Huaneng's share placement could furnish buying opportunity

A compelling one at that.

Huaneng announced issue of 780m H share at HK$7.32/shr, a dilution of 5% of shares outstanding and discount of 10% to last closing price.

According to a research note from Jefferies, while it believes A share placement could be a better option (45% premium), the placing price offers a compelling opportunity to buy a high quality IPP with 7%/9% FCF and dividend yield.

Meanwhile, Jefferies' 2016E earnings are still 25% higher than consensus as it believes consensus has not fully priced in the collapse of thermal coal price.

Here's more from Jefferies:

Buying opportunity. While we believe the company should have used A share instead (which is trading at 45% premium), we believe the placing price offers a compelling opportunity to buy a high quality IPP, which offer 7%/9 FCF and dividend yield. Our 2016 earnings estimates are 25% higher than current consensus as we believe consensus has not fully priced in the collapse of thermal coal price in 1H15.

H-Share placement of HK$5.7bn. Huaneng Power Int'l announced that it will issue 780m of new H share at HK$7.32/shr with net proceeds of HK$5.7bn, implying a dilution of 5% of total shares outstanding and discount of 10% to last closing price of HK$8.09/shr. The placement values the company at just 1x 2016 PB with expected ROE of 20%, there could be negative impact to share price in the near term. The placing share will be allotted to six to ten investors, and none of them will become a substantial shareholder of the company after the placement.

De-lever its balance sheet. The net proceeds will be used to payoff loan and supplementing working capital. We believe the equity placement will help the company to de-lever its balance sheet, easing the pressure due to the Rmb9.3bn asset injection from parent co. last year. In November 2014, Huaneng has issued 365m new H shares and raised net proceed of HK$3bn. The equity placement has helped the company to lower its net gearing from 195% in YE2013 to 168% in YE2014.

Also Read

Chief Execuive Lee talks green cooperation with Qinghai governor

Towngas net profits down by 16% YoY to $3.04b

Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

I want to download the media kit