SemiOT: Solar Cell Maker Suntech Opens Up 36% Post-IPO
DOW JONES NEWSWIRES
December 14, 2005 11:32 a.m.
By Lynn Cowan Of DOW JONES NEWSWIRES
Suntech Power Holdings Co. (STP) clinched investors' enthusiasm for solar-power cell makers Wednesday, with an initial public offering that lit up the market.
The Chinese company's shares opened at $20.35, up 36% from its initial public offering price of $15. Suntech sold 26.38 million shares at the high end of its expected price range of $13 to $15.
It was clear earlier this week that investor demand was strong for the offering, and underwriters Credit Suisse First Boston Corp. (CSF.YY) and Morgan Stanley (MWD) had to raise the price range from a lower level of $11 to $13 a share. The stock was trading recently at $19.70 a share, up 31%.
Suntech's debut follows last month's gains by SunPower Corp. (SPWR), a California-based solar cell maker. SunPower's stock rose 41% on its first day of trading, and is currently up 55% from its IPO price.
Both stocks are benefiting from investor interest in alternative energy companies as the price of oil and natural gas have climbed this year. Solar power becomes more economically viable when traditional forms of energy are expensive, and government subsidies and tax breaks for solar power usage is growing worldwide as oil and gas reserves diminish.
Suntech's offering is considered even more attractive than some of its publicly traded peers such as SunPower because the company has managed to turn an annual profit since 2003 - a year after it began operating. Most of its rivals, however, are still unprofitable. For the first nine months of 2005, Suntech's net revenue rose 188% to $137.0 million and its net income grew 129% to $20.1 million, compared with the same period in 2004.
Suntech has the advantage of lower labor costs than its rivals outside of China, but it is also producing more, with 120 megawatts of production capacity that is expected to double to 240 MW over the next year - a level none of its competitors are expected to match, according to Renaissance Capital, an IPO research firm based in Greenwich, Conn.
Like all solar cell makers, Suntech's business is constrained by the scarcity and rising cost of its primary raw material: silicon wafers. It is using about $100 million raised in the IPO to purchase or prepay for raw materials, $40 million to expand its manufacturing line, and $20 million on research and development.
Suntech has already secured all the raw materials it will need to accommodate demand for its products into 2006, Chief Financial Officer Amy Yi Zhang said Tuesday in a telephone interview. The company expects its low labor cost to remain a significant financial advantage for the next decade, added Stuart Wenham, the company's chief technical officer.
"Besides the direct benefit of lower labor costs, it allows us to avoid buying a lot of the automated equipment that our competitors are forced to use, so we can install new capacity at a fraction of the cost," Wenham said. "Our capital expenditures are one-third the cost of our competitors around the world." |
