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Hanergy's soaring share price raises bubble fears

Stock's surge contrasts sharply with average36 per cent fall recorded by 11 mainland rivals

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Li Hejun. Photo: SCMP Pictures

The alternative energy empire of Li Hejun has long attracted attention over the web of connected deals between his Hanergy Group and its Hong Kong-listed firm. The fact that Hanergy Thin Film Power Group's (HTF) shares have more than tripled in the past five months to vault Li to the top of the mainland's rich list with an estimated US$26 billion is only likely to add to that scrutiny and stoke fears of a bubble.

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Market watchers point to HTF's almost exclusive reliance on its parent firm for sales, lack of extensive third-party customer endorsement of the quality of products produced by equipment that it supplies to Hanergy, lengthy credit and receivables collection periods and lofty valuation. Li, who was named the mainland's richest person by the Hurun Report last week, owns 75 per cent of Hanergy and chairs both companies.

Corporate governance activist David Webb noted that of HTF's HK$8 billion in net tangible assets in June, HK$6.07 billion was from equipment revenue owed by Hanergy, and HK$1.54 billion was from prepayments to the parent firm, which is supposed to deliver solar panels it ordered for solar farms that it planned to build.

"Not only is Hanergy in a bubble [with a market value of over] 15 times its net tangible asset value, but most of the net tangible asset value depends on its parent group not defaulting," he wrote on his webb-site.com "[HTF] pays its parent in advance, but gets paid in arrears."

By Friday's close, HTF's market value had soared to HK$176.9 billion, more than double the HK$83.3 billion combined market value of 11 of its mainland rivals, calculations show.

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HTF's surge is in sharp contrast with the average 36 per cent fall of the 11 rivals over the five months, amid concerns exports of mainland-made panels would be hurt by punitive import duties by the United States on alleged unfair trade practices. The 11 firms produce solar products using the dominant crystalline silicon technology.

HTF's market value is also almost five times that of US-based First Solar, the leader in thin-film technology, also used by HTF.

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