TLG announced to introduce Zhuhai Port Holdings (000507 CH, NR) as strategic investor through Chairman and controlling shareholder, Mr. Zhang Yingcen’s transaction of 120mn existing shares at HK$7.68. Those shares were originally sourced from IFC’s investment exit through transaction with Mr. Zhang in May (141mn at HK$7.50). We are optimistic about TLG’s introduction of SOE background investor, and we also look forward to the two parties’ future collaboration in clean energy business development. We think the transaction will boost market sentiment on TLG. Maintain BUY with TP unchanged at HK$9.90.
Introducing Zhuhai Port as strategic investor. According to TLG announcement, Chiarman Zhang had entered into agreement with Zhuhai Port Holdings (ZHP) for selling 120mn shares (11.96% of TLG’s shares) at HK$7.68. Those shares were originally acquired by Mr. Zhang in May from the investment exit of IFC (141mn at HK$7.50). According to our discussion with mgmt., we expect ZHP will act like a strategic investor. As to net of both transactions, Mr. Zhang still increased ~2.1% share holdings in TLG to 55.96%.
Who’s the buyer? A SOE determined to invest in clean energy. ZHP is controlled by Zhuhai Port Group which is governed by Zhuhai SASAC. ZHP has key business focuses on shipping logistics, new energy, and high-end manufacturing. ZHP has gas distribution projects in west Zhuhai City, including Hengqin District (横琴新区) and Zhuhai West District (珠海西部城区). ZHP has been accelerating clean energy business expansion through active M&A of considerable shares of listing assets, including wind farm, wind and solar component/material manufacturers since 2020.
SOE investments to unlock future growth potentials. We are positive about TLG’s introduction of SOE strategic investor. Based on ZHP’s recent move into its clean energy business, we think there are future collaboration opportunities between TLG and ZHP, such as LNG import, hydrogen business, as well as integrated energy business.
Re-rating to continue. TLG’s share price surged ~13% in the past month.
We think investors are shifting focus from leading players to smaller names in view of rich valuation for leading players. In terms of valuation, TLG is trading at 6.9x FY21E PER, still lagging behind peers. We think the introduction of ZHP as strategic investor will likely boost market sentiment, and trigger further re-rating. We maintain optimistic outlook for TLG with TP of HK$9.90. Maintain BUY.