ubs at it again, page-4

Nightstalker

I gather you're not to impressed with the Swiss at the moment, however I would like to draw your attention to "paragraph 5", this time ;)

I last posted this around the 26/04/2012




Courtesy of Foster Stockbroking - Morning Report

http://www.fostock.com.au/announcements/paladin-energy-ltd-pdn-asx-1-57-sh-mkt-cap-1-3b


Paladin Energy Ltd (PDN.ASX, $1.57/sh, Mkt Cap $1.3b) – Convertible note issue removes short term debt concerns, creates short term trading opportunity. TRADING BUY PT $2.30/sh.

PDN recently announced the issue of US$274m convertible bonds. It was encouraging to see strong demand for the bond issue which was at the top end of the company’s expectations. The new bonds carry a 6.0%p.a coupon and are convertible into Paladin shares worth $US2.19 ($A2.13), which represents a 25 per cent premium to its share price before the issue was announced, and will be redeemed on 30 April 2017.

The proceeds of the issue will be used in part to fund PDN’s concurrent tender offer to acquire up to US$200M of its US$325M issue of convertible bonds due in March 2013, with the remainder of the 2013 notes to be covered by the sale of non-core assets. We view the recent raising as a positive for PDN given it removes concerns regarding the looming maturity of the 2013 bonds and the company’s ability to fund its short term debt position from operating cash flows and should serve to improve investor confidence in the company.

We believe the concurrent issuing and tendering of convertible bonds provides a trading opportunity to capitalise on. Our view is that investors that participated in the bond issue will also likely short the stock on some ratio to hedge their credit risk, hence why on Wednesday we saw 41M shares traded which was more than double the 12month average volume. We believe this will create extra selling pressure over the next few trading sessions and present a buying opportunity. We recommend buying the stock below $1.60/sh.

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Furthermore the tendering of the 2013 bonds which commenced on 23 April and expires on 22 May 2012 will have the opposite effect. Investors in the 2013 notes that tender their bonds will potentially look to buy back stock to remove their hedge thus creating an ideal opportunity to sell into.
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With its Langer Heinrich and Kayelekera operations in Namibia PDN are seeking to increase production from ~5.7Mlbs in FY11 to ~8mlbs in FY12. The company’s growth profile remains one of the most attractive in the uranium industry and we believe PDN provides the greatest leverage to the expected improvement in uranium prices. We rate Paladin a TRADING BUY and recommend buying below $1.60/sh.

Hint hint

SwissB