Business Times - 24 Aug 2007


Details of Perfect Field's deal needed

By CONRAD RAJ

AFTER the initial exuberance over Rowsley Ltd's proposed reverse takeover by China's Perfect Field Investment Inc, the prices of its shares have come down to seemingly more sober levels.


How is Perfect Fields going to guarantee a net profit of $300 million by end-June 2008 when its factory in Jilin is only expected to be completed at the end of this year?

Rowsley's shares are now trading at about half their high of 44 cents.

The company came into play around April of this year when talk of 'something big' about to happen to the stock made their way into the market.

In May, the company announced that it was acquiring the entire share capital of Perfect Field, which makes photovoltaic thin-film solar cells, for a consideration of $2.7 billion.

Perfect Field claims that its solar cells using amorphous silicon technology offered several advantages in cost-effectiveness, flexibility, weight and durability over the more common crystalline silicon technology.

So confident is Perfect Field of the superiority of its technology that it is offering a net profit guarantee of 'not less' than $300 million for each of the financial years ending June 30, 2008, 2009 and 2010.

It was also supposed to achieve an audited consolidated net profit as prepared under Singapore Financial Reporting Standards, of at least $13 million for the financial year ended June 30, 2007. So far, the market has not been told whether this has been achieved.

The injection of Perfect Field's assets into Rowsley would result in its vendor, the Totalpro Group majority owned by its founder, Chinese scientist Ma Xi, owning 92 per cent of the mainboard-listed Singapore company, which is currently 25 per cent controlled by 'remisier king' Peter Lim Eng Hock.

The decision to provide profit guarantees was indeed a bold move by a company that had reported for the nine-months to March 31, a pretax profit of 23.4 million yuan (about $4.6 million). But not a cent came from the sale of solar panels.

So how is it going to guarantee a net profit of $300 million by end-June 2008 when its factory in Jilin is only expected to be completed at the end of this year?

And if the factory is yet to be ready, how is it going to increase its present production capacity of 10 MW 'to 100 MW and 500 MW by 2009'?

There is no doubt that solar technology has a great future - China is the world's third-largest producer of solar cells. The current goal of the Chinese government, according to a report by Kevin McKern in Financial Sense University's website, is to have 8,000 MW of photovotaic cells installed by 2020.

Mr McKern says that more than 500,000 grid-connected solar power systems have already been installed in rural areas, as part of a plan to electrify 20,000 villages with solar power.

This provides lots of opportunities for those involved in the industry - for instance, China's main producer of solar cells, Suntech Power, which is listed on Nasdaq, and which has a market capitalisation of over US$5 billion.

While Perfect Field has provided some information on its plans, there isn't enough to provide a proper assessment of its potential. There are no details on pricing, margins and customers. Also, it does not tell investors how exactly it's going to meet its profit guarantees.

So it's little wonder that the deal has plenty of sceptics.

Hopefully, Mr Lim, who plans to pump $150 million into the venture, knows exactly what he's doing. But then again, he invested US$10 million in palm oil producer Wilmar International many years ago, wrote it off, but is now laughing all the way to the bank with a gain of more than a billion dollars.

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