Paladin Energy Ltd (ASX: PDN) shares are down almost 30% over the past 12 months, and according to the analyst team at Shaw and Partners, that just shouldn't be the case.
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Paladin Energy shares at historic lows
The broker has just released a new research report on Paladin, pointing out that its shares are trading near a 14-month low.
In their own words, "that makes no sense to us".
They added:
The uranium price continues to tick higher, the outlook for the uranium industry could hardly be stronger, and Paladin is making excellent progress with the world class Patterson Lake South Project.
Shaw and Partners said the company did miss consensus expectations for its quarterly production result, with the one million pound result about 140,000 pounds lower than expectations.
This amount was worth about $5 million to the company, but its market capitalisation fell $340 million on the news.
Shaw and Partners noted that despite the production miss, annual production guidance was maintained at 5.1-5.6 million pounds of uranium.
They did put forward another potential explanation for the share price weakness.
Perhaps another reason for the stock weakness today is that cash flow in the quarter was weak. Paladin's cash balance has reduced from US$265m at 30-Jun to US$209m at 30 Sep. This is mainly a function of the timing of customer receipts (US$71m), which were around US$20m lower than revenue and well down on June quarter receipts of US$158m. The company expects receipts to rebound in the December quarter.
Paladin Energy shares looking very cheap
Shaw and Partners noted that Paladin had made good progress at Patterson Lake during the quarter, with regulatory processes moving forward and exploration success at the emerging Atlas and Saloon East Discoveries.
The broker added:
We maintain our BUY recommendation and $19.10 Price Target which is based on our discounted cash flow valuation of Langer Heinrich and Patterson Lake. On our modelling, in our view, the PDN share price pullback below $10 per share is presenting investors with an excellent opportunity to gain exposure to a quality uranium company which is in its strongest position since recapitalising in 2021.
Paladin Managing Director Paul Hemburrow said the result was impacted by the shutdown and pit transition at Langer Heinrich, "with feed grade, plant performance and in-circuit inventory improving during September''.
The company had $US209 million in cash at the end of the quarter.
Paladin shares are changing hands for $7.11 at the time of writing. The company is currently valued at $3.21 billion.
