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Venturing into new business

ROI25per
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12-May-2009 13:04

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C&G to issue Rmb 360m of shares at 121% price premium

Written by Sim Kih

Tuesday, 12 May 2009

Waste meant for Incineration will be delivered to Cugu plants by the government.

TODAY & TOMORROW (12-13 May) in Beijing, financiers, policy shapers, project developers and cleantech manufacturers worldwide congregate at the fourth Renewable Energy Finance Forum to discuss debt and project financing for renewable energy in China.

Some US$270 billion of investment in clean technology will be required if China’s targets for 2020 are to be met, according to the event organizer, Euromoney.

And SGX-listed synthetic fiber maker C&G Industrial is one company that has jumped onto the bandwagon in the chase after China’s cleantech dollar.

Yesterday, it firmed up a 360-million yuan deal to acquire 100% in CUGU Environmental Protection International Ltd (Cugu EPIL), which builds and operates waste incineration power plants under build-operate-transfer (BOT) project financing schemes.

"We decided to bite the bullet and diversify into renewable energy as the sector outlook is very bright, unlike the textile sector which remains extremely challenging," said CEO Cai Junyi in an email response to media query.

"Its revenue stream is stable, and comes from waste supply agreements with customer duties from the government as well as electricity offtake agreements with power companies," elaborated Mr Cai.

Cugu EPIL’s first waste incineration power plant, located in Fujian’s Jinjiang, commenced commercial operations in 2006 when China’s Renewable Energy Law came into effect.

The policy offers financial incentives to stimulate renewable energy development, including discounted lending, subsidies and a range of tax breaks.

High temperature flue gas produced by refuse incineration generates electricity.

As much as 70% of China’s energy is currently generated by coal incineration. However, China’s industrialization has so badly polluted its environment that official studies have linked pollution to the alarming 40%-increase in birth defects reported over 2001-2006.

The positive side of the coin is an increased awareness for the environment that has contributed to a new Chinese industrial revolution in clean energy.

Other than financial stimulus, China’s government is also moving towards more comprehensive support mechanisms such as requiring power operators to buy electricity from alternative energy providers and providing economic incentives to such producers.

Waste-to-energy (WTE) is gaining ground over the land-filling mode of waste disposal in China because of the following advantages:
(i) the ability to recover indigenous energy,
(ii) the scarcity of land near cities for future landfills, and
(iii) outright government support for WTE projects, such as electricity and waste processing credits.

Shareholders will be pleased to know that as purchase consideration, C&G Industrial shares will be issued at a premium 21 cents apiece, about 121% above the weighted average price of 9.5 cents over the 6 months leading up to the Sales and Purchase Agreement.

Stock price has near-doubled since acquisition MOU was announced on 16 Apr.

Investors have so far reacted favourably to this corporate development - C&G Industrial’s share price leapt 50% overnight to 15 cents on trading volumes exceeding 25 million shares immediately after the MOU was announced on 16 Apr.

The stock retraced to 11.5 cents a few days after a tense AGM took place on 21 Apr, when some disgruntled shareholders quizzed the management on its rationale for diversifying out of the synthetic fiber business.

However, the stock quickly recovered, and last closed at 19 cents yesterday on heavy trading volumes of about 15 million shares.

The vendors are under a moratorium not to sell their new share allotment for 12 months from the date of issue.

While the deal is an interested-party transaction (Cugu EPIL’s vendors are none other than C&G Industrial’s chief executives), the Rmb 360.4-million purchase consideration is based on independent valuation by Jones Lang LaSalle Sallmans.

The proposed valuation is based on Cugu EPIL’s concessionary rights to operate 4 waste incineration power plants in Fujian and Hubei until around 2035.

Plans are underway to increase the capacity at Cugu’s Fujian Jinjiang plant by threefold so that it is able to treat 1,800 tons of municipal solid waste daily.

Capital outlay will be heavy, amounting to about a billion yuan for expanding the Jinjiang plant as well as building the 3 other plants.

