icon8888 merely extract those figures from company results announcements. Nothing to lie.

http://www.apcc2.ceec.net.cn/art/2018/12/10/art_8427_1784407.html

12月09日下午16时08分，公司承建的越南海阳2×600MW燃煤电厂工程二号机组2号锅炉钢结构板梁顺利开吊，标志着该机组2号锅炉本体受热面安装工作即将全面展开。
　　板梁吊装前，海阳项目部对第五层钢结构进行严格检查验收，对一线施工作业人员进行精细化技术交底，现场认真做好施工准备及环境确认等，为锅炉钢结构板梁的顺利开吊提供了有力保证。

:)

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Icon8888 it is ok, if DK88 taken up, you still have DK888 to choose from

: )
10/12/2018 10:00

I think most bank backed broking houses force sell before morning session ends.

Sarifah, ha ha, Good suggession, If my ID is blocked for whatever reasons, I will create another ID - DK88. Hopefully, ID not taken up by then.

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SarifahSelinder I con DK66 (why not DK88??) u punya brokers bikin forced selling at wat times?
10/12/2018 09:55

Adam, at current situation, who would subscribe and sell at a loss especially they were given a choice not to take up the warrant before payment deadline ?

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adamsmith at current price , warrant should be below 10 cents or even less ?
10/12/2018 09:42

Most conservative retail investors will opt to buy mother shares as they feel that warrant will likely to worth only few cents now. What will happen if mother is at 0.50 and warrant at 0.05 ?? At 0.50, Jaks appears to be hopeless and dangerous, so smart investors will sell their mother at 0.50 and spend 0.10 to buy 2 warrants. By doing so, they limit their MAXIMUM losses to 0.10 while DOUBLING their future potential earnings. Sounds logical thing to do ?

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adamsmith at current price , warrant should be below 10 cents or even less ?
10/12/2018 09:42

Warrant done on minimum subscription basis with the 2 directors undertake to subscribe 16% of the warrants.

NO, warrant not underwritten

If warrant is heavily under-subscribed, both mother and warrants will benefit greatly from very little dilution impact.

I m not saying I know what is going to happen. I m just doing logical analysis. For someone with limited resources, it is best to keep the share base small to reduce liquidity for easy control. Private placements and warrant issue were tactical moves to fight off intruders. Once objectives achieved, if possible, it is in the best interest of the controller to reduce the dilution impact and keep the share base small.

Hence, I believe Jaks warrant subscription will be minimal given that most retail investors would have given up on the warrants due to low share price.

20th dec

Warrant will have minimal subscription to reduce dilution.

Warrant issue was a tactical move, now that Mr Koon has sold out, ALP will divert the fund to cheaper mother.

The 1 for 2 warrants at RM0.25 has a big dilution impact on those giving up the warrants, and because it is not underwritten, those who subscribed will gain extra shareholdings if the warrant is not fully subscribed.

After the announcement of the latest results, the price dropped below the exercise price of the warrant making it more attractive to buy the mother at 0.50 instead of taking up the warrant with 0.39 premium. As a result, many will give up on their warrants and use the fund to buy mother. This exacerbates under-subscription of warrants.

The is nothing unexpected of the latest results except the extraordinary slow progress billing on the vietnam works.

RM0.25 warrant provides a cheap solution for those who wish to gain more shareholdings. They gain extra weightage if the warrant is under-subscribed.

The purpose of the fund raising is meant to EXPEDITE (not fund) the vietnam works, but it is clearly written in the JV agreement that the entire EPC contract awarded to Jaks must be entirely subcontracted to CPECC. So, how essential is this fund raising exercise ? How essential can it be if it is not underwritten ? Moreover, only RM45m (65%) of the fund is meant for the vietnam works, 65% subscription rate will be sufficient to serve the purpose.

Distribution normally differs from EPS as it only account for installment payments instead of depreciation. And EPS is exactly the opposite, it accounts for depreciation and not the installments. However, in this case, the annual installment of loan (75% cost), over 18 years is roughly the same as the depreciation (100% cost) over 25 years.

Having said that, I only used the minimum DSCR ratio as the guide to compute the minimum EDITA to conform with loan requirements, this is not necessarily the actual profit which should be higher to safeguard against earnings fluctuations.

Also, mong duong only started operation in April 2015, the distribution may not reflect the actual cash flow of the power plant as it has to make reserves for maintenance, working capital, loan installment and certain statutory requirements. Going forward, higher distribution can be expected upon fulfillment of cash reserves requirements.

Therefore, distribution and EPS may not have a direct relationship.

