According to a report published by CMB International, the target price for United Photovoltaics (0686-HK) was given a purchase rating, and the target price rose to HK$0.94.
According to CMB International, United PV announced that it will issue 2,233 million new shares at an placement price of HK$0.5814 per share. Of these, ORIX will subscribe 1,407 million shares, while China Merchants Renewable Energy and Renewable Energy Exchange will subscribe for 757 million shares and 69 million shares respectively. In addition to the equity placement plan, the company also plans to issue 871 million warrants to ORIX and China Merchants New Energy at an exercise price of HK$0.646 per share. The bank expects the net amount raised from the issuance of new shares and warrants to be HK$1,259 million. Following the IPO, China Merchants Renewable Energy and Allied Actors increased their shares in United PV from 24.17% to 28.21%, while ORIX will become the company's second largest shareholder and hold 19.9% of the shares. The equity placement will greatly ease United PV's current tight funding situation.
ORIX, a strategic investor, is a leading Asian financial services company wholly owned by its parent company, ORIXCorporation (8591JP, IXUS). According to information provided by the company, ORIX is one of the largest solar power plant operators in Japan and has a portfolio of solar power plant assets of around 900 megawatts in various regions. As a precondition for the allotment of shares, ORIX will assist United PV in raising no less than HK$2 billion through syndicated loans and/or corporate bonds. The HK$3.26 billion raised by the company (including ORIX assisted loans/bonds) is intended to be used for early redemption of convertible bonds issued earlier. The bank believes that this will be an excellent opportunity for United PV to restructure its capital structure, significantly reduce the burden of financial costs, and dispel market concerns about convertible bonds and equity dilution.
Resuming growth momentum and starting a path of overseas expansion with UK acquisitions.
After announcing the IPO and share option issuance plans, United PV immediately announced the acquisition plan for the project located in the UK. The project was also United PV's first overseas acquisition, indicating that the company had returned to the installed capacity growth trajectory. The target assets of the UK project consist of 6 ground-based photovoltaic power plants totaling 82.4 megawatts. All have obtained 1.4 renewable energy liability certification under the UK Renewable Energy Liability Program. The bank estimates that the purchase price will be equivalent to RMB 8.56 per watt, while Joint PV expects 1) the internal return of the project to be no less than 8%; 2) the project debt-to-equity ratio is 7 to 3; 3) the local currency will be used as a financing channel to obtain natural hedging. The bank expects the company's overseas mergers and acquisitions to accelerate in the next few months.
Raise target prices to reflect changes in fundamentals.
The bank believes that allotment of shares and debt swaps will greatly improve United PV's balance sheet, which will further push the company to obtain a higher installed capacity growth rate, while lower debt costs will improve the company's profit level. Based on this, the bank incorporated these favorable conditions into the forecasting model and obtained net profit forecasts of RMB 106 million, 199 million, and 270 million yuan respectively for 16-18. Based on the updated DCF valuation, the bank raised its target price of HK$0.82 per share to HK$0.94 per share.
