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Canadian Solar (CSIQ)

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Will they make profit at all in Q4 without EPC and project sales?

I think if they are doing this, the yieldco ipo will be solid and on time. And seems yieldco is getting some stability here. If market is always looking forward, it should be good news.

Also there is maybe some good news from the US China EU tariff front and samsung epc projects.

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If so, then two observations: a. JKS will be a run away train next to CSIQ (at least a $10 difference in JKS's favor now I called for a month or so ago, will come true) and b. CSIQ/TSL delta will get a lot closer.  Forget about $30 for CSIQ this year.

If market cares about EPS. A market that penalizes CSIQ for getting better paid for their work and keeping the cake is not very rational. Note that Trina boosted its Q2 bottom line with sales of a 50 MW plant in the UK.

 

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If market is always looking forward, it should be good news.

Exactly. Let's just rip off the bandaid now and look forward.

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If so, then two observations: a. JKS will be a run away train next to CSIQ (at least a $10 difference in JKS's favor now I called for a month or so ago, will come true) and b. CSIQ/TSL delta will get a lot closer.  Forget about $30 for CSIQ this year.

you are probably right about no $30 this year but I think it will hav a great shot at it by March-June next year. I will load up now. 

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Yes, market is forward (and EPS) looking. Hence JKS/CSIQ delta is almost $6 already and on its way even higher after Q3 ER and Q4 guidance for both. Wish I kept all of my JKS instead of moving 25% of "trading" position into CSIQ(which I already had enough of) at only $3 delta.  

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Yes, market is forward (and EPS) looking. Hence JKS/CSIQ delta is almost $6 already and on its way even higher after Q3 ER and Q4 guidance for both. Wish I kept all of my JKS instead of moving 25% of "trading" position into CSIQ(which I already had enough of) at only $3 delta.  

pg6solar, do you think Csiq can reach $30 by April in your opinion?

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Yes, market is forward (and EPS) looking. Hence JKS/CSIQ delta is almost $6 already and on its way even higher after Q3 ER and Q4 guidance for both. Wish I kept all of my JKS instead of moving 25% of "trading" position into CSIQ(which I already had enough of) at only $3 delta.  

I think csiq at this level is more attractive if things are working out as they are planning. Also not surprised that jks csiq gap getting a little wider but could be good news for csiq too. Considering add more csiq here.

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pg6solar, do you think Csiq can reach $30 by April in your opinion?

Well yes, but I was planning on $30 this year with plants sales in Q4 and guided $1 or so in Q4 EPS during Q3 ER call. Agree yield co is coming (soon) with plants acquisitions. After all, Odyd's August predictions (which unfortunately do not always correspond to our actions) might come true for this year - CSIQ at only $25 while JKS at least $35 (which also matches my $10 delta). I also think TSL will make conservatively at least a double in EPS in Q3+Q4 (as compared to CSIQ), and might have a higher total 2015 EPS than CSIQ in most optimistic scenario. And if so will PPS continue to be half of CSIQ's? (I think not). 

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I think csiq at this level is more attractive if things are working out as they are planning. Also not surprised that jks csiq gap getting a little wider but could be good news for csiq too. Considering add more csiq here.

Well of course, but the point it that JKS to CSIQ "trade" is much more attractive now than when JKS was only a $1 or even $2 higher 5-6 weeks ago.

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PG I think you need to compare JKS to TSL and JASO instead. CSIQ is different. In my view TSL and JASO are catching up with JKS on profitability, but not yet on PPS. JKS has a lot of liabilities coming due too. For these two reasons I don't see attractive risk/reward in JKS here relative to comparable CN4 peers.

 

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Explo, I'm not advocating buying JKS or TSL here (sorry I do not really follow JASO). IMHO, good buying opportunity for these two is behind (of course does not mean it will not be presented again should market fall off the cliff again like it did on August 24th). With fresh capital, I would buy only CSIQ here (actually have a bit more shares of CSIQ than JKS so not buying at these levels), but I'm against further moving from JKS/TSL at these levels into CSIQ as I think delta will increase until the time of CSIQ's filling.  

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Maybe it all depends on what perspective the market has. I go a lot by price in my trading after initial picking, since fundentals don't shift as much as we think.

 

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I think anybody who is discounting CSIQ strategy here does not know what they're talking about... I'm still betting on CSIQ $32 before year end... and they will overtake JKS in PSS once again before the year is out.  JKS sure looks great on EPS.... from a Non-GAAP standpoint.  Too bad that's not what standard accounting practices allow them to report and what multiples will be based off of

Edited by bodhi

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I think anybody who is discounting CSIQ strategy here does not know what they're talking about... I'm still betting on CSIQ $32 before year end... and they will overtake JKS in PSS once again before the year is out.  JKS sure looks great on EPS.... from a Non-GAAP standpoint.  Too bad that's not what standard accounting practices allow them to report and what multiples will be based off of

I agree. JKS used to be profitability leader. When you break things down they are losing this position, while growing financial stress compared to peers. There's no reason to appreciate JKS higher than peers here.

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I will stretch a bit since this is a CSIQ thread, but the discussion is centered around JKS as well, so let me say this,  I have trimmed my JKS however I still hold a significant amount, it has been a beast vs other CNs in recent weeks,  and sometimes you cant fight the trend.  We know the market rarely seems to respond like we think it should.  I thought JKS was getting ahead of itself when it was $3 gap between CSIQ and JKS,  then at $4,  then at $5,  recently at $6 ......    China recently up'ed its 2015 target significantly and JKS is a big player there, who knows what percentage of this new pie they will get....  I am cautious however

 

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This is good discussion and both concerns and positive points are valid. If yieldco is started and it is priced that money can be made with the transfer of the plants, CSIQ will have a a lot of money to play with, while not a lot will be shown in EPS. We knew that, this yieldco will be like SUNE, so it will be merged in the financial statements, unless there are surprises and others are partnering with them. No EPS to show.

EPS will not be something CSIQ could be measured by in this case, and that is fine as long as the market will be able to differentiate. The condition today is that the market is not doing a good job differentiating this. CSIQ has been punished for low margin guidance. Stupid as anyone should know this, but shorts played as always a winning hand.

To be honest I hope that CSIQ does not go into a yieldco on its own. If they partner and sell ownership, they can sell plants to yieldco and claim revenues. I am putting my hopes on sentence about doing business in NA with KKR, as those guys plan yieldco for their assets, including wind. I hope that Qu and Potter will exercise their ingenuity to deliver a combination with other company. If not, CSIQ could become a value trap, unreadable value with low EPS and big business made on general ledger transfers.  

Edited by odyd

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This is good discussion and both concerns and positive points are valid. If yieldco is started and it is priced that money can be made with the transfer of the plants, CSIQ will have a a lot of money to play with, while not a lot will be shown in EPS. We knew that, this yieldco will be like SUNE, so it will be merged in the financial statements, unless there are surprises and others are partnering with them. No EPS to show.

EPS will not be something CSIQ could be measured by in this case, and that is fine as long as the market will be able to differentiate. The condition today is that the market is not doing a good job differentiating this. CSIQ has been punished for low margin guidance. Stupid as anyone should know this, but shorts played as always a winning hand.

To be honest I hope that CSIQ does not go into a yieldco on its own. If they partner and sell ownership, they can sell plants to yieldco and claim revenues. I am putting my hopes on sentence about doing business in NA with KKR, as those guys plan yieldco for their assets, including wind. I hope that Qu and Potter will exercise their ingenuity to deliver a combination with other company. If not, CSIQ could become a value trap, unreadable value with low EPS and big business made on general ledger transfers.  

I don't get why not a lot will be shown in the EPS if they start a yieldco?  Are you talking about from the initial drop down of plants?  I would think they would get paid for these from the proceeds of a yieldco going public... the yieldco will have the value of the plants it would own, plus future earnings, etc... and CSIQ would be a majority owner..?

I'm not a business analyst, so i don't fully have the knowledge or time to flush that out, but value is like energy, law of conservation... they won't just lose money on the deal, so that value has to go somewhere on the CSIQ balance sheet, maybe that's what you're getting at?

Once the yieldco is up and running, it will sell equity at times and buy plants from CSIQ for full price, or would that not be the case?  CSIQ will also benefit from what is essentially a lower cost of capital as the revenue will be direct, no negotiating, and at a great price (good margin).  A true NPV of the cash flows a plant generates would be an interesting exercise to see how much money a plant is valued at in a one time, current market sale vs. collection of revenues generated over 20 years.  I know that with interest rates low (discount rate), the collection of revenue over 20 years is better than it would be if discount rates were higher.  A BIG plus for me is it will also provide stable cash flows, helping to streamline EPS and get rid of choppy quarters.  

Either way, a partner (can be different for each plant) would be nice (in the short term) so they can claim full revenue as you stated.  We'll see what route they take.  Maybe they take the partner route for a while until they wittle down their debt, then they start keeping plants all for themselves once their balance sheet shows little to no debt.  Right now i understand their hesitancy in listing a yield though since TERP and CAFD are in the tank.  Part of the value of a yieldco is owning the stock and its respective market price...

Jm2c

Edited by bodhi

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Bodhi,

I suggest to review what I wrote about yieldco, and do not look far but SUNE results to see or rather understand their transactions.

You do not sell to yieldco, you use general ledger to move value and you receive cash margin. No transaction is recognized on the income statement. This has nothing to do with the value, but accounting for a transaction. I do think there is a lot of attention to JKS and EPS on this forum now for this reason, and people here are probably more capable than Joe Average.

