Category

Utilities Sector

Brief Utlilities: RATCH: Stern and Steady Player in Thai Utility Sector and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. RATCH: Stern and Steady Player in Thai Utility Sector

1. RATCH: Stern and Steady Player in Thai Utility Sector

Ea%201

Yesterday analyst meeting came out in a neutral tone. Expect 2020E earnings to remain healthy backed by profit contribution from newly COD projects in 2019.

  • Expect 1Q20 earnings to improve both YoY and QoQ, given the profit recognition from 290MW capacity expansion in 2019. 
  • Positive Long term (2020-21) earnings outlook backed by COD 782 MWe projects in pipeline, representing 11% expansion by 2022.
  • Estimate 7% CAGR EPS growth in 2020-22E.
  • The share has fallen 17% since early 2020 due to the negative sentiments of expected economic slowdown from COVID-19 spread. We believe this should be a short-term impact and recommend to accumulate the stock for 12-month period.

We maintain the BUY rating with a target price of Bt74.5 is based on sum-of-the-parts (SOTP) methodology, implying 16.6xPE’20E or 0.71x relative PE to Thai utility sector.

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Brief Utlilities: Morning Views Asia: Azure Power Global Ltd, Bright Scholar Education, Geo Energy Resources and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Morning Views Asia: Azure Power Global Ltd, Bright Scholar Education, Geo Energy Resources
  2. Zenith Energy’s Offer From Pacific Equity
  3. BGRIM: Limited Impact from Drought and COVID-19 Outbreak
  4. CGN New Energy: The Latest SOE Clean Energy Play
  5. CGN New Energy’s Potential SOE Privatisation Bid

1. Morning Views Asia: Azure Power Global Ltd, Bright Scholar Education, Geo Energy Resources

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

2. Zenith Energy’s Offer From Pacific Equity

Image 2072415821583803538312

Remote power generator Zenith Energy Ltd (ZEN AU) specialist has announced an Offer, by way of a Scheme from Elemental Infrastructure BidCo, a Pacific Equity Partners (PEP) entity, at $1.01/share in cash, a 45.3% premium to last close. 

The Offer has been unanimously recommended by Zenith’s board of directors, and values Zenith’s equity at ~A$150mn (US$98mn) and an enterprise value of ~$250mn.

Rollover shareholders – including Chairman Doug Walker, MD Hamish Moffat and COO Graham  Cooper – collectively holding 23%, will be able to elect to receive at least 66% of their Scheme Consideration as scrip consideration. 

For the purpose of the Scheme, these shareholders form a separate class of shareholder, therefore there will be two Scheme Meetings – the rollover shareholders will be entitled to vote only at their own Scheme Meeting. Both Scheme Meetings will need to pass resolutions approving the Scheme. A similar structure was tabled in Quadrant Cues QMS Offer In OOH Return

This appears a relatively straightforward Scheme. It is now a question whether a competing Offer, as transpired in the Pacific Energy (PEA AU) transaction last year, will unfold. 


For more on the rules, regulations, practices, and foibles of Australian M&A, please refer to the Quiddity Australia M&A Guide 2019.

3. BGRIM: Limited Impact from Drought and COVID-19 Outbreak

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Yesterday analyst meeting came out in a positive tone. Expect 2020E earnings to remain healthy backed by profit recognition from 633MWe project added in 2019.

  • Expect 1Q20 earnings to grow both YoY and QoQ, given the profit recognition from 633MWe capacity expansion in 2019
  • Positive 2020-22E earnings outlook backed by full year operating results from 633 MW projects COD in 2019 and 412 MWe in pipeline, representing 28% growth from current level.
  • The share price fall 30% from January’s peak of Bt65.5 due to negative sentiments from drought impact and expected economic slowdown from COVID-19 spread. However, we see this have only a minimal impact to BGRIM, thus recommend hold due to limited upside to our target price.

We maintain the HOLD rating based on a target price of Bt48 derived using DCF valuation (6.9% WACC and 1% TG). Our valuation implies 36.6x PE’20, which is equivalent to 1.2x PEG for 2020-22E, lower than its peers’ 1.6x PEG.

4. CGN New Energy: The Latest SOE Clean Energy Play

Image 52420142821583195520062

After suspending the shares for yesterday’s trading pursuant to the  Code on Takeovers and Mergers, CGN New Energy Holdings (1811 HK) its parent SOE-China General Nuclear Power Corporation (CGNPC), currently holding 72.29%, is considering privatising the company.

