SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

Singapore Small-Caps with Significant Institutional Inflow in 2019 

<p><i><b>These equity research reports are not written by the SGX.</b> SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</i></p><h2>Sunpower Group Ltd</h2>
<p>Full steam ahead</p>
<ul>
<li>First mover advantage leveraging on environmental protection trend and backed by stable recurring revenue</li>
<li>Steam plants expansion buoyed by defensive textile industry</li>
<li>Further RMB2.3b injection into green investments to cement dominant position; Manufacturing &amp; Services (M&amp;S) segment is group’s backbone</li>
<li>Initiate with BUY and DCF-based TP of S$0.81</li>
</ul>
<p><strong>Green investments (GI) offers a perfect blend of growth and stability.</strong> Sunpower’s new GI business offers resilience with its large exposure to defensive industries. The segment is also aided by supportive government regulations and a global push for environment protection. GI revenue is also recurring in nature, backed by long concessions of around 30 years. As a first mover equipped with proprietary technologies, Sunpower is able to demand prepayments from its customers and generate high operating cash flows in GI.</p>
<p><strong>GI organic growth to complement RMB2.3b in expected GI investments.</strong> We believe Sunpower will invest a further RMB2.3b in GI assets by FY21 to attain its equity investment target of RMB900m. These new investments may potentially generate c.RMB970m and c.RMB275m in revenue and operating income. Additionally, Sunpower is expected to further expand organically as plant utilisations still have room for growth. This combined with the steady closure of small boilers and shifting of businesses to industrial parks will drive organic growth for existing plants.</p>
<p><strong>Margin improvement in traditional manufacturing and services (M&amp;S) driven by peak factory utilisation.</strong> Sunpower’s M&amp;S factory is operating at close to full utilisation on an order book of RMB2.5b. The group is in a good position to cherry pick higher margin projects while keeping its order book steady.</p>

These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.Sunpower Group Ltd
Full steam ahead

First mover advantage leveraging on environmental protection trend and backed by stable recurring revenue
Steam plants expansion buoyed by defensive textile industry
Further RMB2.3b injection into green investments to cement dominant position; Manufacturing &amp; Services (M&amp;S) segment is group’s backbone
Initiate with BUY and DCF-based TP of S$0.81

Green investments (GI) offers a perfect blend of growth and stability. Sunpower’s new GI business offers resilience with its large exposure to defensive industries. The segment is also aided by supportive government regulations and a global push for environment protection. GI revenue is also recurring in nature, backed by long concessions of around 30 years. As a first mover equipped with proprietary technologies, Sunpower is able to demand prepayments from its customers and generate high operating cash flows in GI.
GI organic growth to complement RMB2.3b in expected GI investments. We believe Sunpower will invest a further RMB2.3b in GI assets by FY21 to attain its equity investment target of RMB900m. These new investments may potentially generate c.RMB970m and c.RMB275m in revenue and operating income. Additionally, Sunpower is expected to further expand organically as plant utilisations still have room for growth. This combined with the steady closure of small boilers and shifting of businesses to industrial parks will drive organic growth for existing plants.
Margin improvement in traditional manufacturing and services (M&amp;S) driven by peak factory utilisation. Sunpower’s M&amp;S factory is operating at close to full utilisation on an order book of RMB2.5b. The group is in a good position to cherry pick higher margin projects while keeping its order book steady.