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ew8888 i dun see how distribution can be higher than eps, can u provide more explanation on this? tq
09/12/2018 13:06

Mr Koon announced his complete sellout after the deadline for warrant payment. As it came as a surprise, It won't be easy to expect his 17% warrant entitlement to be fully taken up thru excess application.

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kcchongnz
With this, we should expect the rights issues will be fully subscribed. If a major shareholder doesn't subscribe it, the management and the other major shareholders will do. If it is not, then there may be an alarm.
09/12/2018 11:24

Bear in mind the BOT contract is 25 years. So, is 30 or 20 sen cash flow per share per year for 25 years attractive to Jaks at RM0.50 ?

kcchongnz, the eventual total number of shares is no known yet as the warrant is likely to be undersubscribed.

Whether 30 or 20 sen a year is good enough is really a personal judgement which i leave it to the reader to judge. Is it attractive to buy Jaks at RM0.50 with such cash flow ?

Icon8888, Could Mong Duong 2 be a closer comparison for Jaks' earnings after the completion of the power plant ?

AES-VCM Mong Duong Power Company, a joint venture between AES Corporation (51%), Posco Energy (30%) and China Investment Corporation (19%), developed the 1,240MW Mong Duong-2 (MD2) coal-fired thermal power plant in the Quang Ninh Province of Vietnam.

The power plant was constructed on a build-operate-transfer (BOT) basis and comprises two generating units of 620MW gross capacity each.

Mong Duong-2 is Vietnam’s first and biggest coal-fired BOT project and is also the biggest private sector power project undertaken in the country. The $2.1bn project was developed with 100% foreign direct investment. Ownership will be transferred to the government of Vietnam after 25 years of operation.

Mong Duong 2 is a very close model for the Jaks power plant as;
1. Both in northern Vietnam
2. Both about 1,200MW capacity
3. Both using domestic anthracite coal
4. Both under foreign BOT guaranteed by Vietnam Government
5. Both projects cost around US$2b
6. Both Power purchase agreements signed with EVN
7. Both coal supply agreements signed with Vinacomin
8. Both under max 18 years loan tenure allowed by Vietnam government

Based on financing agreement of Mong Duong 2, the BOT company to maintain debt service coverage ratio (DSCR) of 1.4x – 1.5x

http://www.academia.edu/26270684/Mong_Duong_Power_Project_the_Largest_...

The ratio of (Operating income before interest and depreciation) / (Total loan principal and interest payments) must be above 1.5x otherwise the loan defaults.

As the loan is non-recourse in nature and the collateral is a non-movable object with no market resale value, the Banks would require very high certainty in earnings. In this case the capacity payment alone in the PPA which guarantee fixed annual payment for the tenure of the project must at least meet the DSCR requirements.

Based on Jaks' Vietnam IPP loan of US$1.402b, interest of 6% (Est), Loan tenure of 18 years
Annual principal repayment = 1.402b / 18 = 77.8m
1st year interest repayment = 1.402b x 6% = 84.1m

Based on 1.5x DSCR, Minimum operating income EBITA = (77.8+84.1) x 1.5 = US$242.85m

Annual depreciation = 1.8685b / 25 = 74.7m

Hence, Net Operating income = US$242.85 – 75.7 – 74.7 = US$92.45m

Jaks 40% = US$92.45 x 40% x 4.15(us/rm) = RM153m / 546m = RM0.28 EPS

In practice, the earnings must be much higher to be of comfort to protect the company from loan default risk due to earning fluctuations.

ON CASH FLOW BASIS,

Information sourced from AES corporation which owns 51% of Mong Duong 2.

https://s2.q4cdn.com/825052743/files/doc_presentations/2016/AES-Q4-FY-...

Page 52 Mong Duong distributed US$46m to AES in 2016

https://s2.q4cdn.com/825052743/files/doc_financials/quarterly/2017/q4/...

Page 46 Mong Duong distributed US$51m in 2017

Therefore, Mong Duong distributed US$90m in 2016 and US$100m in 2017 to its shareholders


Base on the same projection, Jaks 40% = US$100m x 40% x 4.15 = RM166m / 546m = RM0.30 cash flow per share

Closest Comparison

AES-VCM Mong Duong Power Company, a joint venture between AES Corporation (51%), Posco Energy (30%) and China Investment Corporation (19%), developed the 1,240MW Mong Duong-2 (MD2) coal-fired thermal power plant in the Quang Ninh Province of Vietnam.

The power plant was constructed on a build-operate-transfer (BOT) basis and comprises two generating units of 620MW gross capacity each.

