Share price of China Longyuan Power (916 HK) has been under pressure over the last two weeks due to concern on future offshore wind power project return.
We believe the low tariff of Rmb0.19/kWh won by a Huaneng Power Group consortium in Fujian is more an exceptional case and should not be taken as a new normal.
China Longyuan’s growth has been well secured by its project pipeline as well as 21GW potential injection from parent. This round of de-rating is just too excessive.
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The listing of EDF’s shares is resumed with the announcement of a minorities buyout offer at €12/share, a 53% premium to the undisturbed share price.
It is a generous offer that also aims to avoid the outcry of EDF’s employees (c. 1% stake). Interloper risk is nil. Delisting is expected by the end of October.
Gross spread is 2.13% which could lead to an interesting c. 8% estimated annual return if settlement takes place by the end of October. Long and tender.
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In the last six weeks, AGL Energy Ltd (AGL AU) has fallen and is now at the low end of its post-Brookfield bid trading range. Now below the A$8.25 bid.
AGL has one generator down – the Loy Yang A Unit 2 – which will be back in late Sep. Guidance is left… unguided. There will be a related loss.
In the meantime, the rest of the producing assets have probably been having a field day. But given shareholder structure, we’re still in limbo.
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We raised our DCF-driven target price to RM3.40 from RM3.10 on the back of 15%-23% upgrade in FY22-FY23 net profit forecasts on higher total margin spread assumption of RM2.60/mmbtu from RM2.50/mmbtu-RM2.40/mmbtu.
We believe our previous assumptions were conservative as the strong 1QFY22 margin is to set a new base for the next three years. OUTPERFORM maintained
Gas Malaysia Distribution Sdn Bhd (GMD) continued to register volume growth as all shippers have to pay for the usage of GMD’s distribution pipeline
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The revision was a remedial requirement (announced on the 27 Dec) after the Office of the Energy Regulatory Commission (ERC) resolved to approve, in principle, the proposed merger of GSPC and GLOW, provided GLOW sells Glow SPP1 before or at the same time as the merger. The ERC had previously rejected the merger on the 11 October.
Subsequent to the SPP1 sale, the purchase price under the SPA was adjusted to Bt91.9906/share, a ~3% decline from the initial Bt94.892/share price under the original SPA.
My discussions with GLOW indicate the SPA is expected to complete this week – i.e. Engie crosses its 69.11% holding in GLOW to GPSC – and that the 247-3 and 247-4 forms will be submitted by GPSC in “around” 1-2 weeks after the close of the main transaction. The ERC signed off on the SPA last Friday.
Assuming late-May payment, this is currently trading at a gross/annualised spread of 1.6%/8.8%.
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The revision was a remedial requirement (announced on the 27 Dec) after the Office of the Energy Regulatory Commission (ERC) resolved to approve, in principle, the proposed merger of GSPC and GLOW, provided GLOW sells Glow SPP1 before or at the same time as the merger. The ERC had previously rejected the merger on the 11 October.
Subsequent to the SPP1 sale, the purchase price under the SPA was adjusted to Bt91.9906/share, a ~3% decline from the initial Bt94.892/share price under the original SPA.
My discussions with GLOW indicate the SPA is expected to complete this week – i.e. Engie crosses its 69.11% holding in GLOW to GPSC – and that the 247-3 and 247-4 forms will be submitted by GPSC in “around” 1-2 weeks after the close of the main transaction. The ERC signed off on the SPA last Friday.
Assuming late-May payment, this is currently trading at a gross/annualised spread of 1.6%/8.8%.
We maintain our positive view toward its long-term outlook on the backs of potential growth from its location and secured contract with government agency. Maintain a BUY rating with a new target price of Bt16.8 (SOTP).
The story:
We cut our 2019-2021 earnings forecast by 12-13% to factor in rising depreciation expenses caused by its shortening depreciated years of PTW’s assets.
Our new target price of Bt16.8 is derived from Some-of-the-parts (SOTP) which comprises (1) Bt13.8 from core business (tap water supply under both TTW and PTW) based on DCF(6.7%WACC, 0%TG) and (2) Bt3.0 from CKP based on IFA report.
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Xinyi Energy Holdings Ltd (1671746D HK) has filed IPO prospectus once again to list its solar generation business that was spun-off from its parent company Xinyi Solar Holding Ltd. Xinyi Energy has 9 operational solar farms with a total capacity of ~950MW.
The company is set to acquire additional solar farms of 540MW capacity from its parent company in a separate transaction post IPO.
Xinyi Energy has not indicated the size and pricing of its offer, however, according to various media reports the company is expected to raise nearly HK$570M (around 12% of the previous offering of HK$4.5B). A significant portion of IPO proceeds is expected to be utilised towards upfront payment of 50% for acquiring solar farms from its parent company and the remainder for working capital and debt repayment. Although we have a positive view of the solar energy sector, the IPO pricing will determine our overall view of the company.
In our Discover HK Connect series, we aim to help our investors understand the flow of southbound trades via the Hong Kong Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by mainland investors in the past seven days.
We split the stocks eligible for the Hong Kong Connect trade into three groups: component stocks in the HSCEI index, stocks with a market capitalization between USD 1 billion and USD 5 billion, and stocks with a market capitalization between USD 500 million and USD 1 billion.
In this insight, we highlight the WH Group, which led the inflows last week.
We initiate coverage of SPCG with a BUY rating and a 2019E target price of Bt22.80, derived from a discounted cash flow valuation (WACC 7.0% and terminal growth of 1.0%). This is equivalent to 8.4x PE’19E.