Non-SGX Report: Sunpower Group Ltd: Full Steam Ahead

<p><i><b>These equity research reports are not written by the SGX.</b> SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</i></p><div>
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<h2>Sunpower Group Ltd</h2>
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<p><strong>Full steam ahead</strong></p>
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</div>
<div>
<div>
<div>
<div>
<ul>
<li>
<p>First mover advantage leveraging on environmental protection trend and backed by stable recurring revenue</p>
</li>
<li>
<p>Steam plants expansion buoyed by defensive textile industry</p>
</li>
<li>
<p>Further RMB2.3b injection into green investments to cement dominant position; Manufacturing &amp; Services (M&amp;S) segment is group’s backbone</p>
</li>
<li>
<p>Initiate with BUY and DCF-based TP of S$0.81</p>
</li>
</ul>
</div>
</div>
</div>
</div>
</div>
</div>
</div>
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<div>
<p><strong>Green investments (GI) offers a perfect blend of growth and stability.</strong> Sunpower’s new GI business offers resilience with its large exposure to defensive industries. The segment is also aided by supportive government regulations and a global push for environment protection. GI revenue is also recurring in nature, backed by long concessions of around 30 years. As a first mover equipped with proprietary technologies, Sunpower is able to demand prepayments from its customers and generate high operating cash flows in GI.</p>
</div>
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</div>
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<div>
<div>
<div>
<p><strong>GI organic growth to complement RMB2.3b in expected GI investments.</strong> We believe Sunpower will invest a further RMB2.3b in GI assets by FY21 to attain its equity investment target of RMB900m. These new investments may potentially generate c.RMB970m and c.RMB275m in revenue and operating income. Additionally, Sunpower is expected to further expand organically U-2 as plant utilisations still have room for growth. This combined with the steady closure of small boilers and shifting of businesses to industrial parks will drive organic growth for existing plants.</p>
</div>
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</div>
</div>
<div>
<div>
<div>
<div>
<p><strong>Margin improvement in traditional manufacturing and services (M&amp;S) driven by peak factory utilisation.</strong> Sunpower’s M&amp;S factory is operating at close to full utilisation on an order book of RMB2.5b. The group is in a good position to cherry pick higher margin projects while keeping its order book steady.</p>
</div>
</div>
</div>
</div>
</div>
</div>
</div>

These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.





Sunpower Group Ltd




Full steam ahead










First mover advantage leveraging on environmental protection trend and backed by stable recurring revenue


Steam plants expansion buoyed by defensive textile industry


Further RMB2.3b injection into green investments to cement dominant position; Manufacturing &amp; Services (M&amp;S) segment is group’s backbone


Initiate with BUY and DCF-based TP of S$0.81















Green investments (GI) offers a perfect blend of growth and stability. Sunpower’s new GI business offers resilience with its large exposure to defensive industries. The segment is also aided by supportive government regulations and a global push for environment protection. GI revenue is also recurring in nature, backed by long concessions of around 30 years. As a first mover equipped with proprietary technologies, Sunpower is able to demand prepayments from its customers and generate high operating cash flows in GI.








GI organic growth to complement RMB2.3b in expected GI investments. We believe Sunpower will invest a further RMB2.3b in GI assets by FY21 to attain its equity investment target of RMB900m. These new investments may potentially generate c.RMB970m and c.RMB275m in revenue and operating income. Additionally, Sunpower is expected to further expand organically U-2 as plant utilisations still have room for growth. This combined with the steady closure of small boilers and shifting of businesses to industrial parks will drive organic growth for existing plants.








Margin improvement in traditional manufacturing and services (M&amp;S) driven by peak factory utilisation. Sunpower’s M&amp;S factory is operating at close to full utilisation on an order book of RMB2.5b. The group is in a good position to cherry pick higher margin projects while keeping its order book steady.








Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

<p><a href="https://www.smartkarma.com/entities/sunpower-group-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:18395:1">Sunpower Group (SPWG SP)</a> reported a strong set of 9M19 figures which met almost 60% of our FY19 forecast. Last year the company posted 4Q18 underlying earnings of 138.5M SGD and we are confident it will at least match this figure in 4Q19, leaving our FY19 forecast (NP of 320M RMB) intact. There is also no change to FY20 and FY21 forecasts as more GI projects ramp up, further GI M&amp;A is expected and the M&amp;S segment continues to execute on its record order book.</p><p>Sunpower's GI segment accounts for 62% of EBITDA and is 100% China-focused. The company has 8 GI projects in operation with more to be added in 2020. So far the company is relatively immune from any macro Chinese slowdown as its key customers are mostly domestically focused. Management highlighted the resilience of its textile customers which serve basic day-to-day textile needs across China.</p><div class="content-highlight"><p><strong>When Sunpower first communicated its GI plans in 2017 their 2021 target looked far off. With 2019 almost behind us the targets specified in CB1+CB2 are now coming into view. Sunpower is backed by a strong management team and two of the most respected PE players in China (DCP+CDH). Given PE mandates are not endless we expect monetization strategies will come into view late 2020 or early 2021. We advise investors to buy into Sunpower <em>before</em> those efforts are communicated as this period likely has the highest upside.</strong></p></div><p>YTD Sunpower's share price has risen by 78% but we still see another 60% upside to reach our unchanged Fair Value estimate of 0.97 SGD <em>(based on 15x FY21 EPS and company meeting its FY21 NPAT targets as communicated in CB2 prospectus</em>).</p>

