r21442
25 Jun 2015
Re: IC update Full text......It would appear that the board of Greenko (GKO: 55p), the Indian developer, owner and operator of clean energy projects, have been listening to their shareholders. They have now entered into discussions with two major investors to work out a compromise deal to prevent a highly dilutive share issue on the conversion (into ordinary shares) of the minority interests in Greenko Mauritius held by the Government of Singapore (GIC) (whose investment has a value of £140m), and Global Environment Emerging Markets (investment has a value of £75m).This is clearly good news as both GIC and Global Environment Emerging Markets (GEF) have the right to convert their investments (GIC owns 17.38 per cent of Greenko Mauritius and GEF owns 14.09 per cent) into Greenko’s ordinary shares from the start of July, so this issue needs resolving as soon as possible. I discussed this important point when I last updated my view when the price was bombed out at 44p (‘Catalysts for share price moves’, 4 Jun 2015). The latest news initially sparked a 50 per cent plus rally in Greenko’s share price to a high of 68p yesterday morning, albeit it only returned the price back to the 70p price level they were trading at seven weeks ago (‘Break-out looms for mobile wonder’, 12 May 2015) before some profit taking set in yesterday afternoon.My advice is to hold firm and await news on details of the compromise deal the company is trying to work out with these two major investors as there could be more significant share price upside in the event of an amicable resolution. That's because after factoring in a December 2015 year-end net debt figure of around $920m (£590m), an increased issued share capital of 329m shares - assuming that GEF and GIC accept conversion terms around 100p a share as I discussed in my article in May - then Greenko's enterprise value of $1.5bn (based on a share price of 100p) would still be only 8.5 times fiscal 2016 operating profit estimates and 7 times likely cash profits. Of course a conversion price of 100p a share is well above Greenko’s current share price, but still represents a chunky discount on the 180p level the shares were priced at last summer, and more importantly the share price at the time when they made their investments in the first place. Moreover, there is no point at all for the two major shareholders to undermine the ability of Greenko's board to progress with its expansion plans as GIC and GEF are still only minority shareholders in Greenko Mauritius, owning less than a third of that subsidiary between them. Hold.
TopTrader2009
25 Jun 2015
IC update ST has an article out today this is his concluding bit:-My advice is to hold firm and await news on details of the compromise deal the company is trying to work out with these two major investors as there could be more significant share price upside in the event of an amicable resolution. That's because after factoring in a December 2015 year-end net debt figure of around $920m (£590m), an increased issued share capital of 329m shares - assuming that GEF and GIC accept conversion terms around 100p a share as I discussed in my article in May - then Greenko's enterprise value of $1.5bn (based on a share price of 100p) would still be only 8.5 times fiscal 2016 operating profit estimates and 7 times likely cash profits.Of course a conversion price of 100p a share is well above Greenko’s current share price, but still represents a chunky discount on the 180p level the shares were priced at last summer, and more importantly the share price at the time when they made their investments in the first place. Moreover, there is no point at all for the two major shareholders to undermine the ability of Greenko's board to progress with its expansion plans as GIC and GEF are still only minority shareholders in Greenko Mauritius, owning less than a third of that subsidiary between them. Hold.
farmerdave
24 Jun 2015
1st July Interesting background shennanigans. I am not invested but have been watching for a while.There is a lot of convertible debt due 1 July at subsidiary levels and the NAV of the company at market levels (for Indian wind power/hydro etc) is -ve but company producing cash etc.Will continue watching but at these levels will not buy FD
Divmad
19 Jun 2015
Re: News I guess not!
SPURRRR
17 Jun 2015
News Are we expecting quarterly results today ?
TopTrader2009
04 Jun 2015
Price Targets 100% upside Investec currently have a BUY rec on Greenko and £1.50 targetCantor currently have a BUY rec 82p price target.Minimum 100% upside from these levels.
