In this briefing:
- Xinyi Energy IPO Valuation: Asking More Than What It Is Paying to Acquire Target Portfolio
- China Tower: Changing Our View to Positive. Low Cost Expansion Should Generate Better Returns
1. Xinyi Energy IPO Valuation: Asking More Than What It Is Paying to Acquire Target Portfolio
Xinyi Energy Holdings Ltd (1671746D HK) is a solar farm operator seeking a listing on Hongkong stock exchange raising up to US$680M (including Greenshoe). The company announced a price range of HK$1.89/share to HK$2.42/share valuing the company between HK$12.5B to HK$16B. The company is issuing 1.9B shares and 282M shares of Greenshoe as part of the IPO. The offer price will be announced on 13th December. The shares are expected to trade on Hongkong Stock Exchange on the 21st December.
Based on GER’s analysis valuations appear rich and the investors should avoid the IPO which are priced at a significant premium at the lower end of offer price compared to its peers.
2. China Tower: Changing Our View to Positive. Low Cost Expansion Should Generate Better Returns
At the time of the IPO we were quite negative on China Tower (788 HK) prospects. However, in recent calls and meetings our view has changed and become more constructive. Chris Hoare now believes that China Tower is managing to generate co-location growth outside the Master Services Agreement (MSA) and at a much lower level of capital intensity (perhaps up to 50%) than indicated in the IPO. Management has also proven to be more open to shareholders than expected and with lower capex, higher FCF generation we upgrade to a BUY with a HK$1.60 target price. The stock has started to move as the market has begun to understand the more positive outlook. It will be interesting to see if China Tower is allowed to retain these benefits long term.
Summary China Tower forecasts:
