Jump to content
Sign in to follow this  
dydo

Daqo (DQ)

Recommended Posts

Any thoughts on Phase 4 financing?   I think we have discussed this before when debating whether DQ will have another secondary and raise money by selling more stock.   I think DQ has addressed this by discussing various loan opportunities, etc. as a way of discouraging the idea of a secondary but with the stock now in the 40s any more of a push up towards the 50s could tease them into re-evaluating the stock issue option.   What do you guys think?  Thanks in advance.  

 

Share this post


Link to post
Share on other sites
16 hours ago, Arrowhd said:

Any thoughts on Phase 4 financing?   I think we have discussed this before when debating whether DQ will have another secondary and raise money by selling more stock.   I think DQ has addressed this by discussing various loan opportunities, etc. as a way of discouraging the idea of a secondary but with the stock now in the 40s any more of a push up towards the 50s could tease them into re-evaluating the stock issue option.   What do you guys think?  Thanks in advance.  

 

Debt  and secondary offerings will be needed to finish off the ~$450M phase 4A. From the Q4 con call the way I read it is that Phase 4A is 2.9Billion RMB or roughly $450M. There is no way cash flows pay for this or a secondary. If they do debt on say $400M, then they have upwards of $20M in interest initially. Earnings would be impacted significantly with that level of debt payments. Thus they need a combination of a secondary, operational cash flow and debt.

 

just my opinion.

 

Then there is the 4B expansion that was not discussed in details in the Q4 call.

 

https://seekingalpha.com/article/4248446-daqo-new-energy-corp-dq-ceo-longgen-zhang-q4-2018-results-earnings-call-transcript?part=single

Longgen Zhang

Well, for Phase A, I think it basically right now because Chongqing right now is in battle with that. So, our construction right now almost finished 18% and for the old design approval all finished. I think for the equipment, I think procurement, the contracts that we have signed, total today, we have signed around RMB2.6 billion. The total project cost – total cost is around below RMB2.9 billion. So basically our schedule starting to trial production is October 15. Up to to-date we are still thinking we are on the schedule and ramping production in the Q1 2020. And for the 4B we need to tell on the market see what’s going on and also to see our future cash flow. So basically we are not determining when or whether we will go to starting 4B.

Share this post


Link to post
Share on other sites

Very nice analysis, I think I would have to agree with this.  The question then becomes, when do they pull the trigger on a secondary to raise cash through a stock sale?   

Share this post


Link to post
Share on other sites
1 hour ago, Arrowhd said:

Very nice analysis, I think I would have to agree with this.  The question then becomes, when do they pull the trigger on a secondary to raise cash through a stock sale?   

By the time their first debt payment comes due. I would expect like most CN offerings a 10-15% dilution or appx 1.5- 2 million shares. That would generate cash for about 15-20% of the debt.  The added capacity should be good for around $40M in added gross profit anually.

Just some rough numbers off the top of my head, I would speculate that would be good for about $2 a share in added  earnings with the debt service payments. That would look to be a  second half 2020 boon in earnings in which they could be looking at $6+ a share($1.5/Q) in earnings if the cost to ASP spread maintains around $1.75.

Share this post


Link to post
Share on other sites

That makes sense too.   So with Phase 4 underway with a target of completion by the end of the year,  any current borrowing of any kind is going to have some repayment obligations during this year.   Maybe they use some of their cash first, then debt, then go to the markets for more cash.   They have options so when is very hard to figure out.     Thanks again for your thoughts.   

 

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • Donate

    Please donate to support this community. We appreciate all donations!

    Donate Sidebar by DevFuse
  • Upcoming Events

    No upcoming events found
  • Forum Statistics

    • Total Topics
      32
    • Total Posts
      91,602
  • Who's Online (See full list)



×
×
  • Create New...