Posted by Primeinvestor > 2019-06-17 00:43 | Report Abuse

sour grape analysis without taking into account potential new customer that can generate Rm100m orders in 2 years

Posted by shortinvestor77 > 2019-06-17 08:26 | Report Abuse

Wait and see who is right.

Posted by Saitama > 2019-06-17 08:35 | Report Abuse

Thanks for the information. Lets wait until next few qtr report. Till then we can only estimate and assume.

Posted by jellyfish > 2019-06-17 10:43 | Report Abuse

very detail analysis..

Posted by wolf1 > 2019-06-17 14:07 | Report Abuse

New customer in 2 years? There is only 1 thin film tech solar company surviving in market. I can't see any potential customer rather than penetrade into Silicon base solar which is Panasonic and Sun power.

Posted by skyrider > 2019-06-17 18:29 | Report Abuse

I have great respect for Jay.
He warned to stay away from vivovom on 27/10/2016, that time vivocom was 17.5 sen, and today vivocom is 1.5/2.0 sen !!!!
https://klse.i3investor.com/blogs/purelysharing/107442.jsp

Posted by VenFx > 2019-06-17 19:24 | Report Abuse

Jay's article is quality biz sense dissection.
Big like.

Posted by 624298991 > 2019-06-17 22:54 | Report Abuse

TEK SENG in the making... remember the glory of tek seng. i can sense the similar situation...

Posted by Albukhary > 2019-06-17 23:03 | Report Abuse

Quality analysis, good job!

Posted by Choivo Capital > 2019-06-18 09:43 | Report Abuse

Great piece.

Posted by Yu_and_Mee > 2019-06-18 10:15 | Report Abuse

To listing, sure give best result. After that, bye bye

Posted by BoPoint > 2019-06-18 10:24 | Report Abuse

I think you've not realised what's happening in Greatech. Go to Penang, visit the Plant and talk to the management then you should know what to expect in 2H 2019. All funds managers have taken note on the briefing recently.

Posted by csan > 2019-06-18 10:30 | Report Abuse

reasonable analysis but there are some key errors.

firstly, 4 out of 5 factories being completed and no more orders is wrong. completed as in building is completed and production started then yes. but not all machines have actually been delivered to reach those capacities they have mentioned. it is a gradual ramp up. this is always the case in the manufacturing industry and also explains why the green arrows are stretching until end-2020 in first solar's capacity roadmap chart.

Posted by csan > 2019-06-18 10:33 | Report Abuse

secondly, if you go deeper and investigate beyond reports (you can search Google Maps), you will see that the Ohio Factory 2 is actually still at building stage. they only started earthwork in June 2018 and building is nearing completion now but NO machines have been delivered.

Posted by csan > 2019-06-18 10:36 | Report Abuse

so what is actually happening is that machine deliveries will still be happening for Malaysia and Vietnam plants until end-2020. Machine deliveries for Ohio Plant 2 will START soon and last until end-2021 earliest.

Posted by csan > 2019-06-18 10:42 | Report Abuse

management also guided that 2019 revenue is expected to grow 10-15% from 2018 revenue. which means around RM241-252 million revenue in 2019. This guidance looks quite reasonable given that machine deliveries to 4 plants are ongoing while Ohio Factory 2 will start contributing soon. I believe that the RM150 million revenue you mentioned is very badly wrong.

Posted by csan > 2019-06-18 10:46 | Report Abuse

what shocked everyone and drove the price up like crazy was actually the profit margin in 1Q19. you would have noticed that profit margin was above 20% in 2016 and 2017. then in 2018, profit margin was at 14%. so many of us expected revenue to be in line with management guidance of RM241-252 million in 2019 AND 14% margin will continue. but the surprise was 20% margin in 1Q19 which was due to large deliveries of machines earlier leading to sharp increase in maintenance revenue which has high margin.

Posted by csan > 2019-06-18 10:54 | Report Abuse

if you look at vitrox, penta, MMSV, and MI Technovation, the valuations are far higher at closer or more than 20x PE. and that means Greatech is still very undervalued. order visibility is actually quite clear for at least another 2 years. and you did not mention that the main purpose of this IPO was actually to expand and secure new customers in the US. the US is actually where a big part of solar producers are headquartered. First Solar is only one of them.

