Berenberg reiterates 'buy' rating on Yellow Cake
By Iain Gilbert
Date: Monday 28 Apr 2025
(Sharecast News) - Analysts at Berenberg took a fresh look at uranium projects investor Yellow Cake on Monday following its quarterly net asset value update for the fiscal year-end, in which it revealed it had a period-end NAV of $1.41bn at the end of March.
As of market close on 25 April, Yellow Cake's NAV stood at roughly $1.47bn, which implies a 15.1% discount to NAV, versus the Sprott Physical Uranium Trust, which was trading at a 9.6% discount to NAV.
Berenberg, which reiterated its 'buy' rating on the stock, said Yellow Cake's quarterly update had provided a summary of recent developments in the uranium market, revealing that the U3O8 spot price had decreased by 11.7% from $73.00 per pound on 31 December to $64.45/lb on 31 March.
"The decrease in the spot price has been primarily due to geopolitical uncertainties about tariffs and US trade policy, which includes potential nuclear fuel-related tariffs. Exemptions remain in place for natural uranium, conversion services and enrichment services, although the situation continues to develop as negotiations with trading partners are ongoing," said Berenberg.
"Despite this backdrop, the long-term uranium price stood at $80.00/lb by quarter-end. Management notes that the long-term supply/demand fundamentals of uranium remain robust, and that volatility in the spot price may persist over the near term, and once there is clarity surrounding the scope and duration of tariffs, uranium spot and term market activity is likely to pick up."
"We expect limited movement from the shares on the NAV publication but would flag to investors that at a 15.1% discount to NAV (and versus a c8% discount since inception), this presents a clear opportunity to gain exposure to a commodity with attractive supply/demand fundamentals at a discount price."
Further, the German bank noted that given the broader market backdrop, it expects sentiment to improve once tariff uncertainty eases, which in its view, should in turn result in market participants stepping back into the market to transact volumes, lending support to higher uranium prices.
"We value Yellow Cake at 1x NAV (the forward value of the uranium holdings and cash position). Our 708.0p price target is driven by our expectation that the uranium price will remain high, at circa $85/lb, in the long term and has the potential to squeeze higher in the short term, beyond the current circa $67/lb level. This should be supported by both growing demand from investors and growing global nuclear power capacity, with North American and then European generators seeking to cover their needs with new contracts as old contracts roll off and supply becomes constrained," concluded Berenberg.
Reporting by Iain Gilbert at Sharecast.com
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