Why this ASX 300 uranium stock could rocket 45%

Bell Potter sees big returns on the cards for this energy share.

| More on:
A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Demand for uranium is expected to increase materially over the coming decades as the world embraces nuclear power again.

This bodes well for a handful of ASX 300 uranium stocks that trade on the ASX boards.

One of those is Deep Yellow Limited (ASX: DYL), which has deep pockets following a recent capital raising.

These funds will be used to advance the development of its flagship Tumas Project in Namibia, as well as progress the development activities at the Mulga Rock Project in Western Australia.

Is this an ASX 300 uranium stock to buy?

The team at Bell Potter was pleased with the capital raising and believes it makes the company a great option for investors that are wanting to gain exposure to uranium. It commented:

DYL has gone hard early, which we believe puts the company in a better position to negotiate offtake with utilities, ultimately feeding into debt negotiations. We estimate the capital requirement to bring Tumas into production at $657m, which following the $250m allocation to Tumas in the recent capital raise, leaves $407m to be sourced. We suspect DYL will look to source traditional debt for most of the remaining balance, however other options include pre-production sales and as a failsafe option, strategic equity.

In response to the capital raising, the broker has reaffirmed its speculative buy rating and lifted its price target on the ASX 300 uranium stock by 5% to $1.90 (from $1.81).

Based on its current share price of $1.31, this implies potential upside of 45% for investors over the next 12 months.

Though, it is worth noting that it has a speculative rating. This makes it a higher risk option that may not be suitable for all investors.

The broker concludes:

Further upside in uranium remains, as limited near-term supply spurs the spot market whilst the global path to decarbonisation shapes the role of nuclear over the longer-term. Following the merger with VMY (Vimy – de-listed), DYL has a Mineral Resource Estimate (MRE) of 431mlbs U3O8, and an Ore Reserve of 110mlbs U3O8. We see DYL as being attractively positioned in a rising uranium bull market, capable of delivering the next wave of supply into an increasingly tight market.

Overall, this could make it a good option if you're bullish on uranium and have a high tolerance for risk.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

a smiling young woman carrying a pile of books, indicating a lifting share price for book sellers
Share Market News

Here's how the ASX 200 market sectors stacked up last week

ASX utilities shares led the 11 market sectors for a second consecutive week.

Read more »

Animation of a man measuring a percentage sign, symbolising rising interest rates.
Share Market News

Here's when Westpac says the RBA will cut Australian interest rates

Are interest rates coming in 2024 or 2025?

Read more »

Contented looking man leans back in his chair at his desk and smiles.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A young boy sits on his father's shoulders as they flex their muscles at sunrise on a beach

Where I'd invest $10,000 in ASX growth shares right now

These are my top picks for growth.

Read more »

A man with his back to the camera holds his hands to his head as he looks to a jagged red line trending sharply downward representing the ASX tech share sell-off today
Share Market News

How likely is a stock market crash in 2024?

Stock market crashes are a painful, but inevitable, part of investing.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Resources Shares

Goldman Sachs says this ASX 200 mining share is in for a 33% whack

The top broker predicts a fairly miserable 12 months ahead for this diversified miner.

Read more »

A woman wearing a top of gold coins and large gold hoop earrings and a heavy gold bracelet stands amid a shower of gold coins with her mouth open wide and an excited look on her face.

I believe this ASX 200 stock can DOUBLE its profit in 5 years

This stock has enormous profit growth potential in my eyes, here’s why.

Read more »

Top ten gold trophy.
Share Gainers

Here are the top 10 ASX 200 shares today

ASX investors endured a sour end to the trading week today.

Read more »