The net amount raised by the share issue is HK $410 million.
On February 21, the company announced that it would issue 50 million new shares at a discount of HK $8.40 per share, equivalent to a 12.8% discount of the previous closing price of HK $9.63, with a net capital of HK $410 million. After the completion of the rights issue, the total share capital of the company will increase by 5.2%, while the controlling position of the main shareholder, Mr. Zhang Yingzen and connected persons, will be maintained, and the shareholding will drop slightly from 58.50% to 55.60%. As far as we know, more than a dozen institutional investors from Asia, Europe and the United States have participated in the subscription. The purpose of the fund raised is as follows: (1) about HK $290 million or 70% will be used for low-carbon energy development such as township and industrial roof photovoltaic; (2) about HK $82.8 million or 20% will be used for clean heating business; (3) the remaining HK $41.4 million or 10% will be used for general working capital.
Photovoltaic light asset development model
Tianlun Gas aims to provide EPC (project procurement and construction) and operation management services with light asset development model, and has become one of the most competitive distributed photovoltaic enterprises in Henan Province. The company plans to accumulate experience in roof photovoltaic project construction and obtain necessary engineering installation qualifications through cooperation with third parties, such as partner National Power Investment Group Henan Electric Power Co., Ltd. Or strategic shareholder Zhuhai Port (000507 SZ), and self-construction mode.
Development of clean heating business
The company also expects to open clean heating business in Shangjie, Xuchang, Xiping and other areas of Henan Province in 2022 to serve residents and industrial and commercial users.
Fund-raising to boost long-term development, although short-term industry risks have increased
We believe that the purpose of this fund-raising is clear, which is conducive to the long-term development of the company's photovoltaic business. Although the conflict crisis between Russia and Ukraine has intensified in recent days, it may lead to tight overseas gas supplies and higher ex-factory prices, increasing short-term operational risks for gas operators. However, the company's gas source comes from mainland China, and we believe that the risk can be controlled. After fine-tuning earnings forecasts and raising risk premium assumptions, we have lowered the target price for discounted cash flow (DCF) analysis from HK $11.00 to HK $10.00, corresponding to a price-to-earnings ratio of 6.9 times 2022 and 41.2% room for growth. Reiterate the "buy" rating.
Risk tips: (1) project delay, (2) tight natural gas supply, (3) reduced connection fee or cancelled.