Suntech Power Capital Structure

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    Suntech Power Capital Structure - Presentation Transcript

    1. Reviewed by Arseny Lebedev BT 401 Due Diligence 12/3/2008
    2. Table of Contents
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
      Arseny Lebedev
    3. Definitions
        • “ PV ” – Photovoltaic
        • “ Si ” – The silicon used in PV production.
        • “ PV Cell ” – a device made from silicon wafer that converts sunlight into electricity.
        • “ PV Module ” – an assembly of PV cells that have been electrically interconnected and laminated in a durable and weather proof package for increased electrical output.
        • “ PV System ” – A package of one or more PV modules physically mounted and electrically interconnected with system components such as batteries and power electronics to produce or reserve electricity.
      Arseny Lebedev
    4. 1. Pre-401 Summary Arseny Lebedev
    5. Overview of PV 16-20% Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    6. PV Market Snapshot Arseny Lebedev
      • World solar photovoltaic (PV) market installations reached a record high of 2,826 megawatts (MW) in 2007, representing growth of 62% over the previous year.
      • Price / Watt = ~$4.10
      Current market size: $10-15 Bn Sources: SolarBuzz, Analysts
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    7. Suntech Overview
      • Operations began in 2003
      • Firm went public in 2005 (NYSE:STP)
      • Initially financed by Chinese government
      • Top 3 producer of solar energy products
      • Finishing acquisition of MSK of Japan
      Dr. Zhengrong Shi Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    8. Important Facts
      • World in economic trouble.
      • STP has long term contracts.
      • STP is actively increasing capacity.
      Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    9. Changes in Comparables #1 Very similar operationally Vertically integrated for silicon production PV leader Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    10. Comparables Arseny Lebedev $Millions
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
      Income Statement Quarterly 2007 2006 (Sep '08) MEMC Total Revenue $ 546.0 $ 1,921.8 $ 1,540.6 Gross Profit $ 269.7 $ 1,000.0 $ 689.0 Operating Income $ 227.5 $ 849.9 $ 558.3 Net Income $ 182.8 $ 826.2 $ 369.3 STP Total Revenue $ 594.4 $ 1,348.3 $ 598.9 Gross Profit $ 128.3 $ 274.1 $ 148.9 Operating Income $ 87.1 $ 171.6 $ 103.2 Net Income $ 55.9 $ 171.3 $ 106.0 Qcells Total Revenue $469.56 $1,125.78 $710.02 Gross Profit $130.03 $424.41 $273.09 Operating Income $69.40 $254.13 $166.41 Net Income $94.94 $191.44 $125.26
    11. II. Financial Markets Arseny Lebedev
    12. Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
      “ Suntech slashed its revenue forecasts for the fourth quarter, blaming the euro's sudden fall against the dollar and delayed orders by customers who had trouble getting project financing.” – Steve Gelsi, MarketWatch
    13. Lifetime Stock Performance (STP) $80 $25 $8 80% Loss Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    14. Since Last May $40 to $8/share Qcells Suntech MEMC Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    15. Analyst Coverage Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
      Source: Marketwatch
    16. Shareholders 64% of outstanding stock is held in the US Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    17. IV. Business Model Analysis Arseny Lebedev
    18. PV Value Chain Majority of Revenue Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    19. Products: PV Cells PV Modules Arseny Lebedev Priced in Watts, i.e. $4.00/Watt
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    20. Segments & Ratios Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    21. P&L Arseny Lebedev $Millions
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
        FY 08 Q3 Q2 Q1 7-Dec 6-Dec 5-Dec 4-Dec     estimate 8-Nov 8-Jun 8-Mar (TTM) (TTM) (TTM) (TTM) Total Revenue $1,865.00 $594 $480 $435 $1,348 $599 $226 $85 Cost of Sales $1,398.75 $466 $364 $338 $1,047 $439 $154 $58 Gross Operating Profit $466.25 $128 $116 $96 $301 $160 $72 $27 Operating Profit before Depreciation (EBITDA) $251.78 $87 $77 $62 $199 $115 $47 $22 Total Net Income $ 216.94 $56 $65 $56 $ 171 $ 106 $ 31 $ 20
    22. Capital Expenditures Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    23. 3. Capital Structure Arseny Lebedev
    24. Debt / Equity 3 rd Quarter Arseny Lebedev 2 nd Quarter
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    25. Other Debt Items Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    26. Derivatives Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    27. Leverage Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    28. Debt / Equity Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    29. Cost of Capital Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    30. Utilized vs. Potential Capacity Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    31. Why so Debt Heavy ? Utilized/Unutilized Capacity Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
      Total: 750 MW 2008 Total: 1 GW 2009
    32. 4. Governance Arseny Lebedev
    33. Governance Nuggets
      • Deals with companies owned by senior executives
      • Complicated company structure
      • SEC filings are non-standard
        • Many Non-GAAP # in filings
        • Depreciation ?
      Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    34. Corporate Structure Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    35. Board of Directors Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
      Name Title Expertise Shi, Zhengrong Chairman of the Board, CEO Technical Know-How Maynard, Jason Independent Director Finance Qiu, Zhi Zhong Independent Director Finance Zhang, Songyi Independent Director Finance Worley, Julian Independent Director Finance
    36. Shareholders Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    37. GAAP vs Non-GAAP, Misc Arseny Lebedev
      • Depreciation is not included in quarterly statements, so estimation is difficult especially with new facilities opening soon.
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    38. 5. Valuation Arseny Lebedev
    39. Market Valuation Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    40. Discounted Cash Flow Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    41. Assets 3 rd Quarter Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    42. Asset Nuggets Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    43. Inventory Turns Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    44. P/E History Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    45. Metrics Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    46. More Ratios Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    47. 5. Other Risks, Conclusion Arseny Lebedev
    48. Risks
      • US and Chinese Economy
        • Politics
      • Company Governance
      • Silicon shortage (maybe)
      Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    49. Silicon Shortage 88% of global polysilicon supply comes from five companies.
      • Hemlock
      • Wacker
      • REC
      • Tokuyama
      • MEMC
      Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
      Suppliers
    50. Polysilicon Prices Per Kilogram Source: Lehmen Brothers + Industry News Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    51. Invest Focuses Arseny Lebedev
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
    52. Conclusion (Investor POV) Arseny Lebedev
      • Supply obligations = must find customers that can pay.
      • Asset troubles (?):
        • Inventory
        • Receivables
      • Poor investing performance (derivatives)
      • Silicon pricing
      Negatives Positives
      • Massive capacity, new facilities
      • Silicon pricing
      • “ Undervalued” stock
      Short: Buy @ < $10 Long: Buy & Hold < $15
      • Pre-401 Summary
      • Financial Market Status
      • Business Model Analysis
      • Capital Structure
      • Governance
      • Valuation
      • Conclusion
      Disclaimer: I am an optimist. And STP shareholder.
    53. Questions? Thank you

    + Sal DBSal DB, 2 years ago

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