VPower formed JV with China National Technical Import & Export Corporation (CNTIC) for developing three IBO projects with aggregate 900MW contract capacity in Myanmar. Mgmt. expected those projects in Myanmar will commence operation from 2Q20, and to ramp up to full output by Jul 2020. For COVID-19’s impact, VPower is subject to only slight impact from employee return to Myanmar project construction, and SI assembly in China. Overall, we believe VPower’s Southeast Asia focus will unleash its growth potential back by rapid increasing power demand, and the Company is on track to deliver rapid earnings growth in FY20/21E. Reiterate BUY.
- Co-developing Myanmar IBO market with powerful partner. VPower had ~10 years’ cooperation with CNTIC for EPC services. Backed by Chinese government, CNTIC has strong financing capabilities and long-term project experiences in various emerging market. With supports from CNTIC, the Company is able to leverage limited resource to develop mega size project scale in Myanmar. According to our estimate, those 900MW projects represents 18.0% of Myanmar’s total power generating capacity. Together with existing IBO project, VPower will be involved for more than 22% capacity of Myanmar’s power supply.
- Project & pipeline update: largely on track. VPower signed another two new projects in Sri Lanka, reaching about 100MW in the newly developed market. Indonesia and Brazil projects may be subject to slight delay. For UK peak shaving units, mgmt. expected Doncaster-20.3MW will be put in operation in 2H20, and the remaining 100MW+ pipeline will likely shift to 2021 depends on Brexit progress. We expect VPower to have 150MW IBO capacity addition in 2020. Adding up 450MW attributable capacity from Myanmar, we expect VPower to deliver significant IBO capacity growth in 2020.
- High earnings growth in FY20/21E. For FY19 earnings preview, we expect VPower to deliver HK$249mn net profit, on track to our earnings rebound outlook in 2H19. Based on more conservative project addition forecast, we tune IBO capacity addition in 2020 from 190MW to 150MW. Our EPS outlooks remain largely intact, and we expect VPower to deliver EPS growth at 65.8%/57.9% to HK$0.161/0.254 in FY20/21E respectively.
- Reiterate BUY. After share price correction, VPower is trading at only 13.3x/8.4x FY20/21E PER. The Company will release annual report on 30 Mar. We expect share price to re-rate as mgmt. share more color for future business expansion. Our TP is unchanged at HK$3.25, representing FY20/21E PER of 20.2/12.8x.
