Uranium Participation Corp: On the Watch List
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Topic: Uranium Mining Stocks — August 13th, 2006
Uranium Participation Corporation is a holding company for investment into uranium assets. The company’s main objective is that of acquiring U308 with the view that it will experience considerable appreciation as the uranium price moves up.
Uranium Participation Corporation recently reported its net asset value at CDN$256,480,000. On a fully diluted basis, the net asset value per share was CDN$6.84.
As the Stock price is at $8.90 it appears to us that we are being asked to pay a considerable premium for this stock. For the moment we will keep it on the Uranium-stocks Watch List but we will not be buyers at this price.
We do anticipate uranium to move higher as the nuclear option becomes more acceptable but we think that there is better value elsewhere.
Uranium Participation Corporation trades on the TSX under the symbol of ‘U’
13 August 2006
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My analysis is very unscientific but your comment caught my attention. I was trying to work out why UPC historically traded between 122% to 132% of NAV. The only answer I could muster was the future expectation of the spot price of the underlying commodity.
Based on my crude calculations the spot price of the underlying would have to increase for 7 months (compounded) on current monthly growth rates for the NAV to catch up with a static share price. My gut feeling is when this number exceeds 9 its time to sell.
Comment by Luke Mellor — September 3, 2006 @ 8:46 pm
Its an interesting one. As of 31 July 2006 UPC reported a NAV of CDN$256,480,000 or $6.91 per share. If we throw in the warrants and options we get the fully diluted figure of $6.84 per share. The current stock price is $9.05 divided by $6.84 and we come with 132%, which you have calculated as the top end of your range - fine by us.
Your gut feeling may be correct, I know that in the past I have sufferd when I have ignored mine. Also, we dont know your particular circumstances or investment criteria or aversion to risk, etc, so we wouldn’t dream of giving you a sell signal on this stock.
However, we would like to share a few thoughts with you:
1. The NAV on its own gives us a guide but should not be considered in isolation.
2. The underlying asset of uranium is destined to go higher according to our research which we will publish shortly. So, the expectation for uranium stocks will be to outperform the market, for which we have to cough and then pay the premium.
3. This company is managed by Dennison mines, so we think that you are in good hands in management terms.
4. The past monthly growth of the spot price is a good indicator so we now need to consider the possible future growth. Will it be the same? will it be slower? For what it is worth we see it accelerating.
We are currently seeking an entry point on this stock and if we owned it we would probably continue to hold it, but not all investors have the same objectives.
Good luck with UPC and if you have the time please let us know the outcome.
As usual please check with your regulated financial advisor before investing your hard earned cash.
Comment by Bob — September 4, 2006 @ 1:56 pm
I’m thinking of buying this stock.
It offers a decent leverage to the uranium price. Sometimes with the explorers and miners, the shares get dumped alongwith all other commodity stocks.
By U you are ensuring that you will profit from an increase in uranium prices.
Before I buy I’m gonna work out the ratio of U the metal vs. U the stock. Also I’m going to do some comparative analysis to see if this stock is traking the price.
I’ll get back to you guys this one and I’ll keep you posted on my progress…
Comment by Sam — October 23, 2006 @ 8:33 pm
Its a hot day for uranium stocks, FRG is up 8%!
We look forward to your deliberations
Comment by Bob — October 23, 2006 @ 8:52 pm