Sunpower Group (SPWG SP) reported a strong set of 9M19 figures which met almost 60% of our FY19 forecast. Last year the company posted 4Q18 underlying earnings of 138.5M SGD and we are confident it will at least match this figure in 4Q19, leaving our FY19 forecast (NP of 320M RMB) intact. There is also no change to FY20 and FY21 forecasts as more GI projects ramp up, further GI M&amp;A is expected and the M&amp;S segment continues to execute on its record order book.Sunpower's GI segment accounts for 62% of EBITDA and is 100% China-focused. The company has 8 GI projects in operation with more to be added in 2020. So far the company is relatively immune from any macro Chinese slowdown as its key customers are mostly domestically focused. Management highlighted the resilience of its textile customers which serve basic day-to-day textile needs across China.When Sunpower first communicated its GI plans in 2017 their 2021 target looked far off. With 2019 almost behind us the targets specified in CB1+CB2 are now coming into view. Sunpower is backed by a strong management team and two of the most respected PE players in China (DCP+CDH). Given PE mandates are not endless we expect monetization strategies will come into view late 2020 or early 2021. We advise investors to buy into Sunpower before those efforts are communicated as this period likely has the highest upside.YTD Sunpower's share price has risen by 78% but we still see another 60% upside to reach our unchanged Fair Value estimate of 0.97 SGD (based on 15x FY21 EPS and company meeting its FY21 NPAT targets as communicated in CB2 prospectus).

