Is this the perfect clue to sell Boss Energy shares? (Or dip buying opportunity)

Tue 28 May 24, 12:48pm (AEST)
Aerial photography reveals the extent of existing development at Honeymoon, near SA's Broken Hill
Source: Aerial photography reveals the extent of existing development at Honeymoon, near SA's Broken Hill

Key Points

  • Boss Energy's CEO and key directors sold a significant portion of their shares, raising concerns about the company's valuation, management changes, and execution risks
  • Despite the selloff, Boss Energy is set to sell its first uranium and increase production amid a strong uranium market, presenting a critical milestone for the company
  • Boss Energy's valuation is high compared to peers like Paladin Energy, posing a challenge in justifying growth and expansion without encountering significant obstacles

Boss Energy (ASX: BOE) is on track for its worst day since mid-February after chief executive Duncan Craib offloaded 3.75 million shares or approximately 72% of his holdings on market just weeks before the company's first uranium sales.

A selldown of such magnitude ahead of a key catalyst has now sparked considerable speculation. In the following sections, we'll delve into some of the key hypotheses and data points to better understand the potential implications of this move.

The selldown

A collective 4.6 million shares (approximately 1.1% of shares outstanding) were sold down as part of the 'Director Share Sale' announcement. While a vast majority of the selldown was attributed to Mr Craib, the other two disposals came from:

  • Non-Executive Director Wyatt Buck sold 291,777 shares or 63% of his holdings

  • Technical Director Bryn Jones sold 600,000 shares or 63.5% of his holdings

All things considered, this was a pretty aggressive selldown from the company's largest holders (in terms of directors).

In the company's defence, they said "several years ago, the Board of Directors made personal commitments not to sell any shares until its 100 per cent-owned Honeymoon uranium mine commenced production."

"Mr Craib joined Boss in January 2017 and was tasked, personally invested, and incentivised with taking the Honeymoon mine toward production. Having achieved that milestone event ... Mr Craib remains a significant long-term shareholder of the Company and has no intention to sell any further shares in the medium term."

Food for thought

#1 Boss has hit a significant milestone and management are simply reaping a well-deserved reward while retaining some shares: The uranium sector has come out of a grueling, decade long bear market. Boss was trading as low as 4 cents in 2013. At current prices, the stock is up more than 13,000% from lows. After such a prolonged period of pain and recent glory ... why wouldn't you want to sell?

#2 Boss has a pretty rich valuation relative to peers and has a lot of work cut out for it: Boss is one of the most expensive uranium stocks. Here's how it compares to Paladin Energy from a resource perspective. (The below data has been taken from Macquarie research reports)

Boss Energy Reserves and Resources (April 2024)

  • Honeymoon (Measured, Indicated and Inferred): 83.75Mlb

  • Alta Mesa (Measured, Indicated and Inferred): 20.20Mlb

  • Total: 103.95Mlb

  • Market Cap/Reserves and Resources: A$19.2/lb

Paladin Energy Reserves and Resources (February 2024)

  • Reserves (Langer Heinrich and Stockpiles): 84.3Mlb

  • Langer Heinrich (Measured, Indicated and Inferred): 127.8Mlb

  • Australia assets: 190.1Mlb

  • Canada assets: 127.7Mlb

  • Total: 548.2Mlb

  • Market Cap/Reserves and Resources: A$8.3/lb

Notwithstanding other factors such as geography and production, Boss is pretty expensive. After such a run up in valuation, the onus somewhat falls on the company to grow its resource, expand production etc. But can it achieve this without running into problems?

#3 Management changes: Boss has experienced two major executive changes in recent months. This includes:

  • Chief Financial Officer: Andre Potgieter (ex-Rio Tinto) was replaced with Justin Laird (ex-Wesfarmers)

  • General Manager: James Davidson (ex-ERA mining) was replaced with Robert Gordon (ex-Newcrest)

Uranium bulls

Uranium has been one of the best performing sectors in the past twelve months, with a benchmark such as Sprott Uranium Miners ETF up around 92%.

BOE 2024-05-28 12-18-39
Paladin Energy (Green), Uranium ETF (Red) and Boss Energy (Yellow) | Source: TradingView

From a spot price perspective, prices have been relatively rangebound since March, trading around the US$90/lb. Most chartists are probably thinking "what a constructive chart ... I'm looking for a breakout to the mid US$90s".

2024-05-28 12 19 14-Uranium - Price - Chart - Historical Data - News
Uranium spot price (Source: TradingEconomics)

The bottom line: The selldown by three key executives has highlighted several of Boss' shortcomings, such as valuation, management changes, and execution risk, which contribute to investor uncertainty. Nevertheless, Boss is poised to sell its first uranium and ramp up production amid a rising uranium market. Will investors stay for this milestone, or are there too many red flags prompting a pivot to other, cheaper options like Paladin or Deep Yellow?

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

Get the latest news and insights direct to your inbox

Subscribe free