Should a firm Offer unfold, this would be the fourth Hong Kong-listed, clean-energy company subject to a privatisation or change of control in less than a year, after:

No price was announced for CGNPC’s proposal. The Offer, should it unfold, will be by way of a Scheme. No single shareholders has the requisite 10% blocking stake of 2.771% of shares out.

CGN is incorporated in Bermuda, therefore the headcount test applies.

Expect shares to pop today. The premiums to last close for 735 HK and 958 HK were 41.90% and 46.08% respectively. That places a possible Offer Price at ~HK$1.70/share.

5. CGN New Energy’s Potential SOE Privatisation Bid

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CGN New Energy Holdings (1811 HK)’s assets comprise wind, solar, gas-fired, coal-fired, oil-fired, hydro, cogen and fuel cell projects as well as a steam project, which is operating in China and Korea power markets. On 2 March, it announced a possible privatisation bid from China General Nuclear Power Corporation. China General Nuclear Power Corporation, an SOE, is the controlling shareholder with a 72.29% stake. This potential privatisation joins a list of recent SOE privatisations of clean energy companies – Huaneng Renewables Corp H (958 HK) and CP Clean Energy.

The offer if forthcoming could lead to the privatisation and the delisting of CGN New Energy. While the details and terms of the possible offer remain under wraps, we believe an offer north of HK$1.60 per share will be needed to ensure broad acceptance. 

You are currently reading Executive Summaries of Smartkarma Insights.

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Brief Utlilities: RATCH: Stern and Steady Player in Thai Utility Sector and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. RATCH: Stern and Steady Player in Thai Utility Sector
  2. GPSC: Positive 2020 Earnings Outlook

1. RATCH: Stern and Steady Player in Thai Utility Sector

Ea%201

Yesterday analyst meeting came out in a neutral tone. Expect 2020E earnings to remain healthy backed by profit contribution from newly COD projects in 2019.

  • Expect 1Q20 earnings to improve both YoY and QoQ, given the profit recognition from 290MW capacity expansion in 2019. 
  • Positive Long term (2020-21) earnings outlook backed by COD 782 MWe projects in pipeline, representing 11% expansion by 2022.
  • Estimate 7% CAGR EPS growth in 2020-22E.
  • The share has fallen 17% since early 2020 due to the negative sentiments of expected economic slowdown from COVID-19 spread. We believe this should be a short-term impact and recommend to accumulate the stock for 12-month period.

We maintain the BUY rating with a target price of Bt74.5 is based on sum-of-the-parts (SOTP) methodology, implying 16.6xPE’20E or 0.71x relative PE to Thai utility sector.

2. GPSC: Positive 2020 Earnings Outlook

4

Last Wednesday analyst meeting came out in a neutral tome. Expect earnings from SPP operation to slightly retard in short term due to drought conditions in eastern Thailand. 2020E earnings outlook remain healthy given full year profit recognition from GLOW assets.

Key takeaway

  • Positive 2020 earnings outlook backed by full year earnings recognition from GLOW assets (2.7GW)  and additional 391 MW projects COD in 2019.
  • 1H20 earnings will be pressured by prevailing drought conditions in eastern  Thailand and slow economic growth.
  • Upside form new Bt1.1bn investment in Energy Storage System (ESS) plant in Thailand.. 

We revise down our 2020-22 earnings forecast by 5%-11% to reflect lower than expected earnings growth from economic show down & drought condition. Thus roll out the new target price to Bt89, derived using DCF methodology (WACC 4.5%,  TG 1%). We believe the correction in share price is a chance to accumulate in 12 months period.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Utlilities: GPSC: Positive 2020 Earnings Outlook and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. GPSC: Positive 2020 Earnings Outlook
  2. Azure Power – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics
  3. Morning Views Asia: Azure Power Global Ltd, Powerlong Commercial Management Holdings, Softbank Corp
  4. BCPG: Upside from Second Hydro Power Plant Acquisition in Laos

1. GPSC: Positive 2020 Earnings Outlook

4

Last Wednesday analyst meeting came out in a neutral tome. Expect earnings from SPP operation to slightly retard in short term due to drought conditions in eastern Thailand. 2020E earnings outlook remain healthy given full year profit recognition from GLOW assets.