Sunpower (SPWG SP): Domestic China Play; All on Track to Meet FY20/FY21 Targets

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/101/421/original/SunpowerSGX.png?1570598879" class="editor-image img-responsive" data-smartkarma-image-id="101421"></figure>
<div class="content-caption">Sunpower</div>
<p>Engineer Frank Ma strives to live a life in 3D - the three Ds of diligence, determination and discipline, that is.&nbsp;<br><br>For the Co-Founder and Executive Director of SGX-listed environmental protection solutions provider Sunpower Group Ltd, these defining qualities are touchstones.<br><br>"Throughout my life, I've always set targets, and worked hard to achieve those goals," said the graduate of Nanjing Chemical Engineering Senior College, who also holds a Master's degree in Engineering Management from the University of Shanghai for Science and Technology.<br><br>Ma's tenacious spirit was never more obvious than when he taught himself to speak English more than three decades ago. "During my university days, my English was really bad. After graduation, I decided to do something about it," he recalled.<br><br>Having no teacher, and armed only with a dictionary and a voice recorder, Ma began memorising and reciting 20 English words every day for a year to build up his vocabulary. Today, his command of and fluency in the language belies that self-taught journey.<br><br>To be sure, Ma's focus and perseverance have stood him in good stead in growing Sunpower, which he founded in 1997 together with his university classmate, Executive Chairman and Chief Executive Officer Guo Hongxin.<br><br>In the late 90s, China began developing its petrochemical industry through oil and gas enterprises like China Petroleum &amp; Chemical Corporation, or Sinopec. But the need to import equipment - which resulted in long delivery lead times and escalating costs - was a serious bugbear.<br><br>"We were able to fill the gap in the market by supplying Sinopec with equipment, like pipe supports, that were made with local technology and know-how. This helped them save time and money," he said.<br><br>That was the milestone that marked the establishment of Sunpower's foundation business - Manufacturing &amp; Services (M&amp;S). This segment makes customised energy-saving and environmental protection products with proprietary heat transfer technologies for diverse industries, ranging from chemicals and petrochemicals to pharmaceuticals and metallurgy.&nbsp;<br><br>Sunpower has served over 1,500 customers, including top-notch global corporations in more than 30 countries to-date, and about 70% are repeat clients.&nbsp;<br><br>From its initial business of pipe supports, the Group went on to develop high-efficiency heat exchangers and pressure vessels, as well as heat pipes and heat pipe exchangers for recovery of waste heat in petchem, steel and chemical projects. Much later, it developed proprietary flare and flare gas recovery systems, used to recover petchem by-products from flare gas generated in a refinery during production.</p>
<p>&nbsp;</p>
<p><strong>China's Smog Woes</strong><br><br>But the petrochemical sector has its downsides, including capacity limitations and a cyclical nature. "We realised we needed to diversify, and expand our technology to other sectors such as pollution control," Ma noted.<br><br>China has increasingly suffered the scourge of polluted air since the country began industrialising, with inefficient, coal-fired boilers in industrial parks identified as one of the biggest culprits contributing to the heavy smog that regularly blankets its skies.&nbsp;<br><br>The window of opportunity for Sunpower to break into this market finally widened in 2015, when the Chinese government stepped up efforts to impose stringent environmental protection laws - including compulsory shuttering of small boilers and promotion of clean coal combustion - to improve the nation's air quality.<br><br>In 2016, Sunpower repositioned itself as an environmental protection services provider through its Green Investments (GI) business. The unit invests in, develops and operates centralised plants to supply steam, heat and electricity on an exclusive basis in industrial parks, replacing existing, inefficient coal-fired plants.&nbsp;<br><br>While its technology cuts the amount of coal used in power generation, it also supplements with alternative feedstock, such as sludge. Using its proprietary energy-saving and long-distance steam distribution pipeline technologies, energy- and time-efficient delivery to customers is ensured.<br><br>Sunpower is building a sizeable portfolio of such GI projects to generate long-term, recurring and high-quality cashflows, based on typically 30-year concession agreements.