CC Asia Focus Comments on V-Power

Coupland Cardiff’s Asia Focus Fund briefly discussed their stake in V-Power Group in the fund’s January update to investors. The investment team spent recently some time in Bangladesh where (amongst other things) they visited one of the company’s distributed power generation plants that “is of vital importance to the local economy [but] also highly profitable for V-Power.” The team believes there is a substantial opportunity for the company in other, similar energy-deficient emerging market economies.

V-Power is one of the leading distributed power generation providers in Southeast Asia, in a similar mould to Aggregko in the UK. The company was founded in 1997 by its current chairman Samson Lam Yee-chun who previously worked at Cummins Engine, which is today V-Power’s biggest competitor in Asia. The company went public in Hong Kong at the end of 2016 to fund its further expansion into other emerging markets, including those in Africa and the Middle East.

As per their IPO prospectus, the majority of the company’s revenue (~80% in 2015) comes from the design, integration and sale of both electricity generation units and power generation units for customers across China and other Asian countries. The remainder comes from its IBO (“Investment, Build, Operate”) division, which charges customers for generators it finances, designs and then operates in countries such as Bangladesh, Indonesia and Myanmar.

In early January 2017, the company issued a positive profit alert driven both by higher revenue and higher margins from their rapidly growing IBO division. Below are some highlights from their announcement to the stock exchange:

  • Year on year growth in total revenue of at least ~80% (2016 vs. 2015)
  • Increases in revenue and gross profit contribution came primarily from four projects across Indonesia and Myanmar in their IBO division
  • Excluding the one-off listing expenses from their recent IPO, total net profit for 2016 is expected to increase by at least ~70% vs. 2015