Sell Alerts + Three ways to ride the nuclear energy boom
14th April 2022 |
The UK seeks to generate 25% of its electricity from nuclear power sources by 2050.
It gets 14% of its electricity from nuclear energy sources.
On the surface, and given the time frame, the 2050 target doesn’t look too ambitious.
However, when you consider that it takes an average of five years to build a nuclear power plant, which is more than double the time required to build a coal-fired plant, it’s pretty audacious.
To help achieve this objective, the UK government is planning some rapid nuclear expansion.
On 7 April, the government announced that it is seeking to approve eight nuclear reactors between now and 2030 as part of a new energy strategy.
De-commissioned nuclear sites – including Wylfa in Anglesey and Oldbury in Gloucestershire – will be re-used to house the reactors. Active reactor sites will also be used. Sizewell B in Suffolk, in particular, is set to accommodate two new nuclear reactors. Sizewell is also probably about to receive planning approval for an £18 billion nuclear site, Sizewell C, following the Sizewell A and B projects. The former is decommissioned, and the latter is still active, meeting some 3% of the UK’s electricity demand.
A final decision on whether the Sizewell C project can go ahead will be given on 25 May.
The UK government has already injected £100 million into the project, so it looks likely that it will, and we think this could be the real catalyst for the UK nuclear energy movement.
It’s clear that, given the current economic climate, the UK government understands the necessity for nuclear energy.
For example, with soaring bills putting a squeeze on our pockets, nuclear energy could provide a cheaper energy alternative.
According to NUCNET, the cost of nuclear energy will range from about $55 to $95 per MWh in 2025. In comparison, coal will cost around $100 per MWh, whilst gas will cost $80 per MWh.
In addition, the Russia-Ukraine crisis has exposed frailties in the efficiency of energy systems.
In particular, the freezing of the Nord Stream 2 gas pipeline that runs between Russia and Germany has put a strain on gas supply and prices in Europe.
Nuclear energy could create energy independence, because it can be generated from almost anywhere in the world.
In this sense, countries could become self-reliant in their energy production, eliminating exposure to external shocks.
But what’s changed since last month’s double recommendation, you ask?
Before, there was a lot of chatter about how to deliver nuclear energy in the UK.
That talk is now being transformed into action, with clear frameworks being put in place.
With this, there is a strong investment case for our UK-listed nuclear energy stocks Yellow Cake (LSE: YCA), Aura Energy (LSE: AURA) and Rolls-Royce Holdings (LSE: RR).
Yellow Cake is a uranium-hoarding company, giving direct exposure to its spot price without mining or processing risk.
Uranium is of course a key ingredient in nuclear energy generation. The splitting of uranium atoms via a process called nuclear fission releases vast amounts of energy.
Yellow Cake holds 18,805,601 lbs of uranium oxide. The current spot price of uranium is $56.70 per lb.
That means Yellow Cake’s assets are worth more than $1 billion at present, which makes its share price of 471.00GBp look hugely undervalued.
Aura Energy is an early-stage mining company that operates a uranium-mining project called Tiris in Mauritania, Africa.
The estimated production of uranium oxide in the project is 12.4 million lbs over 15 years, with the potential to produce more.
Aura is well into the development stage of mining, and aims to move into production. Once it does, it will physically extract the uranium mineral and move closer to commercial production.
The signs are that Aura could move into production soon, which is hugely encouraging.
The company has uncovered water deposits – crucial for an efficient mining process – at Tiris. Managing director Peter Reeve says that this will expedite the mining process.
Finally, Rolls-Royce is an engineering company focused on the production of propulsion systems and renewable energy infrastructure.
Rolls-Royce is in the process of getting approval for its own nuclear reactors from the UK government. Collectively, the reactors would generate up to 470MW of energy per annum, equivalent to production from around 150 wind turbines.
It has already received £500 million in public funding for its small modular reactor nuclear project, and is hopeful that it can begin energy production in 2030.