Key takeaway

  • Positive 2020 earnings outlook backed by full year earnings recognition from GLOW assets (2.7GW)  and additional 391 MW projects COD in 2019.
  • 1H20 earnings will be pressured by prevailing drought conditions in eastern  Thailand and slow economic growth.
  • Upside form new Bt1.1bn investment in Energy Storage System (ESS) plant in Thailand.. 

We revise down our 2020-22 earnings forecast by 5%-11% to reflect lower than expected earnings growth from economic show down & drought condition. Thus roll out the new target price to Bt89, derived using DCF methodology (WACC 4.5%,  TG 1%). We believe the correction in share price is a chance to accumulate in 12 months period.

2. Azure Power – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics

Azure Power’s Q3/19-20 results were short of expectations (in terms of both revenues and earnings) for a second consecutive quarter. This was driven partly by power curtailment in Andhra Pradesh and regulatory issues facing the Rooftop business. That said, cash flows improved on the back of more favourable working capital development, especially for receivables. The financial risk profile continued to deteriorate relative to FYE 2018-19 as the green bond issuance drove debt up, and EBITDA growth lagged the increase in debt. That said, it improved relative to Q2/19-20. Liquidity is adequate, supported by the USD 350 mn green bond issuance in Q2 and the USD 75 mn equity injection from its largest shareholder in Q3. We expect little ratings pressure.

3. Morning Views Asia: Azure Power Global Ltd, Powerlong Commercial Management Holdings, Softbank Corp

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

4. BCPG: Upside from Second Hydro Power Plant Acquisition in Laos

2

BCPG announced acquisition of new 45 MW hydro power plant in Laos. The project is roughly estimated to bring a positive upside of Bt1.0 to our target price. We maintain the BUY rating given the significant upside to our target price of Bt22.1 (excluding the Nam San 3B’s value).

Updates:

  • BCPG announced acquisition of 100% stake in 45MW hydro power plant in Laos increasing the firm’s total operating capacity to 449 MWe (+11%).
  • Expect the transaction to be settled in 1Q20 and estimate the new power plant will bring a positive upside of Bt1.0 per share to our TP, based on 12% EIRR and 1:1 debt to equity ratio.
  • 4Q19 will be a weak quarter due to seasonality factor. While 1Q20 earnings looks bright, given the full quarter and partial earnings recognition from 69MW Nam San 3A and 45 MW Nam San 3B projects respectively acquired in Laos.

We believe the correction in BCPG share price is a chance to accumulate in 12-month period, backed by strong earnings outlook in 2020E.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Utlilities: Zenith Energy’s Offer From Pacific Equity and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Zenith Energy’s Offer From Pacific Equity
  2. BGRIM: Limited Impact from Drought and COVID-19 Outbreak
  3. CGN New Energy: The Latest SOE Clean Energy Play
  4. CGN New Energy’s Potential SOE Privatisation Bid
  5. RATCH: Stern and Steady Player in Thai Utility Sector

1. Zenith Energy’s Offer From Pacific Equity

Image 2072415821583803538312

Remote power generator Zenith Energy Ltd (ZEN AU) specialist has announced an Offer, by way of a Scheme from Elemental Infrastructure BidCo, a Pacific Equity Partners (PEP) entity, at $1.01/share in cash, a 45.3% premium to last close. 

The Offer has been unanimously recommended by Zenith’s board of directors, and values Zenith’s equity at ~A$150mn (US$98mn) and an enterprise value of ~$250mn.

Rollover shareholders – including Chairman Doug Walker, MD Hamish Moffat and COO Graham  Cooper – collectively holding 23%, will be able to elect to receive at least 66% of their Scheme Consideration as scrip consideration. 

For the purpose of the Scheme, these shareholders form a separate class of shareholder, therefore there will be two Scheme Meetings – the rollover shareholders will be entitled to vote only at their own Scheme Meeting. Both Scheme Meetings will need to pass resolutions approving the Scheme. A similar structure was tabled in Quadrant Cues QMS Offer In OOH Return

This appears a relatively straightforward Scheme. It is now a question whether a competing Offer, as transpired in the Pacific Energy (PEA AU) transaction last year, will unfold. 


For more on the rules, regulations, practices, and foibles of Australian M&A, please refer to the Quiddity Australia M&A Guide 2019.

2. BGRIM: Limited Impact from Drought and COVID-19 Outbreak

Bg%201

Yesterday analyst meeting came out in a positive tone. Expect 2020E earnings to remain healthy backed by profit recognition from 633MWe project added in 2019.

