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Kelvin Schulle
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Kelvin Schulle represents a group of researchers who has spent over a decade in the semiconductor/PV and energy industry. He began investment research ten years ago. His team has the first hand information from renewable energy industry. His focus is to identify growth trends in new technology... More
  • A few solar companies are ripe for been acquired 1 comment
    Jun 1, 2011 3:37 PM

    The selloff in solar sector in the last few weeks is not new. Investing in the sector has been cyclical in the last few years because the demand of solar panels are seasonal, the demand in winter is usually the weakest in a year and pickup quickly in spring and summer. Another reason of the poor performance of solar stocks recently is the consistent negative comments from short seller Jim Chanos, his thesis is simple, that is, solar is too expensive, and will never catch the cost level of coal and natural gas. However, the latest thorough research from General Electric(NYSE:GE) shows that solar energy will become cheaper than fossil fuel by 2016. GE is also heavily investing in solar energy. Recently GE acquired Primestar solar, also plans a 400MW factory and earned new orders for its products. So who is right GE or Chanos? I will leave this to readers to decide.

    However before making judgment, let's take a look at the solar demand trend in both Europe and Asia(include China,Japan, and Asia pacific regions). The data is from the International Solar Energy Society. The Asia data has reflected the latest commitment in Japan and China to increase solar energy usage in wake of Fukushima nuclear disaster. We can see clearly Asia demand will pass Europe between 2010 and 2015, and pick up steam quickly after that.Solar energy demand trend in Europe and Asia
    Solar industry in Asia is also heating up in the space, recently both OCI panasonic and OCI announced to invest in solar technology and see strong demand in solar energy in Japan and Korea respectively.  It is worth notice that there is no big solar panel makers in Korea. Hanwha chemical last year acquired 50% of Solarfun(HSOL), It is believed that Hanwha will take full control of the PV maker this year, and become the largest PV supplier in Korea market. Solarfun, later renamed as Hanwha Solar, is the 4th largest PV module makers in the world. Its stock is currently trading below book value and PE less than 5.  We should not be surprised to see Hanwha take action to purchase the rest of 50% stake. However an offer of $10 or below should be rejected by management with no doubt.


    Another value stock is LDK solar(NYSE:LDK), the company is going to spin off its poly silicon business in HongKong this year, and currently has appointed Deutsche Bank (NYSE:DB) to handle its offering according to Morningstar report. It is believed that poly business alone is worth way over current market cap($1B). LDK revenue is estimated to be around $3.5B in 2011. Recently China's National Development and Reform Commision(NDRC) has approved China Developement Bank(CDB) to invest $240M in LDK Solar.  With solar energy demand rising quickly in coming years its a no-brainer that large fossil energy companies in Asia will enter this sector just like Total did.

    Disclosure: I am long FSLR.

    Additional disclosure: long FSLR LDK
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  • nolaig
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    LDK is extremely undervalued, a 3PE stock and next week after earnings will be 2PE stock at current price.....
    2 Jun 2011, 04:21 PM Reply Like
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