Mong Duong-2 is Vietnam’s first and biggest coal-fired BOT project and is also the biggest private sector power project undertaken in the country. The $2.1bn project was developed with 100% foreign direct investment. Ownership will be transferred to the government of Vietnam after 25 years of operation.

Mong Duong 2 is a very close model for the Jaks power plant as;
1. Both in northern Vietnam
2. Both about 1,200MW capacity
3. Both using domestic anthracite coal
4. Both under foreign BOT guaranteed by Vietnam Government
5. Both projects cost around US$2b
6. Both Power purchase agreements signed with EVN
7. Both coal supply agreements signed with Vinacomin
8. Both under max 18 years loan tenure allowed by Vietnam government

Based on financing agreement of Mong Duong 2, the BOT company to maintain debt service coverage ratio (DSCR) of 1.4x – 1.5x

http://www.academia.edu/26270684/Mong_Duong_Power_Project_the_Largest_Project_Finance_Deal_in_Vietnam_-Lessons_Learnt_and_Key_Takeaways

The ratio of (Operating income before interest and depreciation) / (Total loan principal and interest payments) must be above 1.5x otherwise the loan defaults.

As the loan is non-recourse in nature and the collateral is a non-movable object with no market resale value, the Banks would require very high certainty in earnings. In this case the capacity payment alone in the PPA which guarantee fixed annual payment for the tenure of the project must at least meet the DSCR requirements.

Based on loan of US$1.402b, interest of 6% (Est), Loan tenure of 18 years
Annual principal repayment = 1.402b / 18 = 77.8m
1st year interest repayment = 1.402b x 6% = 84.1m

Based on 1.5x DSCR, Minimum operating income EBITA = (77.8+84.1) x 1.5 = US$242.85m

Annual depreciation = 1.8685b / 25 = 74.7m

Hence, Net Operating income = US$242.85 – 75.7 – 74.7 = US$92.45m

Jaks 40% = US$92.45 x 40% x 4.15(us/rm) = RM153m / 546m = RM0.28 EPS

In practice, the earnings must be much higher to be of comfort to protect the company from loan default risk due to earning fluctuations.

ON CASH FLOW BASIS,

Information sourced from AES corporation which owns 51% of Mong Duong 2.

https://s2.q4cdn.com/825052743/files/doc_presentations/2016/AES-Q4-FY-2016-Financial-Review.pdf

Page 52 Mong Duong distributed US$46m to AES in 2016

https://s2.q4cdn.com/825052743/files/doc_financials/quarterly/2017/q4/02-27-18-Fourth-Quarter-FY-2017-Financial-Review_FINAL.pdf

Page 46 Mong Duong distributed US$51m in 2017

Therefore, Mong Duong distributed US$90m in 2016 and US$100m in 2017 to its shareholders


Base on the same projection, Jaks 40% = US$100m x 40% x 4.15 = RM166m / 546m = RM0.30 cash flow per share

It took almost 10 weeks since July for Mr koon to sell 13% and the price dropped from 1.30 to 0.80, but it only took him 7 days to sell his remaining 17% mostly at around 0.50. Obviously, there has to be huge buying interest at this price level to take up the selling pressure. I don't think the retail investors have the muscle to take up so much selling pressure. The price must be very attractive to lure in big players as the stock is so negative now.

Say you own 40% of a company which proposed 1 warrant for 2 shares held, and the warrant is not underwritten. If everyone subscribe for the warrant, your shareholding remains at 40%. However, if you are the only one taking up the warrant, your shareholding increases to 50%.

Hence, those who subscribed for the warrant would prefer the rest don't. Under-subscription benefits those who subscribed. It also benefits the mother shares as there is less dilution as less warrants are issued.

Say you own 40% of a company which proposed 1 warrant for 2 shares held, and the warrant is not underwritten. If everyone subscribe for the warrant, your shareholding remains at 40%. However, if you are the only one taking up the warrant, your shareholding increases to 50%.

Hence, those who subscribed for the warrant would prefer the rest don't. Under-subscription benefits those who subscribed. It also benefits the mother shares as there is less dilution as less warrants are issued.

If it is so easy to create fake "accounting profits", I can assure you that Apple will not be the biggest company in the world.

Now if warrant is under-subscribed, all shareholders and warrant holders benefit from lesser dilution.

Now if warrant is under-subscribed, all shareholders and warrant holders benefit from lesser dilution.

The power plant was 41% completed as at October but Jaks only recognised about 31% completion. Assuming no progress in Nov and Dec, Jaks may recognise 10% work done which mean potential of RM45m profit from vietnam construction in Q4 2018.