<br><br>This unit - the Group's value creator and growth driver - boasts a fully integrated business model, backed by its own design institute, in-house manufacturing and services solutions, as well as proprietary technologies.<br><br>With more than 400 researchers and design engineers, the Group owns 154 patents, including 60 invention patents. It has also taken the lead, or has participated, in the drafting of five engineering-related national standards that have become benchmarks for the rest of the industry.&nbsp;<br><br>The long-term growth potential of its GI business is secured by a robust pipeline of projects in different stages of evaluation, with total value pegged at more than RMB3.2 billion. As at August 2019, eight projects are in operation, while another five are either under construction or in the design phase.&nbsp;<br><br>Although the GI unit is in early stages of development and still ramping up, it has already contributed significantly to the Group's underlying operating cashflow for the first half of 2019, which has more than doubled year-over-year. GI revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) in 1H 2019 also roughly tripled from the previous year, accounting for more than 36% and 65% of group revenue and EBITDA respectively.&nbsp;<br><br>For Ma, the GI unit is akin to an expressway toll booth. "Steam is a non-discretionary input for our clients, and we're exclusive suppliers for the industrial parks we operate in. That gives us captive customers and the ability to obtain advance payments from them," he said.<br><br>"In that sense, we're like toll-keepers, collecting cash regularly."<br><br>This first-mover advantage, combined with its technological expertise and strong track record, gives Sunpower a significant competitive edge, he noted.<br><br>"Our stable and growing M&amp;S business complements our GI unit by efficiently controlling the cost of construction and eliminating project delays. This combination provides synergies that sets Sunpower apart from less-integrated firms."</p>
<p>&nbsp;</p>
<p><strong>Targeting Clear Skies</strong><br><br>In 2019, the Group was recognised as one of the Best Managed Companies in China by Deloitte Touche Tohmatsu, the largest of the "Big Four" accounting and audit firms, in the first year the award was introduced to the country.&nbsp;<br><br>Listed on Singapore Exchange since 2005, Sunpower has a current market capitalisation of about S$365 million. In the 2019 year-to-date, the stock has generated a total return of 39.1%, outperforming total returns of 6.5% and 8.2% for the benchmark Straits Times Index (STI) and broader FTSE ST All-Share Index respectively.<br><br>Looking ahead, prospects are bright, with environmental protection and pollution control continuing to play increasingly pivotal roles in China's national policies. "There's still much to be done to meet the central government's pollution reduction targets, and this offers enormous opportunity for us," Ma added.<br><br>A case in point is the Ministry of Ecology and Environment's crackdown on Shandong provincial officials for missing air quality targets earlier this year.&nbsp;"Such stringent enforcement by top-level officials will drive the long-term prospects of China's environmental protection industry, in particular, the anti-smog services sector that our GI unit is targeting."<br><br>To boost its GI operations, Sunpower plans to invest RMB2.5 billion of equity in green assets by 2021, compared to its equity investment and commitment of RMB1.6 billion as at mid-2019.&nbsp;<br><br>In terms of capacity, which includes plants under construction, the Group aims to grow its current gross annualised steam capacity of 21.5 million tons to 30 million tons, and current gross annualised electricity generation capacity of 2.1 million megawatt hours to 3.5 million megawatt hours.&nbsp;<br><br>This expansion will be funded internally and via capital from its convertible bond tranches. In 2017 and 2018, two strategic private equity investors - DCP Capital Partners and CDH China Management - invested in Sunpower by subscribing for its convertible bonds.&nbsp;<br><br>The Group's mergers and acquisitions (M&amp;A) strategy targets projects that serve a diversified customer base in stable, domestic-oriented, and cashflow-generative industries, such as textiles, printing and dyeing, food and beverage.&nbsp;<br><br>"We're also interested in brownfield projects that can contribute immediately to revenue and earnings, and where we can use our technology to further improve the acquired company's operating and financial performance," Ma noted.</p>