  • Expect 1Q20 earnings to grow both YoY and QoQ, given the profit recognition from 633MWe capacity expansion in 2019
  • Positive 2020-22E earnings outlook backed by full year operating results from 633 MW projects COD in 2019 and 412 MWe in pipeline, representing 28% growth from current level.
  • The share price fall 30% from January’s peak of Bt65.5 due to negative sentiments from drought impact and expected economic slowdown from COVID-19 spread. However, we see this have only a minimal impact to BGRIM, thus recommend hold due to limited upside to our target price.

We maintain the HOLD rating based on a target price of Bt48 derived using DCF valuation (6.9% WACC and 1% TG). Our valuation implies 36.6x PE’20, which is equivalent to 1.2x PEG for 2020-22E, lower than its peers’ 1.6x PEG.

3. CGN New Energy: The Latest SOE Clean Energy Play

Image 52420142821583195520062

After suspending the shares for yesterday’s trading pursuant to the  Code on Takeovers and Mergers, CGN New Energy Holdings (1811 HK) its parent SOE-China General Nuclear Power Corporation (CGNPC), currently holding 72.29%, is considering privatising the company.

Should a firm Offer unfold, this would be the fourth Hong Kong-listed, clean-energy company subject to a privatisation or change of control in less than a year, after:

No price was announced for CGNPC’s proposal. The Offer, should it unfold, will be by way of a Scheme. No single shareholders has the requisite 10% blocking stake of 2.771% of shares out.

CGN is incorporated in Bermuda, therefore the headcount test applies.

Expect shares to pop today. The premiums to last close for 735 HK and 958 HK were 41.90% and 46.08% respectively. That places a possible Offer Price at ~HK$1.70/share.

4. CGN New Energy’s Potential SOE Privatisation Bid

Val%201

CGN New Energy Holdings (1811 HK)’s assets comprise wind, solar, gas-fired, coal-fired, oil-fired, hydro, cogen and fuel cell projects as well as a steam project, which is operating in China and Korea power markets. On 2 March, it announced a possible privatisation bid from China General Nuclear Power Corporation. China General Nuclear Power Corporation, an SOE, is the controlling shareholder with a 72.29% stake. This potential privatisation joins a list of recent SOE privatisations of clean energy companies – Huaneng Renewables Corp H (958 HK) and CP Clean Energy.

The offer if forthcoming could lead to the privatisation and the delisting of CGN New Energy. While the details and terms of the possible offer remain under wraps, we believe an offer north of HK$1.60 per share will be needed to ensure broad acceptance. 

5. RATCH: Stern and Steady Player in Thai Utility Sector

Ea%201

Yesterday analyst meeting came out in a neutral tone. Expect 2020E earnings to remain healthy backed by profit contribution from newly COD projects in 2019.

  • Expect 1Q20 earnings to improve both YoY and QoQ, given the profit recognition from 290MW capacity expansion in 2019. 
  • Positive Long term (2020-21) earnings outlook backed by COD 782 MWe projects in pipeline, representing 11% expansion by 2022.
  • Estimate 7% CAGR EPS growth in 2020-22E.
  • The share has fallen 17% since early 2020 due to the negative sentiments of expected economic slowdown from COVID-19 spread. We believe this should be a short-term impact and recommend to accumulate the stock for 12-month period.

We maintain the BUY rating with a target price of Bt74.5 is based on sum-of-the-parts (SOTP) methodology, implying 16.6xPE’20E or 0.71x relative PE to Thai utility sector.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Utlilities: Azure Power – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Azure Power – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics
  2. Morning Views Asia: Azure Power Global Ltd, Powerlong Commercial Management Holdings, Softbank Corp
  3. BCPG: Upside from Second Hydro Power Plant Acquisition in Laos
  4. Huaneng Renew: Unconditional In All Respects

1. Azure Power – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics

Azure Power’s Q3/19-20 results were short of expectations (in terms of both revenues and earnings) for a second consecutive quarter. This was driven partly by power curtailment in Andhra Pradesh and regulatory issues facing the Rooftop business. That said, cash flows improved on the back of more favourable working capital development, especially for receivables. The financial risk profile continued to deteriorate relative to FYE 2018-19 as the green bond issuance drove debt up, and EBITDA growth lagged the increase in debt. That said, it improved relative to Q2/19-20. Liquidity is adequate, supported by the USD 350 mn green bond issuance in Q2 and the USD 75 mn equity injection from its largest shareholder in Q3. We expect little ratings pressure.