Posted by csan > 2019-06-18 10:59 | Report Abuse

another key point worth noting is that the IPO adviser screwed up by arranging for listing in the ACE Market at a ridiculously low IPO price. the share price rally comes as no surprise, even more so after the latest quarter results. The ACE market status means many institutional funds cannot invest in the company and this is actually slowing down the rally in share price. management also indicated that they will seek transfer to Main Board soon and this should be a key catalyst in the next year or so.

Posted by csan > 2019-06-18 11:32 | Report Abuse

BoPoint, cannot blame Jay because he is writing these articles and thoughts as a retailer. He doesn't have access to management meetings like me and you. But to analyse like this, I think Jay has good potential. All he needs to do is join a research house or any of the funds. Management meeting is the key thing that Jay is missing.

Posted by seekingalpha888 > 2019-06-18 13:56 | Report Abuse

Wonderful write up, Jay! Purely based on facts, easy to understand and a clear demonstration of Jay's good business sense. I'm just amazed how Jay is able to find so much information and being able to piece them altogether. You saved me from jumping in head first.

Posted by Jay > 2019-06-18 14:49 | Report Abuse

Thanks for the opinions. Let me try to reply to some of them.

@Primeinvestor I already mentioned they may or may not secure new sizable orders from other customers. I’m not an insider so I can’t answer that. Track record suggested that other that Panasonic (around RM19m orders), they have not secured any sizable new ones (>RM3-5m) in recent years.

@wolf1 No doubt Greatech’s niche is solar, but I don’t think the company is targeting only solar customers. The only question is how successful can they secure new customers outside solar industry.

@ 624298991 Tek Seng is solar panel manufacturer and one with limited technology know how. Not comparable at all.

@ BoPoint Those are insider information which I don’t have access to. Why don’t you share?

@ csan I’m quite worried if you are one of the unit trust fund managers or analysts managing public money because it does not seem like you do much research.

1. Machines can be fixed inside a factory building before or after completion as long as main structure is done, but nonetheless that doesn’t mean machines are not pre-ordered. Unless the machines are standard ones and available on demand, you have to let your suppliers design and manufacture them.

When that process starts, suppliers will start to recognize the revenue and profits. Revenue and profit would have started to be recognised upon receipt of purchase order and recognised in milestones. Which is also why revenue starts to flow in 2017, more than a year before all the S6 factories are completed. So sorry to poke your bubble, but machines for Malaysia and Vietnam would have been mostly if not all delivered and installed.


2. I think you are confusing adding new lines with ramp up.

When you build a factory you could design extra floor space to add more machines in the future. But not the case for First Solar. They are confident of the end demand and so when they design and build the factory it's all fixed. Machines and production lines are set up to hit 1.2GW from the beginning.

Every new line got early stage teething issues or there may not be enough demand to require it to run up to the designed capacity it was meant for. Ramp up simply means getting it to run smoothly until it reaches optimal capacity. The green arrows stretching to end of that charts simply indicates it is supposed to produce for the foreseeable future, not ramp up period.

I'm sure you would still like to argue one way or another but there's already a conclusive answer in First Solar's disclosures. The fact that you didn't bother to check means you don't even do your research properly.


3. Yes they have allocated IPO proceeds to expand biz in US but there’s nothing concrete. No doubt US is a big market and it would be positive if they could secure more customers there. But I would be very worried if they target more solar customers than to diversify.

4. Margins were not a big surprise. 2017 they hit similar margins only it dropped in 2018. My best guess is the margins could be different at early stage and late stages when they produce and fix the machines. 2019 first quarter I suspect it’s early stage for Ohio Plant 2 again and if there’s also reversal of warranties (when warranty provision is not needed anymore after expiry of warranty period). So it’s not because of maintenance revenue. And if you think the company list at ridiculously low price instead of listing after their best year (might still be their best year for a while), then you have a lot of faith in the company than I do.

Posted by Jay > 2019-06-18 14:52 | Report Abuse

To summarise, I’m not saying Greatech is a good or bad company. All I’m highlighting is there is a high possibility that revenue from First Solar will drop. Whether it could secure new orders to replace or even outgrow that is up to your faith in the management.

