Macquarie initiates coverage on this ASX All Ords energy stock; tips close to 80% upside

Bannerman Energy Ltd (ASX: BMN) shares have jumped 1.98% higher in Friday afternoon trade. At the time of writing the ASX All Ords stock is changing hands for $3.09 a piece.

The shares have dropped 18.47% over the past month but are still 8.04% higher than this time last year.

For context, the ASX All Ordinaries (ASX: XAO) index is down 0.28% at the time of writing. For the year it is 6.98% higher.

Bannerman Energy is an Australian uranium developer. It has a flagship Etango Project in Namibia, Africa, which is one of the world's largest undeveloped uranium assets. Bannerman has undertaken extensive feasibility studies at the site and has environmental approvals for a future mining operation.

And today, analysts at Macquarie Group Ltd (ASX: MQG) have initiated coverage on the stock, with a very bullish outlook on where the share price will go from here.

The ASX All Ords stock is tipped to surge

In a note to investors, the broker revealed it has an outperform rating and $5.50 target price on the uranium developer.

At the time of writing that implies a huge potential 78% upside for investors over the next 12 months.

"Valuation: Our 12-mth TP based on 1.0x NAV is A$5.50/sh (on US$95/lb uranium). We already include the anticipated dilution from equity issuance to build Etango-8 (a strategic partner selldown could pose upside)," the broker said in its note.

Catalysts: Uranium price, Etango strategic partner entry, Etango FID (next 6 mths), Etango first drummed U3O8 (2028), Etango XP decision (~2030)….Investment Thesis and Recommendation Outperform. Etango is at the front of the greenfield uranium project queue, being fully approved in a proven and low risk jurisdiction with early works underway and long leads ordered. Strengthening uranium contract price structures are an enabler of the project, and driver of share price upside.

What else does Macquarie have to say about the energy stock?

Macquarie noted that the uranium industry lacks shovel-ready greenfield uranium projects, at a time when uranium demand growth is structurally accelerating. 

It explains that Bannerman Energy's Etango project is fully approved and has now commenced more substantial early works. A final investment decision (FID) is also approaching, and the company plans to deliver its first uranium to market in 2028. 

Given strong reactor growth (~70 under construction, nearly half in China), utilities will need more uranium – with restarts nearly exhausted, we forecast US$95/lb long term uranium prices. While BMN is retaining uncapped upside on majority volumes for now, which we believe is prudent, if floors rise to the ~US$85/lb zone it could start to make sense to layer in (would depend on financing structure).

The post Macquarie initiates coverage on this ASX All Ords energy stock; tips close to 80% upside appeared first on The Motley Fool Australia.

Motley Fool contributor Samantha Menzies has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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