Yield is a complex format, majority owner will absorb the results and EPS will not be seen from transfers. If CSIQ had a partner, they could both not consolidate, like SPWR and FSLR. FSLR is flying as they are having both worlds. Smart people. Smart as most investors are simply not educated to get yieldco structures. Having EPS and yieldco contribution is the best set up. I hope CSIQ will get that.

Edited by odyd

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Bodhi,

I suggest to review what I wrote about yieldco, and do not look far but SUNE results to see or rather understand their transactions.

You do not sell to yieldco, you use general ledger to move value and you receive cash margin. No transaction is recognized on the income statement. This has nothing to do with the value, but accounting for a transaction. I do think there is a lot of attention to JKS and EPS on this forum now for this reason, and people here are probably more capable than Joe Average.

Yield is a complex format, majority owner will absorb the results and EPS will not be seen from transfers. If CSIQ had a partner, they could both not consolidate, like SPWR and FSLR. FSLR is flying as they are having both worlds. Smart people. Smart as most investors are simply not educated to get yieldco structures. Having EPS and yieldco contribution is the best set up. I hope CSIQ will get that.

Do you think it will be worth it to bring it up to CSIQ CEO? Is that too weird for investors to suggest ideas to CEO? That sounds like a very good and smart plan.

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During the investor presentation they have said following under one of their slides

"Does not include project acquisitions or partnerships under consideration that are potentially accretive"

I am sure they know accounting structure of minority ownership when selling equity to public.  They also are very quick to change things. Japan's project delays, UK total portfolio, buying Canadian assets, which seem to replacing UK portion of plans.  They are very active to make us feel better about the company and how they position themselves.  I am pretty sure that accumulative generation from 60MW in Canada was a lot better than building that 60MW in UK now to collect their rates.

This is why again perhaps naively I see something coming from KKR. After all KKR also planned yieldco.

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Until April Acciona had a plan for IPO,

http://www.bloomberg.com/news/articles/2015-04-17/acciona-said-to-mull-alternatives-to-u-s-ipo-of-renewables-unit

article explains KKR's role. While CSIQ looks like a small fry with its portfolio versus Acciona's, something like that would be fantastic if allowed to develop.

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Bodhi, I think the confusion lies in that many investor view EPS as an end for the success of a "stock", while its just one of the means to grow value of the stock. EPS or rather the earnings does one thing. It grows BVPS (book value per share). But there are other ways to grow BVPS, most notably to issue stock and sell them at a PPS above current BVPS (i.e. at a PB above 1), while issuing stock might seem dilutive to future EPS it servers the same purpose of growing BVPS as generation of EPS does when sold above PB 1 and under the assumption that new BV acquired with low stock currency spent will have same ROE (Return on equity, equity = book value) future EPS is not diluted. If the company is not able to retain current ROE on the newly acquired equity then the stock issue will be dilutive to future EPS (growing BVPS nicely now might be at expense of slower BVPS growth later). This is unlikely for yieldcos/growthcos though if IRRs for plant acquisitions remain same as for existing ones.

The yieldco structure is more about growing BVPS by selling stock at higher price than book value at retained ROE. I've called this model Ponzi-like because new investors add value to the stocks of old investors. Basically the assets (PV plants) created at a certain cost can be monetized at better BVPS return this way than selling them to third parties to print EPS. That's just the initial transaction when forming the yieldco. Then the structure (yieldco consolidated or not) depends on whether you report drop down revenue (FSLR) or power sales revenue (SUNE) in your consolidated reporting. In the SUNE case we have a third way to grow sponsor BVPS called cash margin in which equity grows without growing neither outstandning shares nor retained earnings. Here you take equity from yieldco share holders (non-controlling interest) and give to sponsor share holders without reporting it as sponsor earnings. I still need to better understand how this drop down is reflected in the reporting of the yieldco and the sponsor.

Now some might say that BVPS doesn't matter. It's VPS (value per share) growth that interesting for stock investors. Yes VPS growth should be the ultimate cause of PPS growth, but VPS is abstract and not well defined, since the companies' value per share growth through earnings or selling shares is reported and booked at well book value (values like Potter ending up in a foursome on the golf course with Bill Gates is not reflected in the financial report sheets even though it might impact VPS). VPS would be adjusted BVPS + discounted future adjusted BVPS (with future EPS as one soruce) additions (maybe impacted by Gates contact).

I think one problem here is if too many investors value CSIQ based on MRQ (most recent quarter) EPS annualized as an indicator of VPS (by the naive PE multiplier method) in order to arrive at target PPS. Hopefully the market majority will have a better view of real VPS for CSIQ.

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Explo, broomhilda's concern with wafer price and its negative impact on Csiq's loss of over $3 in eps, does that hav any merit? Sorry for my lack of knowledge. That's why I'm here to learn and gather info from this site. 