2. Morning Views Asia: Azure Power Global Ltd, Powerlong Commercial Management Holdings, Softbank Corp

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

3. BCPG: Upside from Second Hydro Power Plant Acquisition in Laos

2

BCPG announced acquisition of new 45 MW hydro power plant in Laos. The project is roughly estimated to bring a positive upside of Bt1.0 to our target price. We maintain the BUY rating given the significant upside to our target price of Bt22.1 (excluding the Nam San 3B’s value).

Updates:

  • BCPG announced acquisition of 100% stake in 45MW hydro power plant in Laos increasing the firm’s total operating capacity to 449 MWe (+11%).
  • Expect the transaction to be settled in 1Q20 and estimate the new power plant will bring a positive upside of Bt1.0 per share to our TP, based on 12% EIRR and 1:1 debt to equity ratio.
  • 4Q19 will be a weak quarter due to seasonality factor. While 1Q20 earnings looks bright, given the full quarter and partial earnings recognition from 69MW Nam San 3A and 45 MW Nam San 3B projects respectively acquired in Laos.

We believe the correction in BCPG share price is a chance to accumulate in 12-month period, backed by strong earnings outlook in 2020E.

4. Huaneng Renew: Unconditional In All Respects

On the 20 Janaury, the First Closing Date, China Huaneng received valid acceptances representing 90.80% of Huaneng Renewables Corp H (958 HK)‘s total H Shares. This satisfied the 90% “acceptance condition” attached to the Offer. The transaction appeared all done bar the shouting.

The Offer remained conditional on necessary approvals/consents from NDRC/MOFCOM/SAFE, but this was China Huaneng – no one expected an issue with the authorities.

Time dragged. The Anhui Conch Cement Co Ltd H (914 HK) / West China Cement (2233 HK) situation in 2016 was discussed, wherein the regulatory approvals, for whatever reason, were never received.

And with the 10 February fast approaching – 21 days after the first close, therefore entitling shareholders who had tendered, to un-tender – it was coming down to the wire. An extended Chinese New Year holiday due to the coronavirus further muddied matters. The SFC, for their part, had yet to provide a closing date for the Offer.

Last night China Huaneng and HRC announced that all the conditions of the Offer have been fulfilled and the Offer has been declared unconditional in all respects.

This is a done deal and remains open to acceptances. If you can buy at $3.15, do so.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Utlilities: BGRIM: Limited Impact from Drought and COVID-19 Outbreak and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. BGRIM: Limited Impact from Drought and COVID-19 Outbreak
  2. CGN New Energy: The Latest SOE Clean Energy Play
  3. CGN New Energy’s Potential SOE Privatisation Bid
  4. RATCH: Stern and Steady Player in Thai Utility Sector
  5. GPSC: Positive 2020 Earnings Outlook

1. BGRIM: Limited Impact from Drought and COVID-19 Outbreak

Bg%202

Yesterday analyst meeting came out in a positive tone. Expect 2020E earnings to remain healthy backed by profit recognition from 633MWe project added in 2019.

  • Expect 1Q20 earnings to grow both YoY and QoQ, given the profit recognition from 633MWe capacity expansion in 2019
  • Positive 2020-22E earnings outlook backed by full year operating results from 633 MW projects COD in 2019 and 412 MWe in pipeline, representing 28% growth from current level.
  • The share price fall 30% from January’s peak of Bt65.5 due to negative sentiments from drought impact and expected economic slowdown from COVID-19 spread. However, we see this have only a minimal impact to BGRIM, thus recommend hold due to limited upside to our target price.

We maintain the HOLD rating based on a target price of Bt48 derived using DCF valuation (6.9% WACC and 1% TG). Our valuation implies 36.6x PE’20, which is equivalent to 1.2x PEG for 2020-22E, lower than its peers’ 1.6x PEG.

2. CGN New Energy: The Latest SOE Clean Energy Play

Image 52420142821583195520062

After suspending the shares for yesterday’s trading pursuant to the  Code on Takeovers and Mergers, CGN New Energy Holdings (1811 HK) its parent SOE-China General Nuclear Power Corporation (CGNPC), currently holding 72.29%, is considering privatising the company.