However, Mr Cai is confident of raising the necessary funding as Cugu EPIL has a stable revenue model and is also in one of the 10 industries of focus in China's 4-trillion yuan fiscal stimulus.

Upon completion, the 4 plants will have a total capacity of processing about 4,400 tons of municipal waste daily.

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august
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11-May-2009 10:59

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Hi , thanks for the info,.. as I am unable to find similar update in the SGX webpage, how reliable is this info that you have just shared ? Where did you hear it from ? Cheers,

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jensonlaw
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11-May-2009 10:06

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Confirmed acquiring C&G shares at 21c in exchange for the green business. What a vote of confidence ! Thanks to serene, I managed to reap some kopi $$$. Everyone huat-ah !

august ( Date: 08-May-2009 15:54) Posted:

anybody has any idea what announcement they are going to make and when will they lift the trading ?? getting impatient...

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august
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08-May-2009 15:54

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anybody has any idea what announcement they are going to make and when will they lift the trading ?? getting impatient...

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jensonlaw
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07-May-2009 20:51

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Request for Trading Halt

* Asterisks denote mandatory information

Name of Announcer *	C&G INDUSTRIAL HOLDINGS LTD
Company Registration No.	35842
Announcement submitted on behalf of	C&G INDUSTRIAL HOLDINGS LTD
Announcement is submitted with respect to *	C&G INDUSTRIAL HOLDINGS LTD
Announcement is submitted by *	LAM CHIK TSAN
Designation *	EXECUTIVE CHAIRMAN
Date & Time of Broadcast	07-May-2009 18:02:29
Announcement No.	00097

>> Announcement Details

The details of the announcement start here ...

Date of Trading Halt * 08-05-2009

Time of Trading Halt * 0900 hours

Reasons for Trading Halt *

Pending the release of an announcement.

august ( Date: 07-May-2009 20:18) Posted:

Watch out for C&G,.. volume higher than their standard norm. Believe it will surge tmr.

KIV,

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august
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07-May-2009 20:18

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Watch out for C&G,.. volume higher than their standard norm. Believe it will surge tmr.

KIV,

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ROI25per
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18-Apr-2009 10:00

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if like sino-env last time , it will be easily 10 bagger in future

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ROI25per
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18-Apr-2009 09:55

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The issue price of the Consideration Shares shall not be less than 140% of the average market price of the shares of the Group in the six-month period
prior to the date of the MOU

that means that the highest share price for 6 mth since MOU is 12 cents on thursday

so minimum issue price will be 1.4 X 12 = 16.8 cents

To raise RMB359m [~S$72m] will required to issue 72/0.168= 428m shares

current share outstanding = 468m

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TonyGan
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17-Apr-2009 11:29

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today hit 6 mths high @ 13, so 1.4 times will be 18 cents which is around the current price for sino-env

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jensonlaw
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17-Apr-2009 11:11

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Got so good one? No need to pay cash, yet can have a steady stream of revenue and profit? Immediate profit generating somemore. DYOR.

C&G Industrial explores opportunities in waste-to-energy sector through RMB359 million proposed acquisition

• Proposed acquisition to broaden income streams as existing core
textile business suffers from adverse economic conditions

• Tapping on proven and profitable business model from waste
incineration power plant located in Jinjiang, Fujian Province, PRC

The purchase consideration will be fulfilled by the issuance of new shares in the capital of C&G (“Consideration Shares”) to the Vendor. The issue price of the Consideration Shares shall not be less than 140% of the average market price of the shares of the Group in the six-month period
prior to the date of the MOU and will be determined upon completion of the financial due diligence on the Target Group by C&G. The proposed acquisition constitutes an interested person transaction, according to Chapter 9 of Listing Manual.

serene ( Date: 17-Apr-2009 09:16) Posted:

Very hot today - venturing into 'GREEN' business.

Cheong-ah!

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serene
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17-Apr-2009 09:16

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Yells: "No Venture, No Gains (Caveat Emptor)"

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Very hot today - venturing into 'GREEN' business.

Cheong-ah!

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