Thursday’s close: $20.45 a share, up 48 cents
52-week trading range: $16.50 to $26.43 a share
Annual dividend: 40 cents a share for a yield of 2 per cent
Analysts’ ratings: There were 10 “buys,” seven “holds” and no “sells,” according to Bloomberg data. Target prices ranged from $22 to $36.50 a share.
Recent history: Shares of the giant Canadian uranium producer have struggled since the meltdown in early 2011 at Japan’s Fukushima nuclear plant that was triggered by an earthquake and tsunami. Japan shut down all but two of its 51 atomic power plants as public opinion swayed against the nuclear power industry. But there has been more interest in Cameco shares since last month’s landslide victory by Japan’s pro-nuclear Liberal Democratic Party. Over the past year, the stock has gained about 9 per cent, including reinvested dividends.
Outlook: With the election of the Liberal Democrats, “prospects for the nuclear industry have grown a little bit brighter,” said Robert Gill, a portfolio manager with Aston Hill Financial Inc. who owns Cameco stock. “Now that the new government is in place, I think that we probably can look at mid-year for some kind of restart on some of the reactors... Once you see some positive headlines about the nuclear industry in Japan, then you are going to see Cameco stock start to react positively.”
Smart investors will want to be ahead of the curve, he said. “I think the stock is substantially undervalued, and will move up meaningfully this year. In 18 months, Cameco could be worth $30 a share...If you look at where it was before Fukushima, the stock was over $43 a share. We see very little downside, but considerable upside in the stock.”
There are “a ton of other catalysts,” he added. “The main force to increase demand in the industry right now is what is happening in China. It currently has 27 reactors under construction, and is expected to build many more than that...You also have demand from the emerging markets. Even with the amount of oil that Saudi Arabia has under the ground, it is building nuclear reactors. It is doing that because....nuclear is a very economic source of energy.”
The end of the U.S.-Russian Highly Enriched Uranium (HEU) Purchase Agreement at the end of this year will boost uranium prices, he added. Russia will no longer continue to “downblend,” or recycle uranium in its nuclear weapons to energy-grade uranium so that will reduce 12.5 per cent of [current] global supply, he noted. “We would expect Cameco stock to move in advance of this because investors will be knowledgeable about that.”