Analysts: Cameco Well Positioned to Weather the Turmoil

Swirling concerns about Cameco Corp.'s (CCJ) liquidity should be put to rest, says RBC Capital Markets analyst H. Fraser Philips

The analyst wrote in a research note:

We are not worried about Cameco's balance sheet or debt maturities. We believe that Cameco has ample liquidity to meet its near term commitments.

On Tuesday, Cameco Corp. reported a 48% increase in third-quarter profit but said it was re-examining spending going forward due to global economic uncertainty and battered capital markets.

Mr. Philips told clients that he believes Cameco is well positioned to weather the turmoil, saying the combination of its free cash flow, cash on hand and credit facilities is enough to fulfill its near term debt obligations.

Based on his calculations, Mr. Philips says Cameco currently has C$374-million in cash and available credit. Expected free cash flow over the next 15 months is C$422-million for total liquidity of C$796-million. Cameco's total debt obligation in the next year is C$539-million.

The analyst also said Cameco has the option of terming out some of its short-term commitments, noting that credit markets have taken on "a slightly more positive tone" over the past few weeks.

He wrote:

We believe that the primary market for new debt issues will have occasional windows of opportunity and given that Cameco has more than 7 months before the maturity of its revolving credit facility and the company's high credit quality and balance sheet strength, we believe the company has the flexibility to term out some of its short term debt commitments or roll over the short-term facility (even at a reduced size).

Mr. Philips reiterated his "outperform" rating and C$24 price target.  

Scotia Capital analyst Lawrence Smith also told clients that Cameco's current debt level is manageable based on the company's expected cash flow in 2009 of C$390-million. He maintained his "sector perform" rating and C$23.75 price target.

Comments

[User 59050:]

well it SHOULD be able to weather the market turmoil after the way it has sold off. this stock didn't hold up in a good market . .so it is at the bottom in a bad one. this should be approached as a beaten down value play . not some strong stock that has the juice to withstand anything.

2008 Nov 14 08:15 AM

[SWUguru:]

This article was written to counter an Oct 29 alarmist blog "Short Term Debt Saddling Cameco Corp". That earlier blog was published by someone who could never have looked at a Cameco balance sheet, but was probably told to cry "Fire!" in support of a bear raid by one of our illustrious hedge funds. For shame.

That being said, if CCJ can't keep their mines from flooding, its going to be tough to justify much increase in the stock price.

2008 Nov 14 04:35 PM