Should a firm Offer unfold, this would be the fourth Hong Kong-listed, clean-energy company subject to a privatisation or change of control in less than a year, after:

No price was announced for CGNPC’s proposal. The Offer, should it unfold, will be by way of a Scheme. No single shareholders has the requisite 10% blocking stake of 2.771% of shares out.

CGN is incorporated in Bermuda, therefore the headcount test applies.

Expect shares to pop today. The premiums to last close for 735 HK and 958 HK were 41.90% and 46.08% respectively. That places a possible Offer Price at ~HK$1.70/share.

3. CGN New Energy’s Potential SOE Privatisation Bid

Val%201

CGN New Energy Holdings (1811 HK)’s assets comprise wind, solar, gas-fired, coal-fired, oil-fired, hydro, cogen and fuel cell projects as well as a steam project, which is operating in China and Korea power markets. On 2 March, it announced a possible privatisation bid from China General Nuclear Power Corporation. China General Nuclear Power Corporation, an SOE, is the controlling shareholder with a 72.29% stake. This potential privatisation joins a list of recent SOE privatisations of clean energy companies – Huaneng Renewables Corp H (958 HK) and CP Clean Energy.

The offer if forthcoming could lead to the privatisation and the delisting of CGN New Energy. While the details and terms of the possible offer remain under wraps, we believe an offer north of HK$1.60 per share will be needed to ensure broad acceptance. 

4. RATCH: Stern and Steady Player in Thai Utility Sector

Ea%201

Yesterday analyst meeting came out in a neutral tone. Expect 2020E earnings to remain healthy backed by profit contribution from newly COD projects in 2019.

  • Expect 1Q20 earnings to improve both YoY and QoQ, given the profit recognition from 290MW capacity expansion in 2019. 
  • Positive Long term (2020-21) earnings outlook backed by COD 782 MWe projects in pipeline, representing 11% expansion by 2022.
  • Estimate 7% CAGR EPS growth in 2020-22E.
  • The share has fallen 17% since early 2020 due to the negative sentiments of expected economic slowdown from COVID-19 spread. We believe this should be a short-term impact and recommend to accumulate the stock for 12-month period.

We maintain the BUY rating with a target price of Bt74.5 is based on sum-of-the-parts (SOTP) methodology, implying 16.6xPE’20E or 0.71x relative PE to Thai utility sector.

5. GPSC: Positive 2020 Earnings Outlook

4

Last Wednesday analyst meeting came out in a neutral tome. Expect earnings from SPP operation to slightly retard in short term due to drought conditions in eastern Thailand. 2020E earnings outlook remain healthy given full year profit recognition from GLOW assets.

Key takeaway

  • Positive 2020 earnings outlook backed by full year earnings recognition from GLOW assets (2.7GW)  and additional 391 MW projects COD in 2019.
  • 1H20 earnings will be pressured by prevailing drought conditions in eastern  Thailand and slow economic growth.
  • Upside form new Bt1.1bn investment in Energy Storage System (ESS) plant in Thailand.. 

We revise down our 2020-22 earnings forecast by 5%-11% to reflect lower than expected earnings growth from economic show down & drought condition. Thus roll out the new target price to Bt89, derived using DCF methodology (WACC 4.5%,  TG 1%). We believe the correction in share price is a chance to accumulate in 12 months period.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Utlilities: Morning Views Asia: Azure Power Global Ltd, Powerlong Commercial Management Holdings, Softbank Corp and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. Morning Views Asia: Azure Power Global Ltd, Powerlong Commercial Management Holdings, Softbank Corp
  2. BCPG: Upside from Second Hydro Power Plant Acquisition in Laos
  3. Huaneng Renew: Unconditional In All Respects

1. Morning Views Asia: Azure Power Global Ltd, Powerlong Commercial Management Holdings, Softbank Corp

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

2. BCPG: Upside from Second Hydro Power Plant Acquisition in Laos

2

BCPG announced acquisition of new 45 MW hydro power plant in Laos. The project is roughly estimated to bring a positive upside of Bt1.0 to our target price. We maintain the BUY rating given the significant upside to our target price of Bt22.1 (excluding the Nam San 3B’s value).

Updates:

  • BCPG announced acquisition of 100% stake in 45MW hydro power plant in Laos increasing the firm’s total operating capacity to 449 MWe (+11%).
  • Expect the transaction to be settled in 1Q20 and estimate the new power plant will bring a positive upside of Bt1.0 per share to our TP, based on 12% EIRR and 1:1 debt to equity ratio.
  • 4Q19 will be a weak quarter due to seasonality factor. While 1Q20 earnings looks bright, given the full quarter and partial earnings recognition from 69MW Nam San 3A and 45 MW Nam San 3B projects respectively acquired in Laos.

