021, stood at ~A$633.39 million. During Q1FY21, the company continued restart planning activities at the Langer Heinrich Uranium mine. It incurred a cash expenditure of US$1.9 million during the quarter. PDN had US$149.3 million of senior debt, as on 30 September 2020.

Cash Expenditure during Q1FY21 (Source: Company Reports)

Outlook: The company expects improved performance in FY21, with a decrease of 44% in expenditure to US$9.5 million, compared to FY20. It will continue to engage with potential customers for securing uranium term-price contracts and put emphasis on the restart of the Langer Heinrich mine.

Stock Recommendation: The cash position of the company as on 30 September 2020, was at US$32.4 million. The Langer Heinrich Uranium mine is a long-life operation asset, whose operations were suspended in 2018 due to low uranium prices. PDN gave a return of 154.16% in the past three months and a return of 45.23% in the past one month. The stock of PDN is trading above its average 52 weeks’ trading range of $0.035-$0.325. On a technical front, the stock of PDN has a support level of $0.284 and a resistance level of $0.323. On a TTM basis, the stock of PDN is trading at a P/BV multiple of 2.9x, higher than the industry median (Energy) of 1.9x. Considering the current trading levels, steep price movements in the past few months and valuation on TTM basis, we are of the view that most of the positive factors have been discounted, Hence, we give an ‘Expensive’ rating on the stock at the current market price of $0.305, down by 1.613% as on January 11, 2021.

Leigh Creek Energy Limited

Execution of JV Agreement: Leigh Creek Energy Limited (ASX: LCK) is engaged in the development of its Leigh Creek Energy Project. The market capitalisation of the company as on 11 January 2021 stood at ~$113.72 million. As per a recent update, the company has announced that it has executed its JV agreement with China New Energy Group Limited, under which LCK will provide In-Situ Gasification (ISG) consultancy and project management services to CNE.

Q1FY21 Quarterly Update: During the quarter, the company continued its pre-feasibility study for the development of an integrated urea production facility at the Leigh Creek project. LCK reported a net outflow of $1.22 million from operating activities during Q1FY21. The cash position of the company as on 30 September 2020 was at $5.02 million. The company will look for federal funding, given its ability to produce hydrogen for less than half the government target price.

Q1FY21 Cash Flow from Operations (Source: Company Reports)

Outlook: The company recently announced the results of the LCEP PFS, and confirmed the potential and development of urea production in the site aided by syngas feedstock. It continues to focus on the development of LCEP with the use of ISG technology, to be able to produce nitrogen-based fertiliser and hydrogen products.

Stock Recommendation: The company has recently announced that it has been issued with a petroleum production licence and associated activities licence, by the South Australian Government for the LCEP project. LCK gave a return of 83.33% in the past three months and a return of 142.64% in the past six months. The stock of LCK is trading above its average 52 weeks’ trading range of $0.062 - $0.220. On a technical front, the stock of LCK has a support level of $0.1365 and a resistance level of $0.1966. On a TTM basis, the stock of LCK is trading at a P/BV multiple of 3.3x, higher than the industry median (Oil & Gas) of 1.8x. Considering the current trading levels and steep price movements in the past months, we are of the view that most of the positive factors have been discounted and give an ‘Expensive’ rating on the stock at the current market price of $0.165, down by 2.942% as on January 11, 2021.

Enegex Limited

Q1FY21 Quarterly Update: Enegex Limited (ASX: ENX) is engaged in the exploration of natural resources. The market capitalisation of the company as on 11 January 2021, stood at ~$8.48 million. During the quarter, the company expanded its exploration activities in its South West Terrane and applied for a further seven exploration licenses. The South West Terrane project covers an aggregate area of ~3,902 sq. km. as on 30 September 2020. ENX raised $440,000 during the September quarter, via an oversubscribed placement of 20,000,000 ordinary paid shares at a price of $0.022 per share. There is a provision of one or two unlisted options to be granted, based on one option for every two shares subscribed, which can be exercised at $0.03 on or before 31 August 2022. The net cash outflow during the quarter was at $0.038 million.

Q1FY20 Cash Flow from Operations (Source: Company Reports)

Outlook: The company expects the presence of large mines and resources in the South West Terrane. Moreover, its quality infrastructure and proximity to Perth augurs well for ENX to monetise from this asset.

Stock Recommendation: The current ratio of the company has decreased to 0.74x in FY20 from 4.44x in FY19. There was a noticeable increase in the cash cycle from 286.5 days in FY19, to 5,433.2 days in FY20. ENX gave a negative return of 32% in the past three months and a return of 264.38% in the past six months. The stock of ENX is trading above its average 52 weeks trading range of $0.004 - $0.090. On a technical front, the stock of ENX has a support level of $0.049 and a resistance level of $0.062. Considering the current trading levels, decrease in current ratio, high cash cycle days, absence of revenue and low market capitalisation, we give an ‘Avoid’ rating on the stock at the current market price of $0.056, down by 6.667% as on January 11, 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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