Brief Utlilities: Xinyi Energy IPO Preview: Second Time Lucky? and more

In this briefing:

1. Xinyi Energy IPO Preview: Second Time Lucky?
2. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)
3. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn
4. SPCG: Laying Foundations for Next Stage of Growth
5. PG&E: Turnaround; A Mission Impossible Task

1. Xinyi Energy IPO Preview: Second Time Lucky?

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.

2. HK Connect Discovery Weekly: Mainland Investors Buying WH Group (2019-03-22)

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. 

3. Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn

Below is a recap of the key Event-driven, IPO and placement research produced by the Global Equity Research team. This week we highlight Arun’s analysis on the takeover deals for Navitas Ltd (NVT AU) and Mindtree Ltd (MTCL IN) and the valuation range for Delta Electronics Thai (DELTA TB) . In addition, Arun recommends taking the Gds Holdings (Adr) (GDS US) placement while recommending the deal for MYOB Group Ltd (MYO AU) and contends investors may need to be patient for the rejected Sigma Healthcare (SIG AU) deal. Venkat looks into the bankruptcy arbitrage situation for P G & E Corp (PCG US) and contends PG&E has no equity value due to pending litigation risks. Finally, Arun initiates on the IPO of Chinese e-commerce company Ruhnn Holding Ltd (RUHN US)

Best of luck for the new week – Arun, Venkat and Rickin

4. SPCG: Laying Foundations for Next Stage of Growth

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.

The story:

• Promising industry outlook
• Striding toward overseas opportunities
• Expiring adder should have been priced in already
• Expected stable earnings in 2019-21E

Risks:   Single source supplier

                Forex fluctuation

                Uncertainty about sunlight

5. PG&E: Turnaround; A Mission Impossible Task

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.