We believe the correction in BCPG share price is a chance to accumulate in 12-month period, backed by strong earnings outlook in 2020E.

3. Huaneng Renew: Unconditional In All Respects

On the 20 Janaury, the First Closing Date, China Huaneng received valid acceptances representing 90.80% of Huaneng Renewables Corp H (958 HK)‘s total H Shares. This satisfied the 90% “acceptance condition” attached to the Offer. The transaction appeared all done bar the shouting.

The Offer remained conditional on necessary approvals/consents from NDRC/MOFCOM/SAFE, but this was China Huaneng – no one expected an issue with the authorities.

Time dragged. The Anhui Conch Cement Co Ltd H (914 HK) / West China Cement (2233 HK) situation in 2016 was discussed, wherein the regulatory approvals, for whatever reason, were never received.

And with the 10 February fast approaching – 21 days after the first close, therefore entitling shareholders who had tendered, to un-tender – it was coming down to the wire. An extended Chinese New Year holiday due to the coronavirus further muddied matters. The SFC, for their part, had yet to provide a closing date for the Offer.

Last night China Huaneng and HRC announced that all the conditions of the Offer have been fulfilled and the Offer has been declared unconditional in all respects.

This is a done deal and remains open to acceptances. If you can buy at $3.15, do so.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Utlilities: CGN New Energy: The Latest SOE Clean Energy Play and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. CGN New Energy: The Latest SOE Clean Energy Play
  2. CGN New Energy’s Potential SOE Privatisation Bid
  3. RATCH: Stern and Steady Player in Thai Utility Sector
  4. GPSC: Positive 2020 Earnings Outlook
  5. Azure Power – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics

1. CGN New Energy: The Latest SOE Clean Energy Play

Image 52420142821583195520062

After suspending the shares for yesterday’s trading pursuant to the  Code on Takeovers and Mergers, CGN New Energy Holdings (1811 HK) its parent SOE-China General Nuclear Power Corporation (CGNPC), currently holding 72.29%, is considering privatising the company.

Should a firm Offer unfold, this would be the fourth Hong Kong-listed, clean-energy company subject to a privatisation or change of control in less than a year, after:

No price was announced for CGNPC’s proposal. The Offer, should it unfold, will be by way of a Scheme. No single shareholders has the requisite 10% blocking stake of 2.771% of shares out.

CGN is incorporated in Bermuda, therefore the headcount test applies.

Expect shares to pop today. The premiums to last close for 735 HK and 958 HK were 41.90% and 46.08% respectively. That places a possible Offer Price at ~HK$1.70/share.

2. CGN New Energy’s Potential SOE Privatisation Bid

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CGN New Energy Holdings (1811 HK)’s assets comprise wind, solar, gas-fired, coal-fired, oil-fired, hydro, cogen and fuel cell projects as well as a steam project, which is operating in China and Korea power markets. On 2 March, it announced a possible privatisation bid from China General Nuclear Power Corporation. China General Nuclear Power Corporation, an SOE, is the controlling shareholder with a 72.29% stake. This potential privatisation joins a list of recent SOE privatisations of clean energy companies – Huaneng Renewables Corp H (958 HK) and CP Clean Energy.

The offer if forthcoming could lead to the privatisation and the delisting of CGN New Energy. While the details and terms of the possible offer remain under wraps, we believe an offer north of HK$1.60 per share will be needed to ensure broad acceptance. 

3. RATCH: Stern and Steady Player in Thai Utility Sector

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Yesterday analyst meeting came out in a neutral tone. Expect 2020E earnings to remain healthy backed by profit contribution from newly COD projects in 2019.

  • Expect 1Q20 earnings to improve both YoY and QoQ, given the profit recognition from 290MW capacity expansion in 2019. 
  • Positive Long term (2020-21) earnings outlook backed by COD 782 MWe projects in pipeline, representing 11% expansion by 2022.
  • Estimate 7% CAGR EPS growth in 2020-22E.
  • The share has fallen 17% since early 2020 due to the negative sentiments of expected economic slowdown from COVID-19 spread. We believe this should be a short-term impact and recommend to accumulate the stock for 12-month period.