<p>&nbsp;</p>
<p><strong>Promising Potential</strong><br><br>Currently, the Group remains focused on GI prospects within China. "The market potential is huge, and that's our priority," he said.&nbsp;"The challenge is choosing the right target that will guarantee success according to our financial objectives, and that's where careful analysis and due diligence come in."<br><br>A self-confessed "control freak", Ma is all about drilling down into the specifics. "I'm a very detailed person, and I always try to prepare, forecast and plan as much as I can," he said with a grin.<br><br>In this regard, managing a business will always be his first love. "My passion lies in industry - developing strategy, overcoming challenges, driving innovation, and turning that innovation into sustainable cashflows and profits."<br><br>His fervour for enterprise has its roots in China's industrialisation and urbanisation drive, which kicked off as early as the 1930s - a period in the country's history marred by civil war and political strife.<br><br>"Back then, many enterprise owners believed manufacturing would form a base for the nation's development, and the setting up of industries would build the fundamentals of our economy, and thereby save our country," Ma said.<br><br>That belief has also laid the foundation for China's speedy transformation into an industrial powerhouse during the turn of the century.&nbsp;"That's why I have chosen to stay in industry, even though there have been opportunities to break away and do something different," he added.<br><br>When the 53-year-old is not planning and strategising for the future, he's enjoying the outdoors.<br><br>"I love nature, and enjoy climbing mountains all over the country. That's why I'm passionate about this business - I want to give China back her blue skies," he added.<br><br>The wine aficionado also believes in working hard and keeping things simple, a mantra he often shares with his son, 25.&nbsp;<br><br>"You need to add value to yourself and contribute to society. At the same time, it's important to strike a good work-life balance. After all, life is meant to be enjoyed," he smiled.<br><br>"And just like good wine, life is beautiful, deep, and full of complexity. Both should be savoured to the last drop."</p>
<p>&nbsp;</p>
<p><strong>Sunpower Group Ltd</strong></p>
<p>Founded in 1997, Sunpower&nbsp;is a China-based environmental protection solutions company specialising in proprietary energy-saving and clean power technologies, with a strong focus on anti-pollution investment projects. The Group operates two segments - Manufacturing &amp; Services (M&amp;S)&nbsp; and Green Investments (GI). The first segment develops customised energy-saving and environmental protection products with proprietary heat transfer technologies for diverse industries. The second segment - GI - focuses on the investment, development and operation of centralised heat, steam and electricity generation plants that replace existing, inefficient coal-fired plants in industrial parks. The Group is building a sizeable portfolio of GI projects to generate long-term, recurring and high-quality cashflows, based on typically 30-year concession agreements.</p>
<p>The company website is:&nbsp;<strong><a href="http://edm.sgx.com/a/hBdjW0nB86%24MfB9zxYdAABR54sR/link8" target="_blank" rel="noopener">en.sunpower.com.cn</a></strong>.<br><br>Click&nbsp;<a href="http://edm.sgx.com/a/hBdjW0nB86%24MfB9zxYdAABR54sR/link9" target="_blank" rel="noopener"><strong>here</strong></a>&nbsp;for the company's StockFacts page.<br><br>For the six months ended 30 June 2019 financial results, click&nbsp;<a href="http://edm.sgx.com/a/hBdjW0nB86%24MfB9zxYdAABR54sR/link10" target="_blank" rel="noopener"><strong>here</strong></a>.<br><br>For SGX's 10 in 10 report on Sunpower Group Ltd, click&nbsp;<a href="http://edm.sgx.com/a/hBdjW0nB86%24MfB9zxYdAABR54sR/link11" target="_blank" rel="noopener"><strong>here</strong></a>.</p>
<p>&nbsp;</p>
<p><strong>About&nbsp;kopi-C: the Company brew</strong></p>
<p><strong>Text: Jennifer LH Tan</strong><br><strong><strong>Photo: Company file</strong></strong></p>
<p><em>kopi-C&nbsp;&nbsp;</em>is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.<br><br>For previous editions of&nbsp;<em>kopi-C: the Company brew,</em>&nbsp;please click&nbsp;<strong><a href="http://edm.sgx.com/a/hBdjW0nB86%24MfB9zxYdAABR54sR/link12" target="_blank" rel="noopener">here</a></strong>. &nbsp;</p>
<p>For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to&nbsp;<strong><a href="mailto:jennifer.tan@sgx.com" target="_blank" rel="noopener">jennifer.tan@sgx.com</a></strong></p>


