In this briefing:
- Azure Power – Earnings Flash – Q3 FY 2019-20 Results – Lucror Analytics
- Morning Views Asia: Azure Power Global Ltd, Powerlong Commercial Management Holdings, Softbank Corp
- BCPG: Upside from Second Hydro Power Plant Acquisition in Laos
- Huaneng Renew: Unconditional In All Respects
- Huaneng Renewables: Tendering Condition Satisfied. Offer Remains Conditional
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
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.
5. Huaneng Renewables: Tendering Condition Satisfied. Offer Remains Conditional
On the First Closing Date – today – China Huaneng received valid acceptances representing 90.80% of Huaneng Renewables Corp H (958 HK)‘s total H Shares. This satisfies the 90% “acceptance condition” attached to the Offer.
This follows the EGM and H Share Class Meeting of HRC held on 6 January 2020 in which the special resolution to approve the delisting by the independent H shareholders was passed.
What now? The Offer remains conditional on:
… obtaining all necessary authorisations, consents and approvals (including approval in-principle) of any governmental or regulatory body in relation to the H Share Offer (including its implementation) (if applicable); and the condition on the completion of the filing of NDRC and MOFCOM and the registration of SAFE in relation to the H Share Offer.
Both these conditions have not been filled as at the First Closing Date.
Should the Offer be declared unconditional in all respects, it will remain open for acceptance for not less than 28 days. However, as the Offer remains conditional, the Offer “will remain open for acceptance until further notice“.
I’m not aware of similar wording – until further notice – in an Offer. As per page 3 of the Composite Document:
Pursuant to Rule 15.5 of the Takeovers Code, except with the consent of the Executive, the H Share Offer may not become or be declared unconditional as to acceptance after 7:00 p.m. on the 60th day after the posting of the Composite Document.
Evidently, the Executive (of the SFC) has consented to an extension.
Be that as it may, the outstanding regulatory conditions were likely contingent on the acceptance condition. This is China Huaneng – no one expects an issue with the authorities.
This is a done deal. Expect shares to trade tighter to terms tomorrow.
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