according to Fosters.........Today’s Top Picks. Paladin Energy...

according to Fosters.........

Today’s Top Picks.

Paladin Energy (PDN, $0.98, Mkt Cap $825M) – Market update on strategic sales process. TRADING BUY

•In recent days management have provided the market with an update on the operations and the strategic initiatives underway to strengthen the balance sheet (debt currently ~US$740m). We view the strategic initiatives a key near-term catalyst for a re-rating of the stock and demonstrate value across PDN’s asset portfolio.

•While the appetite for uranium stocks remains gloomy with little hint of an upward movement in the spot price, we believe PDN remains a stand-out TRADING BUY opportunity in the lead up to one or more deals being announced near term.

•PDN’s target was to follow the $200m EdF off-take deal (August 2012) with a major asset level deal at the in the June 2013 quarter. We now anticipate the prospect of an extension to this timetable given the nature and scale of a transaction and the importance of the getting the right deal in place that will re-set the valuation of the portfolio and set in train deals to follow.

•We do not view any extension post June 30 as a negative and with the stock ranging between .94-1.00 in recent days; it remains a buy at these levels. We believe the large industry players will view the two operating assets an attractive investment opportunity while at the bottom of the uranium price cycle, the operating costs continue to improve and a uranium price that can only head north from here.

•Operationally, costs continue to come down in line with four full quarters of Stage 3 production above nameplate for Langer Heinrich and Kayelekera production ramp up is also now at nameplate and C1 costs sub $40/lb. Optimisation initiatives at both operations will continue to bring down costs and increase positive operating cash flow. A material impact on the debt will bring down financing costs and see PDN return to profitability and highly leveraged to the uranium price
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•The next catalyst for the Uranium price should follow the elections in Japan set for late July where we expect the Japanese government to announce the restart of 48 reactors. Reports of businesses raising concerns about the additional shortages of electricity supply in the lead up to summer should keep the pressure on government to restart.

•We view PDN one of our top TRADING BUY recommendations on any weakness below $1/sh given a strategic deal could see the stock quickly trading above $1.20/sh.

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