morning report paladin energy ltd -trading buy

http://www.fostock.com.au/announcements/paladin-energy-ltd-pdn-asx

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22-Jan-2014
Morning Report

Paladin Energy Ltd (PDN.ASX; $0.56/sh; Mkt Cap $539m) – Bond spike, a good indicator of future confidence – TRADING BUY

Today’s Top Pick.

Paladin Energy Ltd (PDN.ASX; $0.56/sh; Mkt Cap $539m) – Bond spike, a good indicator of future confidence – TRADING BUY

PDN’s share price reaction has been fairly subdued given a partial sell down of Langer Heinrich (‘LH’) and a favourable restructuring of project finance. However, we believe the spike in the PDN bond prices, which have jumped 20% since the announcement (chart below), provides a good indicator of future confidence and we expect the equity price to follow suit.
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PDN had 93m short position as of 15/01/14. We anticipate a short covering rally has and should continue to occur as a result of the sale and also exacerbated by the increasing bond price which could result in bond holders which are hedged through a short equity position to unwind their hedge positions.
TRADING BUY