Uranium explorer 92 Energy eyes ASX listing for mid-April

Uranium explorer 92 Energy (ASX:92E) is among several companies lined up to list on the ASX this or next week after bioenergy company Delorean joined the bourse yesterday.

There are four IPOs timed for this week, including Delorean (ASX: DEL). The others are Island Pharmaceuticals (ASX:ILA), 92 Energy and Iceni Gold (ASX:ICL).

92 Energy raising $5m

Formed last year, 92 Energy acquired eight mineral claims for uranium in Canada’s Athabasca Basin from Toronto-listed Iso Energy to which it added four of its own tenements.

The tenements are arranged into three projects, Clover, Gemini and Tower, in the Canadian province of Saskatchewan and home to several high profile uranium projects.

ASX stockspert Bhavdip Sanghavi (@Bhavdip143 on Twitter) told Stockhead he believes the current valuation of 92 Energy is “cheap”.

“92 Energy is a uranium explorer in Canada and its Tower project is only 10km from the world’s largest low-cost, highest grade uranium mine, Cigar Lake,” said Sanghavi.

Production is to restart at Cigar Lake in April after a hiatus of four months due to risks from COVID-19 said its operator, Cameco Corporation which owns 50 per cent of the mine.

92 Energy has offered investors 25 million shares priced at 20 cents per share to raise $5m in its IPO, that closed late March, for which Pamplona Capital was the lead manager.

“The valuation of the company is currently cheap with a $13m market cap, and it has $7m of cash on hand, which gives it an enterprise value of $6m compared with $100m for three to four listed uranium companies,” said Sanghavi.

“And it is in a safe mining jurisdiction, Canada, holds 600sqkm of tenements, and has an experienced management team,” he said.

Uranium market tightens

In its IPO prospectus, 92 Energy highlighted that more than 110 of the world’s countries have pledged to make their economies carbon neutral by 2050 and China by 2060.

“The current uranium price of about $US30 per pound is not economical for a lot of uranium companies, but it is moving up and is trading at a six-month high after US president Joe Biden released his zero carbon emissions policy,” said Sanghavi.

“The global focus is on carbon neutral energy and uranium will play a vital role in that,” he said.

“In the last uranium bull market some stocks went up from 100 per cent to 10,000 per cent which was a life-changing event for investors,” he added.

Supply has been tight in the uranium market following the closure of Rio Tinto subsidiary Energy Resources of Australia’s (ASX:ERA) Ranger mine in the Northern Territory.

Island Pharmaceuticals

Another IPO stock to capture Bhavdip’s attention is Island Pharmaceuticals which joins the ASX market today after a $7.5m capital raising.

“Island Pharmaceuticals has repurposed ISLA-101, an antiviral oral drug, to treat mosquito-borne viruses (e.g. Dengue fever, and Zika) and intends to complete Phase II studies with a significantly de-risked clinical program,” said Sanghavi.

Around 390 million humans annually are infected with Dengue, with half showing no symptoms, while Zika virus has spread from West Africa to South America and Southeast Asia.

ISLA-101 was originally a developmental cancer drug developed by Johnson & Johnson and has been through more than 40 Phase I and II clinical trials.

Stock valuation, Priority Review Voucher

“Equatorial mosquito-borne viruses are expanding into developed countries via global warming and there are currently no therapeutics available to treat these viruses,” Sanghave said. “WHO has declared Dengue fever a ‘priority issue’.”

“Hence, the Company is eligible for a Priority Review Voucher (PRV) from the FDA which can sell for up to $US350m on the secondary market.”

A PRV provides a financial incentive to pharmaceutical companies to develop non-commercial treatments that may not be profitable because of a small pool of patients.

“As a repurposed drug, it does not have to repeat its phase one trials and can go straight to the second clinical phase, thereby saving a lot of time and money,” he said.

“The Island Pharma valuation is $12.5m versus a list of peer market caps of between $230m and $830m. I have rarely seen such good value in an IPO stock.

“Currently, only one company on the ASX is developing anti-viral drugs, Starpharma Holdings (ASX:SPL), and it has a market cap of $830m. Two ASX companies with repurposed drugs Paradigm Biopharmaceuticals (ASX:PAR) and Race Oncology (ASX:RAC) have market valuations of $591m and $427m, respectively,” he said.

“Kazia Therapeutics (ASX:KZA) with a market cap of $230m has PRV-eligible drugs.”

Overall, Sanghavi reckons 2021 has been a good year so far for IPO investing.

“Because the bull market has gone up so far, it is hard to find good value in existing stocks, and that is why it is good to consider well-priced IPO stocks,” he said.

“It has been a crazy IPO market lately, with Airtasker (ASX:ART) up to a market cap of $700m at one point. I wasn’t sure it would do that well, but on its second day after listing on the ASX it went up 100 per cent,” said Sanghavi.

Sanghavi participated in the listing of emerging medical imaging company Singular Health Group (ASX:SHG) with its $6m IPO in February, and CAR T gene therapy company Chimeric Therapeutics’s (ASX:CHM) $35m IPO in January.

Singular Health Group has more than doubled its IPO share price of 20 cents to 48 cents this week, while Chimeric Therapeutics was trading up at 30 cents to its IPO price of 20 cents.

The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.