r21442
04 Jun 2015
Another IC update I published a detailed analysis of the issues facing Greenko (GKO: 44p), the Indian developer, owner and operator of clean energy projects, only three weeks ago but given the share price slide since then another update is warranted.To recap, I initiated coverage on the shares when they were 138p ('Buy signal flashing green', 18 March 2013), the price subsequently hit a high of 190p and I then downgraded my advice to hold at 104p post the fiscal 2014 results announcement ('Small cap updates', 31 March 2015).There has been no corporate newsflow since my last article (‘Break-out looms for mobile wonder’, 12 May 2015), but clearly some investors have bailed out, hence the share price drop from 70p to 44p in the past three weeks. This has resulted in Greenko now being valued at £68m, or almost £100m less than its equity shareholder funds, and reflects the potential for a dilutive share issue on the conversion (into ordinary shares) of the minority interests in Greenko Mauritius held by the Government of Singapore (GIC) (whose investment has a value of £140m), and Global Environment Emerging Markets (investment has a value of £75m). I raised this specific issue in both my March and May articles, noting that GIC has the right to exchange its 17.38 per cent interest in Greenko Mauritius into Greenko ordinary shares anytime between 1 July 2015 and 30 June 2017. True, the number of shares that can be issued to GIC is capped to prevent it from owning more than 29.9 per cent of Greenko's enlarged ordinary share capital. But with Greenko’s share price now so depressed, then if GIC takes up its conversion rights next month then it will not only be issued with a chunk of new equity in Greenko, but will also end up owning a minority interest in Greenko Mauritius as well. The same applies to Global Environment Emerging Markets (GEF) which has the right to exchange its 14.09 per cent interest in Greenko Mauritius into Greenko ordinary shares anytime between 1 July 2015 and 30 June 2017.Clearly, there needs to be discussions between GIC and GEF and the board of Greenko to resolve the conversion issue as a matter of urgency. It would be negligent for the board of directors not to protect the interests of their own shareholders. Furthermore, it makes sense for all parties to come to some sort of compromise agreement as soon as possible, and preferably before the first exercise date on 1 July 2015, in order to reverse the steep fall in Greenko’s share price which has so undermined investor confidence even though the business has been making strong progress operationally.From a technical perspective, I would point out that Greenko’s share price is as oversold as it ever has been: the monthly RSI is below the level at the March 2009 bear market low, and the weekly and daily readings are in extreme oversold territory. At the intraday low of 40p yesterday, the price was also close to testing the support level at those March 2009 lows. From my lens at least, this technical set up is such that any positive news regarding a resolution to the conversion issue should lead to a very sharp bounce in Greenko’s share price given the massively oversold technical conditions. In the circumstances, my advice is to hold on.
phonic
03 Jun 2015
Back to 2009 Jeez...
farmerdave
14 May 2015
Re: Article in today's IC r thanks for posting that. I agree the dilution is a problem but a big issue is if you add up their assets - 1,200 MW operating and value it at market you get 720m USD (at 0.6m a mw - a lot of hydro and wind in india is trading at less) which exceeds its debt pile with or without dilution.At present the share can only be an option on the recovery of renewable assets in India.I also have a few problems with the accountsThe MI interest shown in the notes do not add up to the balance sheetCash interest of 56m is not reconciled to the P&L - I presume they are capitalising some56m interest is equal to their op cash flow !If they held their assets at the lower of cost or market value the write down would take the co into -ve equity with the pref share holders at Greenko Mauritius and Greenko Wind ending up with most assetsI do not know enough of the terms of their debt etc to know how this will pan out but worrying timesFYI I am not a holder but am sitting watchingFD
r21442
12 May 2015
Article in today's IC Shares in Aim-traded shares in Greenko (GKO:70p), the Indian developer, owner and operator of clean energy projects, have endured a roller coaster ride since I initiated coverage at 138p ('Buy signal flashing green', 18 March 2013).Having hit a high of 180p at the end of September 2014, Greenko's share price fell steadily thereafter and I subsequently downgraded my view to hold when the price was 104p after it became apparent that the operational progress the company has been delivering is being undermined by its capital structure ('Small cap updates', 31 March 2015). Clearly, some investors headed for the exit as Greenko's share price declined a further 20 per cent to 82.5p by the time analysts at brokerage Investec released a note in mid-April with a 150p revised target price.In that note to clients, Investec's utilities analyst Harold Hutchinson noted: "We believe the recent share sell off reflects some shareholders' concern on Greenko's financing structure. This has been magnified by the potential conversion of the Government of Singapore (GIC) (which invested £100m in Greenko Mauritius in 2013) and Global Environment Emerging Markets (invested in 2009) minorities into ordinary shares in the near future. The original GIC investment at a subsidiary level offered re-assurance to ordinary shareholders in terms of capital commitment. The need now is for Greenko's capital structure to be simplified and organised to ensure a recovery in confidence of all shareholders." Calculating the level of potential dilution The issue of dilution to existing shareholders is the one I raised in my article at the end of March. That's because GIC has the right to exchange its 17.38 per cent interest in Greenko Mauritius into a minimum of 44.8m Greenko ordinary shares anytime between 1 July 2015 and 30 June 2017. However, the number of new ordinary shares to be issued is capped to prevent GIC from owning more than 29.9 per cent of Greenko's enlarged ordinary share capital. Greenko currently has 155.8m shares in issue. So with Greenko's share price significantly lower than at the time when GIC made its original investment, then GIC could end up owning a minority interest in Greenko Mauritius as well as being issued with a slug of new equity in Greenko. Global Environment Emerging Markets (GEF) has the right to exchange its 14.09 per cent interest in Greenko Mauritius into a minimum of 29.1m Greenko ordinary shares anytime between 1 July 2015 and 30 June 2017. To put the interests of both GIC and GEF into some perspective, Investec calculate that GEF's interest in Greenko Mauritius would convert into 75m new Greenko shares based on its present value of $113m (£75m) and using a share price on conversion of 100p; and 70 per cent of the GIC interest would be satisfied by the issue of 99m new Greenko shares based on a present value of its investment of $210m (£140m). But because of the 29.9 per cent shareholder cap, GIC would also retain an interest in Greenko Mauritius worth £40m. As a result, Investec have factored in a raised share count of 329m, up from 156m currently, assuming conversion occurs on 1 January 2016 and a share price of 100p being accepted by both GIC and GEF. This is significantly higher than Greenko's current share price.It's possible that both GIC and GEF would accept conversion of their minority interests under these terms as it would enable Greenko to simplify its balance sheet and funding structure, remove the issue of dilution that is undermining sentiment, and enable investors to focus on the strong operational progress the company is actually making. Greenko's operating profit is expected to more than double from $55.6m in the 2014 fiscal year (nine month period due to change of year-end), to $121m in 2015, and $174m in 2016, according to analysts at both brokerage Arden and Investec. An issue that needs addressing The issue of GIC's and GEF's minority interests needs sorting out
phonic
12 May 2015
Re: nosedive Exchange Rate?
