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Analyst Actions: Credit Suisse Analyzes Cameco Corp Q2

Event: "CCO reported adjusted Q2 FD EPS of $0.18 compared to our estimate of $0.20 (consensus of $0.18). Adjusted EPS excludes $0.04 in unrealized losses on derivative contracts (primarily currency). Revenues of $426Mln were lower than our estimate on lower sales (5.8Mln lbs U3O8 vs. our 6.6) which we attribute to normal variability of uranium deliveries and lower realized price ($46/lb vs. our $51), offset by favorable currency gains and income tax recovery."

View: "Mixed. Normal discretionary (seasonal) patterns in customer deliveries of uranium resulted in relatively low volumes in Q2 (18% of annual sales target). Mgmt expects sales to be heavily weighted to 2H, with deliveries in Q4 expected to account for about 1/3rd of annual sales. EBIT from the Uranium Business of $65Mln was lower than expected ($108Mln) on lower sales and price. EBIT from Nuclear Generation of $14Mln was lower than expected ($17Mln) on lower output and pricing. A number of strategic alternatives are being evaluated at Cigar Lake which has delayed release of the technical report beyond Q3. Initial production is still targeted for mid-2013."

Catalysts: "Japan exposure represents 12% of FY11 sales and 18% of total uranium contact book. CCO re-iterated its FY11 uranium sales guidance of 31-33Mln lbs and further noted that they still expect utilities in Japan to take the majority of contractual deliveries. In our view, we expect some of this material to become available and volumes placed back into the market."

Valuation: "We continue to believe CCO will trade at a premium the peer group of uranium miners based on its vertical integration in the nuclear fuel cycle, strong strategic position, cash-flow generating non-mining businesses, and strong balance sheet. Our TP of C$32 is based on 1.3x P/NAV (C$24/share). We are lowering our 2013 EPS estimates to $1.90 (from $1.91)."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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