Sunpower
Engineer Frank Ma strives to live a life in 3D - the three Ds of diligence, determination and discipline, that is.&nbsp;  For the Co-Founder and Executive Director of SGX-listed environmental protection solutions provider Sunpower Group Ltd, these defining qualities are touchstones.  "Throughout my life, I've always set targets, and worked hard to achieve those goals," said the graduate of Nanjing Chemical Engineering Senior College, who also holds a Master's degree in Engineering Management from the University of Shanghai for Science and Technology.  Ma's tenacious spirit was never more obvious than when he taught himself to speak English more than three decades ago. "During my university days, my English was really bad. After graduation, I decided to do something about it," he recalled.  Having no teacher, and armed only with a dictionary and a voice recorder, Ma began memorising and reciting 20 English words every day for a year to build up his vocabulary. Today, his command of and fluency in the language belies that self-taught journey.  To be sure, Ma's focus and perseverance have stood him in good stead in growing Sunpower, which he founded in 1997 together with his university classmate, Executive Chairman and Chief Executive Officer Guo Hongxin.  In the late 90s, China began developing its petrochemical industry through oil and gas enterprises like China Petroleum &amp; Chemical Corporation, or Sinopec. But the need to import equipment - which resulted in long delivery lead times and escalating costs - was a serious bugbear.  "We were able to fill the gap in the market by supplying Sinopec with equipment, like pipe supports, that were made with local technology and know-how. This helped them save time and money," he said.  That was the milestone that marked the establishment of Sunpower's foundation business - Manufacturing &amp; Services (M&amp;S). This segment makes customised energy-saving and environmental protection products with proprietary heat transfer technologies for diverse industries, ranging from chemicals and petrochemicals to pharmaceuticals and metallurgy.&nbsp;  Sunpower has served over 1,500 customers, including top-notch global corporations in more than 30 countries to-date, and about 70% are repeat clients.&nbsp;  From its initial business of pipe supports, the Group went on to develop high-efficiency heat exchangers and pressure vessels, as well as heat pipes and heat pipe exchangers for recovery of waste heat in petchem, steel and chemical projects. Much later, it developed proprietary flare and flare gas recovery systems, used to recover petchem by-products from flare gas generated in a refinery during production.
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China's Smog Woes  But the petrochemical sector has its downsides, including capacity limitations and a cyclical nature. "We realised we needed to diversify, and expand our technology to other sectors such as pollution control," Ma noted.  China has increasingly suffered the scourge of polluted air since the country began industrialising, with inefficient, coal-fired boilers in industrial parks identified as one of the biggest culprits contributing to the heavy smog that regularly blankets its skies.&nbsp;  The window of opportunity for Sunpower to break into this market finally widened in 2015, when the Chinese government stepped up efforts to impose stringent environmental protection laws - including compulsory shuttering of small boilers and promotion of clean coal combustion - to improve the nation's air quality.  In 2016, Sunpower repositioned itself as an environmental protection services provider through its Green Investments (GI) business. The unit invests in, develops and operates centralised plants to supply steam, heat and electricity on an exclusive basis in industrial parks, replacing existing, inefficient coal-fired plants.&nbsp;  While its technology cuts the amount of coal used in power generation, it also supplements with alternative feedstock, such as sludge. Using its proprietary energy-saving and long-distance steam distribution pipeline technologies, energy- and time-efficient delivery to customers is ensured.  Sunpower is building a sizeable portfolio of such GI projects to generate long-term, recurring and high-quality cashflows, based on typically 30-year concession agreements.  This unit - the Group's value creator and growth driver - boasts a fully integrated business model, backed by its own design institute, in-house manufacturing and services solutions, as well as proprietary technologies.  With more than 400 researchers and design engineers, the Group owns 154 patents, including 60 invention patents. It has also taken the lead, or has participated, in the drafting of five engineering-related national standards that have become benchmarks for the rest of the industry.&nbsp;  The long-term growth potential of its GI business is secured by a robust pipeline of projects in different stages of evaluation, with total value pegged at more than RMB3.2 billion. As at August 2019, eight projects are in operation, while another five are either under construction or in the design phase.&nbsp;  Although the GI unit is in early stages of development and still ramping up, it has already contributed significantly to the Group's underlying operating cashflow for the first half of 2019, which has more than doubled year-over-year. GI revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) in 1H 2019 also roughly tripled from the previous year, accounting for more than 36% and 65% of group revenue and EBITDA respectively.&nbsp;  For Ma, the GI unit is akin to an expressway toll booth. "Steam is a non-discretionary input for our clients, and we're exclusive suppliers for the industrial parks we operate in. That gives us captive customers and the ability to obtain advance payments from them," he said.  "In that sense, we're like toll-keepers, collecting cash regularly."  This first-mover advantage, combined with its technological expertise and strong track record, gives Sunpower a significant competitive edge, he noted.  "Our stable and growing M&amp;S business complements our GI unit by efficiently controlling the cost of construction and eliminating project delays. This combination provides synergies that sets Sunpower apart from less-integrated firms."
