The total amount of shares and allotment options is HK $1.299 billion. United Photovoltaic announced the placement of 2.233 billion new shares at a placing price of HK $0.5814 per share, of which Orix will subscribe for 1.407 billion shares, while China Merchants New Energy and New Energy Exchange will subscribe for 757 million shares and 69 million shares respectively. In addition to the share placement scheme, 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 net amount raised by new shares and warrants is expected to be HK $1.259 billion. Immediately after the placement of new shares, China Merchants New Energy and United Action's shareholding in United Photovoltaic rose from 24.17% to 28.21%, while Orix will become the company's second largest shareholder with 19.9%. Equity placement will greatly alleviate the tight financial situation of United Photovoltaic.
Strategic investor Orix, a leading financial services company in Asia, is wholly owned by its parent company ORIX Corporation (8591 JP, IX US). According to the company, Orix is one of the largest solar power plant operators in Japan, with a portfolio of about 900 megawatts of solar power plants in several regions. As a prerequisite to the rights issue, Orix will assist United Photovoltaic in raising not less than HK $2 billion through syndicated loans and / or corporate bonds. The HK $3.26 billion (including Orix-assisted loans / bonds) raised by the company is planned to be used to redeem convertible bonds issued earlier. We believe that this will be an excellent time for joint photovoltaic to restructure the capital structure, significantly reduce the financial cost burden, and allay market concerns about equity dilution for convertible bonds.
Restore the growth momentum and start the road of overseas expansion with British acquisitions. After the announcement of the new share placement and share issue plan, United Photovoltaic immediately announced a project acquisition plan in the UK, which is also the first overseas acquisition of United Photovoltaic, indicating that the company is back on the track of installed capacity growth. The UK project's target assets are made up of six ground-based photovoltaic power stations, totaling 82.4 megawatts, all of which have received 1.4 Renewable Energy responsibility Certification under the UK Renewable Energy responsibility Plan. We estimate that the acquisition price will be equivalent to RMB 8.56 per watt, and United Photovoltaic expects 1) the internal rate of return of the project is not less than 8%; 2) the debt-to-equity ratio of the project is 7: 3; 3) it will use the local currency as a financing channel to obtain natural hedging. We expect the company's overseas mergers and acquisitions to accelerate in the coming months.
Raise the target price to reflect the fundamental change. We believe that the rights issue and debt swap will significantly improve the balance sheet of United Photovoltaic, which will further boost the company's higher installed capacity growth, while lower debt costs will improve the company's profitability. Accordingly, we put these favorable conditions into the forecasting model, and get the net profit forecasts of RMB 106 million, 199 million and 270 million yuan for 16-18 years, respectively. Based on the updated DCF valuation, we have raised the target price from HK $0.82 per share to HK $0.94 per share.