BOC International Initiates Coverage on VPower Group with "BUY" Rating
Headquartered in Hong Kong, VPower Group is an integrated expert in distributed power generation. It principally engages in power system integration (SI) business, covering designing, integrating and sale of gas-fired and diesel-fired engine-based gen-sets and power generation systems, and Investment, Building and Operating (IBO) business, involving investing in, building and operating distributed power stations to supply reliable electricity. It is now a leading distributed power station owner and operator in Asia.
BOC International reckoned VPower Group's engine-based generation model has multi-faceted advantages, thus allowing the Group to fit into different markets especially the under-electrified markets and auxiliary services market. The firm believed VPower Group is well positioned to win more businesses given its solid track record in both developing and developed regions in the past few years.
BOC International highlighted that the commissioning of the Myanmar liquefied natural gas (LNG) to power projects with CNTIC in the near term would boost VPower Group's earnings growth. The firm estimated the projects will make a significant contribution to the Group's profit, leading to a net profit CAGR of 53% from 2019 to 2022. The successful commissioning of the three Myanmar LNG to power projects within a tight deadline has demonstrated VPower Group's capability and unique relationship with upstream engine suppliers to win future tenders.
Regarding the recent top-up placement in which VPower Group raised net proceeds of HK$299 million, BOC International pointed out the proceeds will further replenish the Group's balance sheet and get it prepared for future investments.
BOC International used SOTP methodology to value VPower Group in light of the different business nature of its IBO and SI segments. It initiated coverage with a BUY rating and a target price of HK$ 4.10, implying 11x 2021 P/E.
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