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Targeting Clear Skies  In 2019, the Group was recognised as one of the Best Managed Companies in China by Deloitte Touche Tohmatsu, the largest of the "Big Four" accounting and audit firms, in the first year the award was introduced to the country.&nbsp;  Listed on Singapore Exchange since 2005, Sunpower has a current market capitalisation of about S$365 million. In the 2019 year-to-date, the stock has generated a total return of 39.1%, outperforming total returns of 6.5% and 8.2% for the benchmark Straits Times Index (STI) and broader FTSE ST All-Share Index respectively.  Looking ahead, prospects are bright, with environmental protection and pollution control continuing to play increasingly pivotal roles in China's national policies. "There's still much to be done to meet the central government's pollution reduction targets, and this offers enormous opportunity for us," Ma added.  A case in point is the Ministry of Ecology and Environment's crackdown on Shandong provincial officials for missing air quality targets earlier this year.&nbsp;"Such stringent enforcement by top-level officials will drive the long-term prospects of China's environmental protection industry, in particular, the anti-smog services sector that our GI unit is targeting."  To boost its GI operations, Sunpower plans to invest RMB2.5 billion of equity in green assets by 2021, compared to its equity investment and commitment of RMB1.6 billion as at mid-2019.&nbsp;  In terms of capacity, which includes plants under construction, the Group aims to grow its current gross annualised steam capacity of 21.5 million tons to 30 million tons, and current gross annualised electricity generation capacity of 2.1 million megawatt hours to 3.5 million megawatt hours.&nbsp;  This expansion will be funded internally and via capital from its convertible bond tranches. In 2017 and 2018, two strategic private equity investors - DCP Capital Partners and CDH China Management - invested in Sunpower by subscribing for its convertible bonds.&nbsp;  The Group's mergers and acquisitions (M&amp;A) strategy targets projects that serve a diversified customer base in stable, domestic-oriented, and cashflow-generative industries, such as textiles, printing and dyeing, food and beverage.&nbsp;  "We're also interested in brownfield projects that can contribute immediately to revenue and earnings, and where we can use our technology to further improve the acquired company's operating and financial performance," Ma noted.
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Promising Potential  Currently, the Group remains focused on GI prospects within China. "The market potential is huge, and that's our priority," he said.&nbsp;"The challenge is choosing the right target that will guarantee success according to our financial objectives, and that's where careful analysis and due diligence come in."  A self-confessed "control freak", Ma is all about drilling down into the specifics. "I'm a very detailed person, and I always try to prepare, forecast and plan as much as I can," he said with a grin.  In this regard, managing a business will always be his first love. "My passion lies in industry - developing strategy, overcoming challenges, driving innovation, and turning that innovation into sustainable cashflows and profits."  His fervour for enterprise has its roots in China's industrialisation and urbanisation drive, which kicked off as early as the 1930s - a period in the country's history marred by civil war and political strife.  "Back then, many enterprise owners believed manufacturing would form a base for the nation's development, and the setting up of industries would build the fundamentals of our economy, and thereby save our country," Ma said.  That belief has also laid the foundation for China's speedy transformation into an industrial powerhouse during the turn of the century.&nbsp;"That's why I have chosen to stay in industry, even though there have been opportunities to break away and do something different," he added.  When the 53-year-old is not planning and strategising for the future, he's enjoying the outdoors.  "I love nature, and enjoy climbing mountains all over the country. That's why I'm passionate about this business - I want to give China back her blue skies," he added.  The wine aficionado also believes in working hard and keeping things simple, a mantra he often shares with his son, 25.&nbsp;  "You need to add value to yourself and contribute to society. At the same time, it's important to strike a good work-life balance. After all, life is meant to be enjoyed," he smiled.  "And just like good wine, life is beautiful, deep, and full of complexity. Both should be savoured to the last drop."
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Sunpower Group Ltd
Founded in 1997, Sunpower&nbsp;is a China-based environmental protection solutions company specialising in proprietary energy-saving and clean power technologies, with a strong focus on anti-pollution investment projects. The Group operates two segments - Manufacturing &amp; Services (M&amp;S)&nbsp; and Green Investments (GI). The first segment develops customised energy-saving and environmental protection products with proprietary heat transfer technologies for diverse industries. The second segment - GI - focuses on the investment, development and operation of centralised heat, steam and electricity generation plants that replace existing, inefficient coal-fired plants in industrial parks. The Group is building a sizeable portfolio of GI projects to generate long-term, recurring and high-quality cashflows, based on typically 30-year concession agreements.
The company website is:&nbsp;en.sunpower.com.cn.  Click&nbsp;here&nbsp;for the company's StockFacts page.  For the six months ended 30 June 2019 financial results, click&nbsp;here.  For SGX's 10 in 10 report on Sunpower Group Ltd, click&nbsp;here.
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About&nbsp;kopi-C: the Company brew
Text: Jennifer LH Tan Photo: Company file
kopi-C&nbsp;&nbsp;is a regular column on the SGX Research website that features C-level executives of leading companies listed on Singapore Exchange. These interviews are profiles of senior management aimed at helping investors better understand the individuals who run these corporations.  For previous editions of&nbsp;kopi-C: the Company brew,&nbsp;please click&nbsp;here. &nbsp;
For more information, or if you would like your senior executives to be featured on SGX Market Dialogues, please send suggestions to&nbsp;jennifer.tan@sgx.com

Sunpower Eyes Green Assets in Battle for Blue Skies

China

Sunpower Group Ltd. is an investment holding company that invests in, develops, and operates centralized heat, steam, and electricity generation plants in the People's Republic of China. It focuses on Green Investments (GI) business, supplying clean steam to industrial parks, providing civil heating, and selling electricity to the State Grid. The company was founded in 1997 and is headquartered in Nanjing, People's Republic of China.

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