paladin report

from morgan stanley today, please DYOR, thx

Paladin Energy Ltd
Impressive Commissionings, Buy Maintained
Paladin’s FY09 result was a shade better than expected, with an underlying loss
of US$49m vs CIRA estimate of US$53m after stripping out interim after tax
impairments. Despite recent slackening in the spot price, we remain positive on
the uranium outlook given the global reactor build continues to be revised upward
and security of supply concerns mount. We maintain our Buy rating and A$5.40
target price.
Growth projects hitting their straps — Stage 2 of the Langer Heinrich (LH)
expansion to 3.7mlbpa is expected later this quarter having suffered only minor
tie-in delays to date. The Kayelekera project is contending with some inevitable
material handling ramp-up challenges, but the project is within 5% of budget and
is now running at ~60% design with full 3.3mlbpa capacity expected early CY10.
Paladin’s US$134m cash position following first draw-down of US$167m
Kayelekera project financing leaves company well funded. US$71m is required
for LH Stage 3 expansion, with expected completion date late in CY10.
Notwithstanding relatively smooth commissionings, PDN admits FY10 production
guidance of 6.6mlb will be “a stretch”. We maintain our more conservative FY10
forecast of 6.16mlb, with the company to provide a further update at Sep Q result.
Our estimate of ~1.1mlb inventory (excl. strategic PDN Nuclear inventory of
>500,000lb) provides the company with solid negotiating currency and ability to
capitalise from any market tightness with uncommitted volumes.
Rating Buy, Medium Risk (1M)
Price $4.37
Target Price $4.75
Expected Total Return (%) 14.4