Jaks Vietnam BOT contract has the following features;

1. Government guarantee which guarantees all counter parties risks as well as foreign currency risks

2. Coal supply agreement with Vinacomin which guarantees the supply of anthracite coal for 25 years. Allows import of coal in situation of supply distraction. All coal costs are on pass thru under the PPA.

3. A power purchase agreement (PPA) with EVN which guarantees the uptake of electricity generated by EVN. It has 2 tiers tariff payment structures.

- Capacity payment which guarantees sufficient payment for loan installments, interests, fixed maintenance expenses, equity capital and agreed investment returns. It is based on predetermined payment for each KwH of dependable capacity for each of the 25 years regardless of actual electricity output.

- Energy payment which is based on electricity output. Efficiency of the plant determines the profit level of the operator. The quantity of coal, fuel oil, and limestone as well as variable operating and maintenance costs are predetermined for each KwH of electricity generated by the plant. The amount to be charged to EVN is electricity output x price of fuels. Hence, fluctuation in prices of fuels do not affect the profitability of the operator.

4. Termination clauses which allows the operators to terminate the BOT contract under Force Majeure events whether governmental or non governmental. If invoked, Vietnam Government will ensure all outstanding balances, loans and capital as well as 6.25 years of future profits. However, if the government opt to continue making capacity payment, the BOT contact shall continue.

5. Jaks must complete and commence commercial operation 48 months and 54 months from the agreed start date for unit 1 and unit 2 respectively. Official start date was 1/10/2016. However, the completion dates given by Jaks Hai Duong to EPC contractors were 6 months earlier.

Todate, there were only 2 foreign BOT coal power plant commenced operation. Mong Duong 2 in April 2015 and Vinh Tan 1 in Nov 2018. Mong Duong was operating in full capacity immediately since operation and made cash distribution in 2016 and 2017.

Foreign BOT contracts are operating under very difference parameters as compared to those domestic power plants owned by EVN who has to bear transmission costs, subsidies, fluctuations in fuel costs etc.

2 new BOT contracts were awarded to Japanese and korean in 2018.

If the above terms in the BOT contract aren't attractive and profitable, I can't see why consortium from all over the world are eager to take up "doomed to fail" projects in vietnam.

Plant contract value US1.87b. Borrowings US1.402b

Financial Edge Daily 5/12/18 - Jaks anticipates "very significant" profit growth in next two years. As at October, the power plant is 41% completed

A lot of cynics here talking down the stocks but can't they just tell everyone why the vietnam power plant will fail or can't profit ??

When you are fearful, stay away from speculation and focus on facts because facts don't lie.

Jaks' equity investment of US$140m in the vietnam power plant is already twice its current market valuation.

Malakoff is probably mouth watering too looking at Jaks' valuation.

At 0.53, jaks market cap is only RM289m, but it still has ownership rights to 40% of the RM8b Vietnam power plant. CPECC definitely willing to pay RM289m to buyout Jaks' ownership in the power plant. It will only cost them less than a year of future profit to own 100% of the power plant.

Sarifah, There is likelihood that warrant will be under subscribed. Even so, there is no need to worry about it. If there is risk arising from under subscription of warrant, they need to disclose it in the prospectus. But the prospectus didn't cite anything to that effect.

I still stand by my notion that the Vietnam project is fully taken care of by CPECC.

Sarifah, I cannot confirm.

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SarifahSelinder DK66 as at npw can u confirm Koon wil subscribe d warrant?

Sarifah, Mr koon did not screw up the warrant. If he abandons his warrant, who benefits ?

The timing for the corporate exercise is extremely bad. Why plan it with a poor results ? Most corporate exercises are done with lots of feel good factors.

The vietnam IPP is a game changer for jaks', not only Andy won't risk the construction works, CPECC will not allow Jaks to jeopardize the whole project.

Sarifah, obviously Andy is not worry about under subscription as he didn't procure any underwriter.

Most conservative retail investors will opt to buy mother shares as they feel that warrant will likely to worth only few cents now. What will happen if mother is at 0.50 and warrant at 0.05 ?? At 0.50, Jaks appears to be hopeless and dangerous, so smart investors will sell their mother at 0.50 and spend 0.10 to buy 2 warrants. By doing so, they limit their MAXIMUM losses to 0.10 while DOUBLING their future potential earnings. Sounds logical thing to do ?

