Tuesday, December 12, 2006

Calls of Note Part 3

- RBC Capital is upping Cameco (AMEX:CCJ) to Top Pick status as the shares offer significant upside potential. The negative effects of the flooding at Cigar Lake mine should be more than offset by rising uranium prices.

Uranium prices look set to continue their ascent. Firm believes that the uranium market will be in deficit in 2006 through 2008 and in a relatively balanced state from 2009 to 2010 based on a 2-year delay in the start-up of Cigar Lake. Their bullish outlook for uranium is unchanged from their November 17, 2006 upgrade. They continue to forecast an average price of $100/lb in 2007.

RBC expects the contribution from Bruce Power to increase over the next three years, and longer-term, as there is the potential for a significant expansion at Bruce. Also, Centerra is one of firm's Top Picks in the gold sector. Cameco has signalled that it will sell its interest in Centerra to fund further investments or acquisitions.

RBC values Cameco based on forecast 2007 uranium and power earnings with target P/E's of 25x and 15x respectively, in-line with historical trading ranges, and then add to that the company's 53% interest in Centerra Gold at market. Firm target price is $67.00.

Notablecalls: I guess the Top Pick status combined with $67 tgt will create some buy interest in CCJ.

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