We maintain the BUY rating with a target price of Bt74.5 is based on sum-of-the-parts (SOTP) methodology, implying 16.6xPE’20E or 0.71x relative PE to Thai utility sector.

4. GPSC: Positive 2020 Earnings Outlook

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Last Wednesday analyst meeting came out in a neutral tome. Expect earnings from SPP operation to slightly retard in short term due to drought conditions in eastern Thailand. 2020E earnings outlook remain healthy given full year profit recognition from GLOW assets.

Key takeaway

  • Positive 2020 earnings outlook backed by full year earnings recognition from GLOW assets (2.7GW)  and additional 391 MW projects COD in 2019.
  • 1H20 earnings will be pressured by prevailing drought conditions in eastern  Thailand and slow economic growth.
  • Upside form new Bt1.1bn investment in Energy Storage System (ESS) plant in Thailand.. 

We revise down our 2020-22 earnings forecast by 5%-11% to reflect lower than expected earnings growth from economic show down & drought condition. Thus roll out the new target price to Bt89, derived using DCF methodology (WACC 4.5%,  TG 1%). We believe the correction in share price is a chance to accumulate in 12 months period.

5. Azure Power – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics

Azure Power’s Q3/19-20 results were short of expectations (in terms of both revenues and earnings) for a second consecutive quarter. This was driven partly by power curtailment in Andhra Pradesh and regulatory issues facing the Rooftop business. That said, cash flows improved on the back of more favourable working capital development, especially for receivables. The financial risk profile continued to deteriorate relative to FYE 2018-19 as the green bond issuance drove debt up, and EBITDA growth lagged the increase in debt. That said, it improved relative to Q2/19-20. Liquidity is adequate, supported by the USD 350 mn green bond issuance in Q2 and the USD 75 mn equity injection from its largest shareholder in Q3. We expect little ratings pressure.

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Brief Utlilities: BCPG: Upside from Second Hydro Power Plant Acquisition in Laos and more

By | Daily Briefs, Utilities Sector

In this briefing:

  1. BCPG: Upside from Second Hydro Power Plant Acquisition in Laos
  2. Huaneng Renew: Unconditional In All Respects

1. BCPG: Upside from Second Hydro Power Plant Acquisition in Laos

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BCPG announced acquisition of new 45 MW hydro power plant in Laos. The project is roughly estimated to bring a positive upside of Bt1.0 to our target price. We maintain the BUY rating given the significant upside to our target price of Bt22.1 (excluding the Nam San 3B’s value).

Updates:

  • BCPG announced acquisition of 100% stake in 45MW hydro power plant in Laos increasing the firm’s total operating capacity to 449 MWe (+11%).
  • Expect the transaction to be settled in 1Q20 and estimate the new power plant will bring a positive upside of Bt1.0 per share to our TP, based on 12% EIRR and 1:1 debt to equity ratio.
  • 4Q19 will be a weak quarter due to seasonality factor. While 1Q20 earnings looks bright, given the full quarter and partial earnings recognition from 69MW Nam San 3A and 45 MW Nam San 3B projects respectively acquired in Laos.

We believe the correction in BCPG share price is a chance to accumulate in 12-month period, backed by strong earnings outlook in 2020E.

2. Huaneng Renew: Unconditional In All Respects

On the 20 Janaury, the First Closing Date, China Huaneng received valid acceptances representing 90.80% of Huaneng Renewables Corp H (958 HK)‘s total H Shares. This satisfied the 90% “acceptance condition” attached to the Offer. The transaction appeared all done bar the shouting.

The Offer remained conditional on necessary approvals/consents from NDRC/MOFCOM/SAFE, but this was China Huaneng – no one expected an issue with the authorities.

Time dragged. The Anhui Conch Cement Co Ltd H (914 HK) / West China Cement (2233 HK) situation in 2016 was discussed, wherein the regulatory approvals, for whatever reason, were never received.

And with the 10 February fast approaching – 21 days after the first close, therefore entitling shareholders who had tendered, to un-tender – it was coming down to the wire. An extended Chinese New Year holiday due to the coronavirus further muddied matters. The SFC, for their part, had yet to provide a closing date for the Offer.

Last night China Huaneng and HRC announced that all the conditions of the Offer have been fulfilled and the Offer has been declared unconditional in all respects.

This is a done deal and remains open to acceptances. If you can buy at $3.15, do so.

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