PDN 0.00% 42.0¢ paladin energy ltd

support for paladin

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    Support For Paladin
    FN Arena News - July 19 2007

    By Rudi Filapek-Vandyck

    Equity strategists at UBS made no secret of the fact they have been searching the Australian share market for laggards to add to their model portfolio. For what it’s worth, the broker remains a firm believer in strong global economic growth in the year ahead, albeit with the potential for the US to disappoint. Bond yields should remain contained in the six months ahead.

    UBS sees value in Australian banks, selected infrastructure stocks (see bond yields above), and selected long-duration growth stocks. Add resources to this list as the strategists believe the market has not reached the hype stage yet. As they expect this to happen at some time the sector should offer more upside still.

    Investors in the uranium sector may be heartened by the fact that the broker has added Paladin Resources (PDN) to its model portfolio. Paladin is currently the broker’s most preferred resources stock in the Australian share market showing a firm belief in further upside for uranium prices as well as management’s ability to bring the Kayelekera project on line.

    UBS currently has a $11 target for the shares and that is, to our knowledge, only beaten by the $12.10 target ABN Amro placed on the stock in April this year. The average target price in the FNArena database is $10.60, well above current share price levels of $8-something.

    GSJB Were has maintained Paladin as a Sell on its Conviction List. The broker did remove Rio Tinto (RIO) as a Conviction Buy from the list after the proposed takeover of aluminium producer Alcan had been announced.

    However, UBS’s positive view on Paladin’s share price prospects received support from resources analysts at Royal Bank of Canada (RBC) this week with RBC arguing Paladin remains the best exposure to uranium in Australia. RBC is less enthusiastic about Energy Resources of Australia (ERA), predominantly because of the latter’s legacy contracts.

    In breaking news for the uranium market, the US Department of Energy (DOE) has announced it will be soliciting proposals to sell eight lots of Natural Uranium Hexafluoride (UF6) – up to 200 metric tons (MTU) by August 17th.

    Stockinterview.com reports the amount being offered for sale, in terms of U3O8 equivalent, represents less than 520 thousand pounds. However, the DOE’s decision comes at a time when the uranium market is in seemingly oversupply which has caused the weekly spot price to decline in each of the past three weeks.

    Other companies added this week to the UBS model portfolio were Ausenco (AAX), Babcocck & Brown Capital (BCM) and Macquarie Communications Infrastructure Group (MCG). These stocks, and Paladin, replaced Australian Worldwide Exploration (AWE), Transurban (TCL), Transfield Services (TSE) and Challenger Infrastructure Fund (CIF).

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