We write this note to provide P G & E Corp (PCG US) current state of affairs. First and foremost, we believe that the equity value is zero as the company restructures under chapter 11 bankruptcy code. Most companies that enter chapter 11 bankruptcy either face operational or financial headwinds. PG&E problems are compounded by complications of litigation and regulatory risk along with operational and financial risks.
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Khazanah plans to raise around US$260m via selling 85m share in Tenaga Nasional (TNB MK). We have covered three such placements since 2015 and most have ended up doing ok, if not well.
Out of the three previous placement, Khazanah was the seller for the first two (2015 and 2016). Hence, this deal is unlikely to be a huge surprise. However, the stocks recent performance hasn’t been great and the replacement of the CEO seems to have raised more questions than it answers.
In our Discover SZ/SH Connect series, we aim to help our investors understand the flow of northbound trades via the Shanghai Connect and Shenzhen Connect, as analyzed by our proprietary data engine. We will discuss the stocks that experienced the most inflow and outflow by offshore investors in the past seven days.
We split the stocks eligible for the northbound trade into three groups: those with a market capitalization of above USD 5 billion, and those with a market capitalization between USD 1 billion and USD 5 billion.
We note that in March, northbound inflows turned more cautious vs strong inflows in February (link to our Feb note) and January (link to our Jan note). Nevertheless we see strong inflows into Healthcare sector, led by Jiangsu Hengrui Medicine Co., (600276 CH). We also highlight Universal Scientific Industrial Shanghai (601231 CH 环旭电子) in the mid cap space that attracted strong northbound inflows.
In my initial insight on China Power New Energy Development Co (735 HK, “CPNED”)‘s privatisation by China Power New Energy Limited (the Offeror) by way of a Scheme, I concluded China Three Gorges, CPNED’s largest shareholder with 27.10%, will likely be required to abstain at the Court Meeting as it is presumed to be a connected party to the Offeror as per the Takeovers Code.
But the announcement states that CTG has given an irrevocable undertaking to vote for the Scheme and to elect the share alternative.
It seems illogical to mention in the irrevocable CTG will vote for the Scheme when in actuality it cannot vote. So, which one is it?
The short answer is: CTG cannot currently vote.
But understanding this requires diving into the minutiae of Hong Kong’s Takeovers Code. So I do.
SOE State Power Investment Corporation (SPIC) is seeking to privatise China Power New Energy Development Co (735 HK) by way of a Scheme at $5.45/share, a 41.9% premium to last close and a 78.1% premium to the 30-day average.
A scrip alternative (6 New shares for one Scheme shares) into an unlisted vehicle under SPIC is also available.
China Three Gorges, CPNED’s largest shareholder with 27.10%, have given an irrevocable undertaking to vote for the Scheme and to elect the share alternative.
However, China Three Gorges is presumably required to abstain from voting at the court meeting, as it is deemed to be acting in concert with the SPIC under class (1) of the definition of the acting in concert in the Takeovers Code. The announcement does not make this clear.
Assuming China Three Gorges does abstain, a 10% blocking stake at the court meeting is equivalent to 4.48% of shares out or 53mn shares.
This looks like a pretty clean deal. It is priced above the highest close since its listing by way of introduction on the 18 July 2017, while the excitement over the potential injection of all nuclear power assets and businesses from State Nuclear Power Technology Company has been removed after the restructuring was cancelled in July last year.
The stock is currently trading at an attractive gross/annualised spread of 8.3%/28.9% conservatively assuming a late July completion, and inclusive of the final dividend.
Our proprietary corporate governance scoring system now covers over 1,800 stocks including 70 Electricity, Alternative Energy, Distribution, Water and Utilities companies in Emerging Markets.
This report includes the Energy and Utilities names currently under coverage. The lowest score in this group is Korea Gas (44/100).
We have found that scores below 50/100 indicate poor corporate governance and higher risk of fraud.
Korean companies often have lower scores as a result of a lack of board independence and convoluted corporate structure.
Of the groupings presented here Alternative Energy has the highest average score at 64/100. We welcome requests from clients of names they want to see added to the universe.
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We maintain our positive view toward its long-term outlook on the backs of potential growth from its location and secured contract with government agency. Maintain a BUY rating with a new target price of Bt16.8 (SOTP).
The story:
We cut our 2019-2021 earnings forecast by 12-13% to factor in rising depreciation expenses caused by its shortening depreciated years of PTW’s assets.
Our new target price of Bt16.8 is derived from Some-of-the-parts (SOTP) which comprises (1) Bt13.8 from core business (tap water supply under both TTW and PTW) based on DCF(6.7%WACC, 0%TG) and (2) Bt3.0 from CKP based on IFA report.
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We maintain our positive view toward its long-term outlook on the backs of potential growth from its location and secured contract with government agency. Maintain a BUY rating with a new target price of Bt16.8 (SOTP).
The story:
We cut our 2019-2021 earnings forecast by 12-13% to factor in rising depreciation expenses caused by its shortening depreciated years of PTW’s assets.
Our new target price of Bt16.8 is derived from Some-of-the-parts (SOTP) which comprises (1) Bt13.8 from core business (tap water supply under both TTW and PTW) based on DCF(6.7%WACC, 0%TG) and (2) Bt3.0 from CKP based on IFA report.
A shareholder of China Gas Holdings (384 HK) is looking to sell about 142m shares worth approximatel US$443m. This is a clean-up trade.
The deal scores well on our framework owing to its pristine track record of outperformance and decent earnings momentum. It is also a clean-up trade, hence, no overhang on its share price.
However, the performance of prev deals show that placements larger than HK$3bn tend to perform flat over one-month period whereas placements with smaller deal size did well.
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