16 November 2019

GCL-Poly’s move on Same Time hard to justify

Polysilicon maker GCL Poly Energy Holdings’ (03800.HK) plan to invest in printed circuit board maker Same Time Holdings (00451.HK) clearly reflects the former’s appetite for more downstream solar business. But questions are being asked as to why the choice had to be Same Time.

GCL plans to invest HK$1.8 billion (US$232 million) in Same Time shares and convertible bonds (00451.HK) to become the latter’s biggest shareholder. In GCL’s game plan, Same Time will remain a separately listed entity, but it will give up its main business and focus on solar power plant projects, while GCL-Poly itself continues to concentrate on upstream polysilicon and wafer manufacturing.

GCL Chairman Zhu Gongshan {朱共山} actually started his business empire by building and operating traditional power plants, and was once dubbed “the father of private power plants”. And he has long set sight on solar power plants.

He even sent staff overseas to develop solar plant engineering procurement & construction (EPC) business in recent years, but it’s never been on a big scale. Revenue from its overseas solar power plants business was HK$432 million for the six months ended this June, a meager 3.8 percent of the company’s total revenue.

The latest acquisition shows how keen he is on gaining a stronger foothold in the field, both domestically and overseas.

However, it is difficult to see how using Same Time as a separate platform to develop solar power plant business will be more efficient. 

There is no clear connection between printed circuit board and solar power. Also, Same Time has been unprofitable in three of the past four years. It lost HK$ 175 million for the year ended March.

Thus it is hard to understand why GCL would want to spend so much money on an irrelevant business. 

Given these concerns, it is not surprising that GCL-Poly shares have underperformed those of Sam Time in the past couple of days. Same Time has surged over 22 percent since the transaction was announced on Tuesday while GCL-Poly gained 3 just percent during the same period.

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