Funding Option at a Premium

Analyst Details
Company: Southern Cross Equities
Analyst: Fleur Grose & David O’Halloran
URL: http://www.sceq.com.au/

Summary

WEC is now well established in its key markets with strategic partners. A recent equity raising, followed by a favourable merger proposal from a US listed fund, provides funding for the first phase of an accelerated module roll-out. The new merged entity, to be renamed White Energy Company Inc., will be dual listed on the NYSE /ASX, which will provide greater exposure in the US, one of WEC’s largest markets.

US listed ASSAC offers funding at a premium
Asia Special Situation Acquisition Corp., essentially a cashbox looking for Asian investment opportunities, has proposed a merger with WEC. This would provide WEC with US$100m-US$140m in cash, in exchange for diluting WEC shareholders ownership in the new combined entity to approximately 80% (terms effectively equivalent to an issue at A$3.15/share). The new entity, to be renamed White Energy Company Inc. would be listed on the NYSE, and then dual listed on the ASX.

Now well funded for at least 10 new modules
In May WEC raised A$55m in a share placement, and a further A$2.6m in a share purchase plan offer. With the addition of US$120m from ASSAC, WEC would have total cash of c.A$205m, sufficient for its share of equity funding for at least 10 new modules. We value 11Mpta of capacity at A$5.04/share and 61Mtpa of capacity at A$22.75/share. With only 1Mpta of capacity constructed we remain conservative and have set a price target of A$3.50, to account for development risks. However we maintain a Speculative Buy, and the view that the company is likely to transform into a substantial growth stock over time.