Analyst Actions: Credit Suisse Keeps Outperform, Target $1.80 On Paladin Energy

Credit Suisse says: "Mar-Qtr Production In-line; Cost Controls Working In Tough Uranium Market."

Event: "PDN announced Mar-Qtr (3Q13) production of 1.992Mln lbs U3O8 - in-line with our estimate. Uranium sales volumes of 1.92Mln lbs were below our estimate of 2.20Mln lbs, offset by a higher realized price of C$55.22/lb vs. our C$47.55/lb estimate. As a result, Mar-Qtr revenues of C$106Mln were also in-line".

View: "In-line production quarter. Production at Langer Heinrich ( LH ) of 1.230Mln lbs was in-line vs. our 1.228Mln lbs, but down 13% QoQ owing to water constraints and operational issues. We believe the issues surrounding water limitations are a result of disruptions due to upgrades to NamWater infrastructure, and together with interim agreements for additional desalinated water supply and water conservation measures, should not affect LH nameplate performance (5.2Mln lbs annual run-rate). Kayelekera production of 0.762Mln was largely in-line vs. our 0.776Mln lbs. FY13 production guidance on-track. PDN maintained its FY13 production target of 8-8.5Mln lbs. Through the Mar-Qtr, production has totaled 6.112Mln lbs, or 74% of the mid-point of the range, placing PDN in a good position to achieve annual production targets."

Catalysts: "Keys to the PDN story remain strategic initiatives, deleveraging, and cost optimization. PDN previously announced a program to realize cost savings of C$60-80Mln over the next two years. At LH, Mar-Qtr C1 costs remained steady at C$29.60/lb (in-line) despite water disruptions reducing LH production to 96% of nameplate. At Kayelekera, Mar-Qtr C1 costs were 8.5% lower QoQ at C$39.80/lb (vs our C$44/lb). We currently forecast cash cost improvements of 8% YoY in FY13 (to C$35/lb from C$38/lb). PDN noted that its previously announced strategic initiatives of debt reduction is ongoing. PDN has targeted a D/D+E ratio of below 30% in the medium-term (from 46% at end 2Q13), a level we believe is mostly achievable through pre-payment cash inflows (EdF contract) and the sale of a minority stake (20-30%) in its Queensland (Australia) assets, which could raise proceeds of C$80-100Mln."

Valuation: "Our TP of C$1.80/share is based on 1x our NAVPS of C$1.79/share, which includes C$1/share in exploration and development properties."

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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