Mega Uranium Ltd (TSX: MGA) is a Canada based exploration stage mineral resources which is engaged in the acquisition and exploration of uranium prospective properties. Its properties include Ben Lomond, Georgetown, and Kintyre in Australia. Geographically, it operates in Canada and Australia.

Key Updates:

• Exit from Mustang Lake uranium property: On May 18, 2022, the company reported the sale of its 66% interest in the Mustang Lake uranium property located in Labrador, Canada to Labrador Uranium Inc. The property is subject to a joint venture with Anthem Resources Inc. and was originally acquired by MGA in 2007 through its acquisition of Monster Copper Corporation.

• Decline in Cash balance: At the end of Q2FY22, the company reported its cash balance of CAD 0.46 million, which is significantly lower than CAD 1.28 million in Q4FY21. Moreover, the company reported a net cash used in operations of CAD 1.31 million in Q2FY22, significantly higher than CAD 0.96 million in pcp. A lower liquid asset remains a key concern and might hinder the overall liquidity position of the company.

• Lower Net profit: The company’s net income decreased to CAD 3.91 million v/s CAD 11.55 in pcp. This was primarily due to an unrealized gain on marketable securities amounting CAD 8.99 million in pcp. Income per common share stood at CAD 0.01 in Q2FY22, as compared to CAD 0.03 in pcp.

Stock Recommendation:

The company is yet to report a stable income from its operations and is going through several testing process. Hence, we are uncertain regarding the exact time of uranium discovery and prefer to remain on the sidelines. Moreover, the stock corrected ~32% in the last one month depicting a higher selling pressure from the investor’s end. The stock of MGA is available at a P/E multiple of 11.2x on TTM basis, as compared to the industry (Energy) median of 2.3x. Considering the aforesaid facts, we recommend a ‘Watch’ stance on the stock of MGA at the last closing price of CAD 0.225 on May 25, 2022.

One-Year Technical Price Chart (as of May 25, 2022). Analysis by Kalkine Group

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

 Technical Analysis Summary

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