As for valuation, it’s subjective and it also depends on your views on the sector and the company. Of course you could argue that Vitrox trades at >30x PE or Pentamaster >15x PE. But not too long ago both these companies trade at much lower valuations. It’s far too common when people pay high PE during periods of higher profits and only to realise that PE also shrinks together when profits plateau or drop, causing a double whammy to the share price. That’s why you see a lot of roller coaster rides in Malaysia listed companies’ share prices.

Posted by Aries > 2019-06-18 15:08 | Report Abuse

Thanks, Jay. Good advice. Agree with you , don't chase the share price because it is hot, we will not know when the music stops.

Posted by csan > 2019-06-18 15:16 | Report Abuse

Jay,

" revenue and profit would have started to be recognised upon receipt of purchase order and recognised in milestones. Which is also why revenue starts to flow in 2017, more than a year before all the S6 factories are completed. "

lol u think this is property development progress billing method?

" So sorry to poke your bubble, but machines for Malaysia and Vietnam would have been mostly if not all delivered and installed. "

lol that means you're implying that the management doesn't know anything about their company when they said there a lot more to deliver? its funny because some things i'm saying comes from management themselves when meeting with them... so maybe it is your bubble that is a little too big.

Posted by csan > 2019-06-18 15:56 | Report Abuse

"I’m quite worried if you are one of the unit trust fund managers or analysts managing public money because it does not seem like you do much research"

its good for you to speak more because the more you speak, the more you get exposed on how ametuer you are.

" revenue and profit would have started to be recognised upon receipt of purchase order and recognised in milestones. Which is also why revenue starts to flow in 2017, more than a year before all the S6 factories are completed. "

there is no chance for this to happen. the accounting standards do not allow this. recognition is only AFTER delivery of products. probably want to correct your mistake....for the benefit of the other readers....the ACTUAL thing that happened was that Greatech DELIVERED a production line to First Solar in Vietnam in 2017. it wasn't recognised as they manufactured it lol.

and to other readers, please ignore all the total NONSENSE that Jay was trying to explain about how the factory is built, how machines are set up and designed etc. the actual scenario is that Greatech has close to RM100 million in machine orders yet to be delivered to First Solar's Vietnam and Malaysia plant.

As for the Ohio plant, first installation of equipment will only start at the end of this month.

Posted by skyrider > 2019-06-18 16:48 | Report Abuse

The FACT is the first tool will arrive at the factory about 1 year before production !!

Please see the dotted line (----) in the Series 6 Manufacturing Milestones which mean tools arriving, in this link https://www.pv-magazine.com/2018/02/23/first-solar-sold-out-well-into-...

You may see that 2017 start to have tools arriving, mostly in 2 factories (Ohio S6 factory 1 and Malaysia S6 factory 1)

In year 2018, tools arriving in FOUR factories (Ohio S6 factory 1, Malaysia S6 factory 1, Vietnam S6 factory 1 and factory 2). That is why the balloon in Greatech revenue for year 2018 !

But look at year 2019, tools arriving only in Vietnam S6 factory 2. If we add in the Ohio S6 factory 2, then only tools arrving in 2 factories.

If we presume on that tools delivery milestones, then we can expect to see lower revenue for Greatech in 2019.
18/06/2019 4:46 PM

Posted by skyrider > 2019-06-18 17:05 | Report Abuse

I expect the effect of lower tool deliveries on revenue start to kick in either by Q2 2019 or Q3 2019.

Posted by Jay > 2019-06-18 17:22 | Report Abuse

@csan Unfortunately you are the one who does not understand the situation here. Unlike others that sell mainly machines, Greatech is selling a production line to First Solar which consists of multiple machines. In this case, it is only logical that it would follow project revenue and costing. Every major parts delivered would constitute billable milestones. Greatech would be an idiot if they only ship and bill First Solar once they complete the whole thing.

Management doesn’t know anything about their company? If you attend enough AGM or meet enough management, you would know what is called “management talk”. Unless the industry or company is in a bad shape or clear downtrend, there is always “a lot more” to do. Longer term they may be right, but did they say a lot more from Vietnam/Malaysia or in 2019?

