KUALA LUMPUR (May 6): Share prices of VSolar Group Bhd slipped further today, down 19% to 21 sen, on heavy trading volume of 60.68 million shares.
The company’s announcement on a tie-up with Japanese-based Eastasia Group Co Ltd to venture into solar power project fails to sustain its earlier rally that lifted its share price to five-year high of 38 sen, from 12 sen in early January.
Worse still, VSolar (fundamental: 0.6; valuation: 0) proposed a rights issue to raise up to RM115.3 million fresh capital. The proposed amount to be raised seems like a tall order now, considering its market capitalisation contracted to RM61.9 million on today’s closing of 21 sen.
Interestingly, prior to the announcement on April 21, VSolar’s share price had soared tremendously by about 218% to 35 sen, in a span of four months.
The Edge Weekly had reported that VSolar may face challenges in making solar power generation as its core business to go alongside its current software and systems development business.
Apart from loss-making, VSolar is relatively new to solar power generation, while the Sustainable Energy Development Authority (Seda) has no more solar capacity left for bidding under the new Feed-in-Tariff (FiT) system, following the award of 66MW this year.
But an industry executive was quoted as saying VSolar does not have to rely on bidding for FiT capacity alone. “It could acquire existing projects or take part in joint ventures,” the industry executive said.
Still, VSolar may face further hurdles as Seda has put a freeze on the award of solar projects of more than 1MW, according to The Edge Weekly.
Furthermore, the FiT scheme could become increasingly redundant, once independent power producers begin building commercial-scale solar farms at lower tariffs.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)