We reiterate our BUY recommendations for Yellow Cake, Aura Energy and Rolls-Royce Holdings.
You can find their original recommendations here, by clicking on each of their “open dates”.
Trade Alert: two SELL moves to take some profits
We’ve been reviewing some positions in the portfolio.
The Frontier Tech Investor buy list has been looking pretty hefty for a while, so we think now is a good time to trim it down a little.
That said, we’re going to sell two holdings from the buy list, both for a healthy gain.
Of course, there’s always the lingering “FOMO” that sets in when selling stocks. However, sometimes it’s about knowing when to take the money off the table.
The first one we’re selling is Marston’s (LSE: MARS).
Marston’s, an operator of UK pubs, has been in the portfolio for around two years now.
When the hospitality sector was on its knees following the coronavirus pandemic, we took a position in the stock, getting in at 37.5GBp.
We thought this was a gross undervaluation at the time, given the popularity of Marston’s pubs in the UK and the inevitable post-pandemic recovery.
We were right.
Its current share price of 78.10GBp represents a healthy 108% gain, which we believe is too good to ignore.
Also, bearing in mind the rising foods cost stemming from supply chain shortages and the Russia-Ukraine conflict, we think now is a good time to sell given the impact this could have on the hospitality sector.
Action to take: sell Marston’s (LSE: MARS)
The second is Corero Network Security (LSE: CNS).
Again, we believe the pandemic put this one in the shop window when we bought it for 6.45GBp back in June 2020.
Being a provider of cyber-defence solutions, Corero was caught up in the tech sell-off that shook stock markets two years ago.
With more people working at home, and moving data off-premises, we envisaged the role cybersecurity would have to play in subsequent months.
In part, this has helped to drive Corero’s share price up to 14.25GBp at the time of writing, which is a 120% gain.
With Corero’s commercial progress slowing a little, we believe now is the perfect time to exit a position in the stock, and take the healthy gain off the table.
Action to take: sell Corero Network Security (LSE: CNS)
The Frontier Tech Investor “Top Three”
Sometimes, it’s hard to decide which stocks to invest in from our buy list.
Below is our Frontier Tech Investor “Top Three” section, showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: it’s just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Team17 (LSE: TM17) – Team17 is a video game publisher. It has a large collection of games that contains some of the most popular products of the gaming world. One of these is Worms, the enthralling last-man-standing survival game born out of the nineties gaming boom. Team17 is keeping up with the times and offers its games across a number of contemporary technology platforms. It has even flirted with the idea of non-fungible tokens (NFTs), a megatrend which could revolutionise the gaming industry. At a time where sceptics think online gaming will come off the boil following the easing of lockdown restrictions, Team17 keeps gamers coming back for more. You can find the original recommendation here.
MPAC Group (LSE: MPAC) – MPAC is a leading provider of packaging solutions. The company is helping to deliver efficiency gains to customers through its automated processes that harness some of the most powerful technologies of the modern day. This includes augmented reality (AR) and the use of “smart” machinery. With MPAC, it’s the machines telling the human what to do, rather than the other way around, with the result that human error is eradicated and that manufacturing lines are smoother than ever before. You can find the original recommendation here.
Volex (LSE: VLX) – Volex is a global manufacturer of power and connectivity products. This includes power cables, fibre optics and charging plugs. It might sound a little basic – however, these are critical mechanisms which are powering some of the key technologies of the modern day. These technologies include electric vehicles (EVs), artificial intelligence (AI) and big data networks. Volex has huge credibility behind it, especially as it does business with some of most widely recognised companies in the world, including Tesla. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Junior Analyst, Frontier Tech Investor
PS As we’re coming into the Easter long, long weekend we just wanted to let you know that next week’s edition of Sam Volkering’s Crypto Network will come to you on Tuesday when we’re back in the office rather than Monday, which is of course a bank holiday.