Btw, according to one of the readers, apparently Greatech’s orderbook was RM169m as at Apr 2018 when the draft prospectus was released (unfortunately I couldn’t verify it since the copy was taken down). It shrunk to RM91m in April 2019 when the final prospectus was launched. Which also means they have less than one year revenue cover now.

Unless there’s a lot new orders coming in after April 2019, it seems like “a lot more” is more based on hope at this juncture rather than real figures.

Posted by Baby Shark > 2019-06-18 17:28 | Report Abuse

What a shit article. Lose up so much profit after read yr lousy article.

Posted by Jay > 2019-06-18 17:34 | Report Abuse

@ Baby Shark On hindsight, I should only write this article when Greatech's bubble blows up

Posted by Jay > 2019-06-18 17:45 | Report Abuse

Correction: Greatech's orderbook was RM169m as at Oct 2018. So it has gone down by almost half in around 6 months time.

Posted by BoPoint > 2019-06-18 17:46 | Report Abuse

From our understanding several funds are still picking up so demands are far exceeding the supply in terms of stocks. Great analysis from a retailer point of view anyway. Can go deeper to understand more about the business

Posted by skyrider > 2019-06-18 17:53 | Report Abuse

Apparently the drop in Greatech's orderbook of RM169m as at Oct 2018 to RM91m in April 2019 match the lowering of tool deliveries in 2019 !!
https://www.pv-magazine.com/2018/02/23/first-solar-sold-out-well-into-2020/

Oh my god, that EXPLAIN everything !!

Posted by csan > 2019-06-18 18:54 | Report Abuse

Baby shark, I initially thought he had good intentions and I even went on to praise him for having good potential but when he replied things like revenue and profits start being recognised upon receipt of purchase order, no more deliveries to First Solar in Vietnam etc and also making personal attacks like not doing my research work properly and in a bubble bla bla, I knew his intentions were bad and the first comment saying that this is sour grape analysis looks to be true. It looks like he tried to desperately push the price down by fooling some retailers but he forgot that insti funds have been the one aggressively buying because of what management presented when they met us. And insti funds don't need to rely on such articles from retailers like this because we can to meet with management every now and then.

Posted by Saitama > 2019-06-18 19:13 | Report Abuse

Hehe, I collect Greatec share when there's "pessimism" at large, but its REAL price keep going up.

Posted by skyrider > 2019-06-18 21:08 | Report Abuse

Greatech is now clearly a GORENG STOCK !!

but why Greatech is a GORENG STOCK now ??

because when we have ppl who PURPOTEDLY have direct access to the company management be so KIND to come to i3 frequently to share his PURPORTEDLY discussion with the company management in detail which paint a bright immediate future for the company, OBSTENSIBLY without any form of documentary evidence whatsoever,

while public info contrarily and clearly show the COLD HARD FACT that Greatech's year 2019 tool deliveries to First Solar will be much lower (https://www.pv-magazine.com/2018/02/23/first-solar-sold-out-well-into-2020/) and hence Greatech's 2019 revenue will be much lower than last year !

It is jubilant when the party is on, but when the music stop, some will leave with only underwear!! Hahaha ... have fun guys ........

Posted by shpg22 > 2019-06-19 00:14 | Report Abuse

Semiconductor ATE is in downward cycle. Wait for another 3 years before buy in.

Posted by Jay > 2019-06-19 05:50 | Report Abuse

@shpg22 Greatech has limited semiconductor exposure so they are not really affected. But yes it would not be good timing if they are trying to break into that space now

Posted by Jay > 2019-06-19 06:10 | Report Abuse

@csan my personal guess is you never work in a real firm in your life before. Just writing reports as an analyst in IB gives you little feel of the real world. Just imagine, would you bill your customer a multi-million system all at one go at the end of delivery? Like any major project, MRT, power plants or even just a company implementing a firm wide ERP system, do you think any of those would be recognised based on milestones or lump sum at the end? You may not grasp the concept of accrual accounting but actually all you need is just need basic logical thinking.

Or better, maybe you should check with the company if they recognise the production line system revenue for the whole factory all at one go or do they go by milestones.

