Bring in new investors. Kamdanke announced earlier this week that Guolian Financial Holdings and Li Wanbin, chairman of Henan Wanzhong, would subscribe for 672.9 million and 255.2 million new shares (at HK $0.66 per share), respectively, accounting for 29 per cent and 11 per cent of the enlarged share capital, respectively. League of Nations Financial Holdings are owned by Xizhou International (wholly owned by Wuxi League of Nations Development), first holding Group [1269 HK, unrated] and New Citic respectively. After the completion of the subscription (subject to the approval of the special general meeting of shareholders), the League of Nations Financial Holdings will become the largest shareholder of Kamdanke. The shareholding of Zhang Yi (chairman) will fall to 26.91%, making him the second largest shareholder.
Wuxi League of Nations has a strong background: Wuxi League of Nations is a large state-owned enterprise in Wuxi. The company is mainly engaged in financial business, including banking, insurance, securities, trusts and funds, and invests in green energy business. According to the company's website, the total assets and net assets of Wuxi League of Nations reached 70 billion yuan and 25 billion yuan respectively. The operating income and net profit reached 10 billion yuan and 1.7 billion yuan respectively.
Cooperation form: (1) as far as we know, Wuxi League of Nations currently has a 200MW distributed solar power generation project in Jiangsu, and another 200MW-300MW project will be gradually put into production. Kamdanke may buy when the middle part of the project (double-digit return; debt / shareholder equity ratio: 70 prime 30). (2) in the future, Kamdanke will be able to sell some of its rights and interests in solar energy projects to the trust and fund established by Wuxi League of Nations. This will help Camdanke boost its cash flow and accelerate investment in new solar projects.
Wafer business: the company's production capacity in Malaysia is gradually increasing. At present, Kamdanke's production capacity is 400MW in Shanghai and 300MW in Malaysia. Kamdanke plans to move more capacity from Shanghai to Malaysia to reduce labour costs, power generation costs and tax rates.
Valuation: Kamdanke's current price-to-book ratio is 0.6 (based on the company's book value of 1.347 billion yuan at the end of June 2015). Other things being equal, the book value of the company will increase to HK $2.2 billion after the company has raised HK $611 million from the rights issue. The price-to-book ratio will be 0.7 times and we don't think the valuation is high.
Company background: Camdanke announced in 2004 to enter the solar business, the company mainly to produce single crystal silicon wafers and sell to the world's major solar cell manufacturers. The company's business is mainly located in Shanghai and Malaysia. At present, the company's annual wafer production capacity is 70MW. Zhang Yi, the company's chairman, currently owns 45.21% of the company (before bringing in new investors). Risk factors: (1) change of government policy; (2) fluctuation of solar electricity price; (3) slower-than-expected progress of capacity increase; and (4) delay in the process of collecting electricity price revenue after the expansion of solar power plant business.
