Roth MKM raised its target price on Uranium Energy Corp. (UEC:NYSE AMERICAN) after its agreement to acquire Rio Tinto Plc.’s (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) Wyoming uranium assets for US$175 million in cash.
Roth MKM analyst Joe Reagor, in a research report published on September 25, 2024, reiterated a Buy rating on Uranium Energy Corp. (UEC:NYSE AMERICAN) while raising the price target from US$9.00 to US$9.50. The report follows UEC’s announcement of its agreement to acquire Rio Tinto Plc.’s (RIO:NYSE; RIO:ASX; RIO:LSE; RTPPF:OTCPK) Wyoming uranium assets for US$175 million in cash.
Reagor highlighted the significance of the acquisition, stating, “We view this acquisition as an ideal bolt-on for UEC and as such, we are increasing our price target from US$9.00 to US$9.50.” The analyst noted that the acquired assets include the Red Desert project, the Green Mountain project, and the Sweetwater uranium plant, with historical resources of 175 million pounds of uranium.
The analyst emphasized the potential value creation from these assets, explaining, “Given the current resource base is historical, there is potential for UEC to generate shareholder value by converting these resources to a SK-1300 compliant resource, in our view.” Reagor also pointed out the potential for new discoveries and the significance of the Sweetwater plant, stating, “Ultimately, we believe the licensed capacity could be converted to ISR resin stripping and thereby provide UEC with significant production growth potential.”
Regarding UEC’s strategic plans, Reagor noted that the company intends to fund the transaction from its existing liquidity. He added, “We believe UEC’s purchase price for Rio’s Wyoming uranium assets reflects the historical nature of the resources and a lack of recent work on the projects. However, if UEC is able to update the resources to be SK-1300 compliant, they would be worth significantly more, in our opinion.”
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Roth MKM’s valuation methodology for UEC is based on a sum-of-the-parts analysis. Reagor explained, “We assign a value of US$974.5 million to UEC’s ISR projects (US$8.5 per pound of resource including the historical resources from Uranium One), US$156 million for the potential to add 52 million additional pounds of ISR resources in Wyoming (US$3.00 per pound), US$246.4 million for its hard rock assets (US$6.00 per pound of resource), and US$69.3 million for the company’s exploration project Oviedo (US$3.00 per pound of the low end of the exploration target).”
The analyst added values for various facilities, assets, and investments, including “US$250 million to the company’s Hobson Facility, US$250 million for the Irigaray facility, US$1.2 billion for the former UEX assets, US$255 million for Roughrider, US$325 million for the Rio Wyoming assets (less US$175 million acquisition cost), and US$38.3 million for its titanium asset.”
In conclusion, Reagor’s sum-of-the-parts analysis led to a total valuation of US$3.9 billion, or US$9.45 per fully diluted share, rounded up to a price target of US$9.50. This represents a potential return of approximately 47% from the current price of US$6.45.
The report also outlined several risk factors, including political risk, commodity price risk, operational and technical risk, pre-revenue risk, and market risk, which could impact UEC’s ability to reach the price target.
Important Disclosures:
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Uranium Energy Corp.
- This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.
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Disclosures for Roth MKM, Uranium Energy Corp., September 25, 2024
Regulation Analyst Certification (“Reg AC”): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has received compensation for investment banking services from Uranium Energy Corp.. ROTH makes a market in shares of Uranium Energy Corp. and as such, buys and sells from customers on a principal basis. Shares of Uranium Energy Corp. may be subject to the Securities and Exchange Commission’s Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2024. Member: FINRA/SIPC.
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