Given the current mother price and the latest results, it is natural for retail investors to be pessimistic and uncertain about the warrant listing price now. Most will opt to wait for listing of warrant before buying. As warrant provide higher leverage for higher potential investment returns, most will switch mother to warrant after listing.

As for the investors with margin financing, the warrant provides them the option to swap 1 mother for at least 1 warrant and clear all margin financing. I believe after been troubled by margin calls for so long, this is an attractive option for them.

In conclusion, there will be a lot of interests for warrant after listing. There is much higher chance for it to open up above 0.25 than below.

Icon8888, I agree with what you did.

If most minorities abandoned the warrant (which is very likely now), those who subscribed will be laughing their head off. If that happens, can you still hope to buy at below 0.25 ?

And if it is someone's motive to suppress the share price to make warrant subscription unattractive, then it is likely that the mother share will move up after 6th Dec, then it become unlikely for warrant to list below 0.25. My prediction is warrant will be trading at half the mother share price.

So, my feeling is warrant subscription is a safer choice provided you have full confidence in Jaks vietnam ipp.

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Icon8888 DK66 what is your opinion ? Should I subscribe for the rights at 25 sen or should I wait for them to be listed with hope of collecting below 25 sen ?

The official start date of the project as agreed with the Vietnam gov't was 1/10/2016. 54 months is the agreed deadline to commence commercial operation. The main construction works only started in early 2017. The construction profit recognition will follow "S" curve, which means the bulk of the work and hence profit will be recognised in 2019 when the plant construction has to be mostly completed.

Based on Mong Duong 2 and Vinh Tan 1 which commenced operation 6 months ahead of deadline, Jaks power plant will likely has its 1st unit to commence operation in April 2020 and unit 2 Sept 2020. As the testing and synchronisation will take about 3-4 months, the construction of the power plant will likely be completed by end 2019.

At this point in time, those who proceed to subscribe will not sell the warrants below RM0.25 because they have the option not to subscribe now.

Initial proposal indicated that there will be no underwriter. However, when the circular to shareholders mentioned that it may procure underwriters, I presumed that jaks warrants will be underwritten. Finally, when the prospectus came out, NO underwriters was sought.

This means that whatever warrants not taken up will not be issued. Hence, less warrants and less dilution. If the warrant is under-subscribed, the 2 directors who undertake to subscribe and those who subscribed will benefit the most. This will benefit the mother shares too as there is less dilution.

Now the price is below the exercise price and the results was poor due to timing of progress billing of vietnam ipp works, would minorities still proceed to subscribe for their warrants ? Most will think twice.

Think again, had the payment for warrants ended before the release of the results, the warrants will most likely be fully subscribed. Poor timing .... or .....

Mr Koon sold 20m shares after the release of the results. Why ? Is it really the results that scared him. Remember, he bought a huge amount of Jaks after the release of the huge loss making Q4 2016 results. Just a wild guess, is he sourcing to subscribe for excess warrants because he thinks that most minorities will opt out of subscription now.

For those who subscribe anyway would prefer the rests don't. This is also human nature.

At this point in time, those who proceed to subscribe will not sell the warrants below RM0.25 because they have the option not to subscribe now.

Initial proposal indicated that there will be no underwriter. However, when the circular to shareholders mentioned that it may procure underwriters, I presumed that jaks warrants will be underwritten. Finally, when the prospectus came out, NO underwriters was sought.

This means that whatever warrants not taken up will not be issued. Hence, less warrants and less dilution. If the warrant is under-subscribed, the 2 directors who undertake to subscribe and those who subscribed will benefit the most. This will benefit the mother shares too as there is less dilution.

Now the price is below the exercise price and the results was poor due to timing of progress billing of vietnam ipp works, would minorities still proceed to subscribe for their warrants ? Most will think twice.

Think again, had the payment for warrants ended before the release of the results, the warrants will most likely be fully subscribed. Poor timing .... or .....

Mr Koon sold 20m shares after the release of the results. Why ? Is it really the results that scared him. Remember, he bought a huge amount of Jaks after the release of the huge loss making Q4 2016 results. Just a wild guess, is he sourcing to subscribe for excess warrants because he thinks that most minorities will opt out of subscription now.

For those who subscribe anyway would prefer the rests don't. This is also human nature.

Sarifah, I presumed that it will be underwritten. The prospectus says there is no underwriter

Geoffrey85, 28 Nov is the last trading day for the warrant right. You have until 6 Dec to decide whether to pay RM0.25 to subscribe for the warrant.

If Big sharks wish to accumulate rights, they will save the good results to month end. If poor results might as well release it now to frighten the minorities to sell the rights.