Best stock to invest in
Investors based in the U.S. need to look far and wide for new stock
issues from renewable energy companies. Capital markets
activity has slowed in the last couple of years, in part to due to
their own success. In reaching new efficiency in energy
production, renewable energy companies are generating their own
internal capital and are not as dependent upon the capital
markets. The Hong Kong market has come to the rescue of U.S.
investors with a ‘green’ offering
China Everbright Greentech Ltd. is now trading on the Hong
Kong Exchange with the stock code 1257 following a successful
offering of 560 million shares in April 2017. The company
raised $385.6 million (HK$3.0 billion) in new capital that will be
used to develop business in the People’s Republic of China as well
as research and development in advanced technologies.
A spin-off of parent China Everbright International, the
waste-to-energy and water treatment developer, China Everbright
Greentech invests in a variety of renewable energy projects.
These projects are capital-hungry and sometimes deliver volatile
returns. The spin out should help the parent to present more
stable financial results. Investors in the spinout are getting
a more speculative play at a more compelling valuation.
China Everbright Greentech is a self-described “specialty
environmental protection service provider.” Its portfolio
includes biomass, solar and wind energy production as well as
hazardous waste treatment facilities. Total energy product at
the time of the IPO was 125.9 megawatts from solar and wind
facilities and another 810 megawatts from biomass projects currently
in the planning and construction stages. Current hazardous
waste treatment capacity is in excess of 500,000 tons per year.
Management has wasted no time in deploying new capital. In
late May 2017, the company announced definitive agreements for three
new hazardous waste treatment projects in mainland China. The
total investment of US$102 million (RMB680 million) will add 120,000
tons per year in waste processing capacity after all construction
phases are completed.
The company’s public
offering document provides details on revenue and
profits. Sales value has increased in each of the last three
years, with profits following. In 2016, the company delivered
HK$629.5 million (US$81.8 million) in profit on HK$3.0 billion
(US$390.0 million) in total sales, representing a profit margin of
21%. Operations generated HK$886.2 million (US$115.2 million)
in cash flow.
China Everbright International remains the controlling shareholder
in its greentech spin-off. However, the offering makes room
for investors of all stripes to participate in what appears to be a
successful formula for growth and income.
Debra Fiakas is the Managing Director of Crystal Equity
Research, an alternative
research resource on small capitalization companies in selected
Neither the author of the Small Cap
Strategist web log,
Crystal Equity Research nor its affiliates have a beneficial
interest in the companies mentioned herein.
– Best stock to invest in