Furnace100
11 May 2015
nosedive Something is not right here, I contacted GKO about 10 days ago and they indicated that all is well and that they are still on target for 1000 MW this year. Can anyone shed any light in what is happening to the share price?
the last night trader
07 May 2015
Any ideas why the constant drop? In theory these are growth shares in a growth market, hit all their targets etc any ideas why they are bombing??
The Preston Plumber
01 May 2015
Re: Latest IC comment When is the share price going to stop falling over a cliff?
r21442
31 Mar 2015
Latest IC comment Aim-traded shares in Greenko (GKO: 104p), the Indian developer, owner and operator of clean energy projects, have endured a roller coaster ride since I initiated coverage at 138p a couple of years ago ('Buy signal flashing green', 18 March 2013), but operationally the company continues to hit its milestones. Following a change of financial year-end, power generation of 1,565GWh in the nine months to end December 2014 was 46 per cent higher than in the previous 12-month period to produce an increase in revenues from $71m to $100m, slightly better than analysts had anticipated. There was an earnings beat, too: adjusted pre-tax profit of $35m (£23.6m) was $5m ahead of forecast even though a net finance charge of $40m was $6m higher than predicted, a consequence of the board’s decision to sensibly hedge out the currency risk on its US dollar denominated debt. Last year, Greenko successfully raised $550m (£369m) though a five-year bond issued on the Singapore Stock Exchange and secured a US$125m (£84m) six-year credit line from EIG Global Energy Partners.Importantly, the company looks set fair for the year ahead with the board reiterating guidance yesterday to hit operating generating capacity of 1GW during 2015, up from 715MW at the end of last year. The company currently has 550MW of wind and hydro projects under construction, and a further 1,350 MW at the development stage. But there are a few negatives, too. Firstly, shareholders will have to wait for an inaugural dividend as the board now intend to consider a cash return at the time of the interim results in September. Analyst Adam Forsyth at Arden Partners had forecast a 2.5c a share dividend alongside this week's figures.Secondly, factoring in slightly higher operating costs, cash profits for the 2015 fiscal year have been pared back a few percentage points to $121m, albeit this still represents a hefty increase on the $80m announced for the nine month reporting period in 2014. However, the hit to the pre-tax line is far greater. That’s because after accounting for the impact of higher net interest charges, and stripping out a $6.3m non-cash gain on acquisitions, Arden have sliced their 2015 pre-tax profit estimate by a quarter to $44.4m on revenues 85 per cent higher to $185m. Mr Forsyth has also adjusted his post-tax earnings estimates to account for a high minorities’ charge which means that Greenko is now expected to make net profits this year of $28.3m, rather than $47m previously forecast. That’s a big difference and on an EPS basis the downgrade is even greater partly due to dilution from the EIG warrants issued on the above fundraise, but also taking into account shares to be issued from previous fundraises.Impact on EPS estimates The Government of Singapore (GIC) which invested £100m a couple of years ago in Greenko Mauritius, and Global Environment Emerging Markets (invested in 2009), have the right to exchange their investments for shares in Greenko between 1 July 2015 and 30 June 2017. This will lead to at least 74m new shares being issued. As a result Mr Forsyth now factors in an issued share capital of 243m shares this year, up from 153m at the end of 2014, rather than 210m in his previous estimates. The net result of all these adjustments is that Arden now expects Greenko to report EPS of 11.6¢ in 2015, or 7.9p a share, half his previous estimate.The positive is that this still represents a step change on the EPS figure of 6.1¢ reported for the last fiscal year. And with the roll-out of the new power plants on track, then it’s realistic to expect Greenko to hit Mr Forsyth’s revenue figure of $258m for 2016. On this basis, cash profits rise again to $174m to produce pre-tax profits of $68.7m and EPS of 16.5¢, or 11p at current exchange rates. This means the shares are still only being rated on about 9 times earnings estimates for 2016, hardly a high rating for company tha