 

 

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Explo, broomhilda's concern with wafer price and its negative impact on Csiq's loss of over $3 in eps, does that hav any merit? Sorry for my lack of knowledge. That's why I'm here to learn and gather info from this site. 

 

 

That post was deleted. I think loss referred to Japan plan changes. Anyway I don't agree with Broomhilda that CSIQ is losing money by not investing in something (be it upstream manufacturing equipment or faster development of Japan pipeline). CSIQ invest in other things instead and will get return there. Personally I like to diversify and not only go asset lite och asset heavy in terms of manufacturing capacity strategy. Everybody understands that the asset heavy guy thrives in boom and the asset light guy feels less pain in the bust.

CSIQ deserves a respectable valuation for the ROE it has produced in recent years even though we understand that they picked some low hanging fruit in their own garden to achieve it. They played the game best and deserves a vote of confidence that they can play the game until proven otherwise. Their moves the past year have impressed me. More than say Jinko.

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Did you read what he/she wrote? So CSIQ is going to lose $180M in EPS becasue of the wafer? The same way they were going to lose in 2014 or was it in 2015 because of the poly?

I thought the focus of the post was about Japan, which we already discussed. I also wrote about UK, where 114 became 55MW. Nobody picked this up. One of the SunEdison companies went bankrupt in the UK and CSIQ has adjusted its projects to Canada purchase. There are many moving parts and Canadian is adjusting it. Yes, you may do not like the company, but I am pretty sure that Canadian will never lose $180M becasue of the wafer.

However, why people do not think that the same company cannot adjust its manufacturing basis to make price go down? For some reason perception is there is a silo surrounding each and they cannot do anything about it. 

Finally, GET is a Taiwanese company, you do remember that cells and modules draw tariff in the US, what it shapes up to be biggest market for CSIQ, Finally my point was prices will not go equally for everyone. This would be against any dynamic in any industry. If prices go up,  if they will, for those who are not leading makers, and if the do eventually increase for all, they will be compensated by selling at higher level modules. And typically for China all the wafer foundries will restart so the price will not go up.

This argument is as old as this board. I will be the first to change my view if it plays out.

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This is the article on the UK company bought by the SUNE at one point.

http://www.wsj.com/articles/sunedisons-u-k-solar-panel-installer-mark-group-seeks-creditor-protection-1444337148?mod=yahoo_hs

I think the shift in UK had something to do with the environment. I personally believe that Canadian does a great job adjusting into environments they operate in for the best effect to shareholders. They keep the value and eliminate risk. I have no problem with shifting environment if this means more bottom line.

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That post was deleted. I think loss referred to Japan plan changes. Anyway I don't agree with Broomhilda that CSIQ is losing money by not investing in something (be it upstream manufacturing equipment or faster development of Japan pipeline). CSIQ invest in other things instead and will get return there. Personally I like to diversify and not only go asset lite och asset heavy in terms of manufacturing capacity strategy. Everybody understands that the asset heavy guy thrives in boom and the asset light guy feels less pain in the bust.

CSIQ deserves a respectable valuation for the ROE it has produced in recent years even though we understand that they picked some low hanging fruit in their own garden to achieve it. They played the game best and deserves a vote of confidence that they can play the game until proven otherwise. Their moves the past year have impressed me. More than say Jinko.

An excellent post Explo. In my personal view only, I no longer believe that capacity expansions unless they have reflective relationship to combat form of curtailment, like tariffs, having vertical equality in mind make any supply or value chain sense.

The only making sense to me expansion is driven by technological advancement. Is CSIQ going to produce revolutionary wafer? The answer is no. If they can invest in technology to improve any wafer, then they will do it. Hence building wafer capacity has not become any priority. Anyone can slice a wafer, and the ReneSola is an example of wasted effort trying to reinvent the wheel with wafer to be quickly surpassed by GCL in every aspect. Not militant and arrogant view as the one deleted.

Edited by odyd

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from a "technical" stand point, CSIQ could do quite well near term,    50 day MA crossed 200 on upside, good news on china install goals, oil up nicely..........

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from a "technical" stand point, CSIQ could do quite well near term,    50 day MA crossed 200 on upside, good news on china install goals, oil up nicely..........

This belongs in trading

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I think it is not good to censor negative post to a company. Clearly CSIQ's strategy right now is not very logical now. Japan pipeline was assumed to be postponed due to cash rationalization, but they still have money to buy finished Canadian solar assets even though they stated that the have enough CAFD to start a YieldCo (that was said before the YieldCo crash). Whatfor this transaction? Therefore Broomhilda doubts to Japanese pipeline might not be going according to plan are not totally baseless at least. Or somebody can explain the logic?

Edited by Makan

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