The fact is you did not do your research thoroughly. I doubt you even read their prospectus in full. Did you compare their orderbook 6 months ago vs now? Are you aware of their book-to-bill? Did you even bother checking their main customer's progress and plans?

Posted by Jay > 2019-06-19 06:14 | Report Abuse

Demand>supply means share price go up. Doesn't mean it has to be backed by fundamentals or anything. From the beginning, I leave it to readers to decide what they want to do with this stock because I know equipment makers do trade at premium valuation at current environment (doesn't mean I have to agree on that). So share price could go higher and stay high for a while (which it did, at least for now).

I'm not judging the buyers or sellers. But just that they should be aware of the actual situation. If they are aware and they decide to buy/sell, at least that would be an informed decision. Everyone can have different reasons for their decision, that should give you comfort when you bought and share price go down or when you sold and share price go up.

Posted by jasonor > 2019-06-19 11:24 | Report Abuse

thanks jay. sold at rm 1 psychological price.

Posted by seekingalpha888 > 2019-06-19 12:12 | Report Abuse

===>> csan And please, we don't meet management by going to AGMs, taking the mic and asking questions. We meet them face to face, call them, message them etc. I just messaged the CEO to verify if rumours that there are zero future deliveries to Vietnam are true and he said "nonsense" lol. He maintained what he said during the last meeting.
18/06/2019 7:00 PM

I work for First Solar and I can assure you that the delivery for Vietnam has been completed several months ago. The two plants in Vietnam are in full production ramp - no additional production line installation. csan - you should really do your own homework rather than believing what MGMT is telling you.

Posted by csan > 2019-06-19 16:59 | Report Abuse

Accrual accounting means recognise as you deliver. Once delivered, can recognise because risk and reward is substantially transferred to customer. Of course recognise as each machine part is delivered, not after delivery of whole machine. But what u said was recognise upon receipt of purchase order ...which is never the case.

Posted by Martin99 > 2019-06-19 17:14 | Report Abuse

The thin film PV maker reported solid year-end 2018 results, with future bookings extending out four years and the fourth of five Series 6 factories already online.

https://pv-magazine-usa.com/2019/02/21/first-solar-is-sitting-pretty/

Posted by Baby Shark > 2019-06-19 18:19 | Report Abuse

@csan ya next time just ignore this of analyst. Never focus on good sides and long term perspective.

Posted by skyrider > 2019-06-20 08:28 | Report Abuse

When the lower tool deliveries to First Solar is reflected in Q2 or Q3, then Greatech will go below 70 sen.

When the tool deliveries to the 5th factory, i.e. Ohio S6 factory 2 is finished (probably by year end) and no order from new solar factory (or new order not in time to fill the gap), then Greatech may go below 50 sen !!

.... and this is just CONSERVATIVE prediction !!

Previously I predicted that comcorp will go below 20 sen, and today comcorp is at 7.5 sen !!

-----------
Posted by skyrider > Mar 21, 2018 9:08 PM | Report Abuse X

If a few negative qtrs without BCM contributions, it may even go below 20 sen!
20/06/2019 8:09 AM

Posted by csan > 2019-06-20 15:37 | Report Abuse

just found out from someone in i3 that seekingalpha888 is the same person as Jay! hahaha so desperate to defend yourself and save face until must use fictitious account.

meanwhile Greatech is booming.

Posted by Jay > 2019-06-20 17:45 | Report Abuse

@csan now seems like not only you have a work ethic problem, but character as well. that someone in i3 is yourself isn't it hahaha? why don't you confirm with i3 admin if seekingalpha888 is the same person as me? or use whatever digital means like IP address etc.? I'm more than willing to bet any amount of money with you on that.

On a more serious note, slander and lies show one's character. You may lie to all the people part of the time, and part of the people all the time, but not all the people all the time. eventually you have to pay your dues.

maybe money has blinded you to do whatever it takes, but mark my words, a morally bankrupt person more often than not also ends up financially bankrupt. Maybe not instantly, but it could always be just round the corner.

Hope that you might still change while you are young.

Posted by csan > 2019-06-20 17:50 | Report Abuse

Sorry jay/seekingalpha888...but you have been wrong for greatech. Or maybe not ...maybe you were right....maybe you collected some today at 92sen....that's morally bankrupt.