After an enjoyable summer off I returned to Sharesoc refreshed and looking forward to another interesting line up of small-cap companies. Unlike many seminar providers the companies that Sharesoc attracts are always changing and often entirely new to me; this time around I'd only heard of SRT Marine Technology and even then purely in passing. So I made doubly sure to take my seat in plenty of time for the show!
OPG Power VenturesForeign companies listed on AIM aren't exactly popular at the moment following a number of Chinese frauds. However OPG appears to be one of those rare beasts: a real overseas business which listed in London to achieve a decent valuation. Since 2008 the company has designed and constructed two coal-fired power stations in India with these supplying commercial and industrial customers. The attraction for clients is a more reliable and slightly cheaper supply than they get elsewhere while OPG generates a reasonable return on investment with some security from medium-term contracts. For investors OPG intends to offer a decent dividend (payout ratio growing to 35% in 3-4 years) from a stable, moderately geared, long-term utility business.
However despite these attractions the share price has languished (down 30% in the last year) and I think that there are a few reasons for this. One is that OPG are actively moving into the solar power market as apparently it can be profitable at certain tariff levels (>4 rupee per kWh) as a result of falling capital costs and the availability of brownfield sites for construction. There is also the possibility of OPG taking on half-completed thermal assets in distressed sales although this isn't key to their goal of growing to around 1200MW+ in five years (from the current base of 750MW).
Solar is a bit of a change in focus and appears to have been on and off the agenda a few times. At the same time Arvind Gupta, the founder and chairman, still owns 51% of the business and this level of control is always a concern (even for a business located in the UK). So far all parties have been treated fairly, the board have delivered operationally in a professional way and the shares are cheap if forecasts of >50% earnings growth in 2017 are met: an interesting way to gain exposure to Indian economic growth and…
