Paladin Energy Inc. (PALAF.PK) is a nice bet for investors looking to benefit from improving sentiment in the uranium market.
That's the call from Canaccord Adams analyst Orest Wowkodaw, who initiated coverage on Paladian on Thursday with a "buy" rating and C$4 price target.
He wrote in a report to clients:
Given the global credit crisis and the financial meltdown, we view uranium as a good place to hide for investors in the near term, as demand remains relatively inelastic to economic activity. In the long term, uranium fundamentals look extremely encouraging.
Mr. Wowkodaw says Paladian is well positioned to take advantage of strong uranium markets, given its production growth profile, healthy balance sheet and attractive valuation that compares favourably to other uranium producers.
The analyst said he expects the company, which has a 100% interest in the Langer Heinrich uranium open-pit mine in Namibia and is also currently advancing the 85%-owned Kayelekera project in Malawi, to report uranium production of 3.35 million pounds in fiscal year 2009 – up from 1.7 million pounds in 2008 – and 6.6 million pounds in fiscal 2010.
The company balance sheet, meanwhile, is supported by C$280-million of cash, and although the company has roughly C$580-million in debt, Mr. Wowkodaw noted that Paladin has no significant debt maturities until fiscal year 2012.