Roth Capital Positive on Sky Solar's (SKYS) Move to Sell Japanese Solar Project Assets; Affirms at 'Buy'
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Roth Capital affirms Sky Solar Holdings, Ltd. (Nasdaq: SKYS) with a Buy rating and $8 price target after the company announced entering a Letter of Intent to sell Japanese solar projects.
Analyst Philip Shen commented,
Last week, SKYS announced the signing of an LOI with Solar Partnership Capital (SPC) to sell 152MW of Japanese solar projects for ~$165mn. We see the sale as a positive outcome as the deal value exceeds our expectations and demonstrates the value of SKYS's portfolio and pipeline. Despite shares being up 14% on the news, our liquidation analysis suggests shares remain undervalued.
Despite stock strength postannouncement, we believe SKYS’s portfolio remains undervalued. We estimate an implied asset value of ~$4.50/W for operational Japanese assets based on the $165mn purchase price for the transaction. Assuming a leverage ratio of 65%, our back-of-the-envelope analysis suggests the EV for the transaction could be ~$470mn. After subtracting an estimated $117mn in value for the 78MW under construction/shovel ready (~$1.75/W of value) from our estimated EV, we reach a $335mn estimate for the value of the 74MW operational assets or ~$4.50/W vs. our previous estimate of $4/W. At a $4.50/W value, this suggests SKYS’s operational Japanese assets alone could be worth ~$5.35/share vs. our prior estimate of ~$5/share and the current share price for SKYS of ~$3. Extending our analysis, we believe the rest of SKYS’s portfolio could be worth an additional ~$3/share for a total share value of ~$8 after accounting for debt.
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