May 6, 2008
Knobias Clip Report (05-06-2008)
By admin
Submitted By Knobias ClipReport
Solars Shine as Crude Reaches Another New High
Tuesday’s session saw oil reach another high as the mantra, “another day, another dollar” was heard in sarcastic fashion across the US. With oil breaching new highs, other commodities were also seeing increases on the back of the rise in crude.
With expanding prices in energy, many were rotating their investment dollars back into the solar area as a sympathy play. Solar names were all green with the exception of Emcore Corporation (EMKR).
On Monday, rumors emerged again on LDK Solar Co., Ltd. (LDK) of a potential buyout by Siemens in the mid $40 range. LDK Solar Co., Ltd. is a leading manufacturer of multicrystalline solar wafers, which are the principal raw material used to produce solar cells. LDK sells multicrystalline wafers globally to manufacturers of photovoltaic products, including solar cells and solar modules. In addition, the Company provides wafer processing services to monocrystalline and multicrystalline solar cell and module manufacturers. Shares gained over 5% on heavy volume on the speculation. But after the bell, the Company did report news, though it had nothing to do with a potential takeover.
The Company announced that it signed a five-year contract to supply multicrystalline solar wafers to Germany-based Qimonda AG (Qimonda). Under the terms of the agreement, LDK Solar will deliver approximately 540 MW of multicrystalline solar wafers to Qimonda (or its new joint venture with Centrosolar) over a five-year period commencing in 2009 through 2013. Qimonda will make an advanced payment representing a portion of the contract value to LDK Solar. Qimonda is leveraging its experience with silicon suppliers, as well as the availability of scrap silicon from its DRAM operations, to set up supply contracts with favorable terms. The signed agreement furthermore allows LDK to receive scrap silicon material from Qimonda’s chip production operations. Silicon supply for the initial capacity has been secured with wafers from LDK.
Many who follow the Company will remember that the Company was embroiled in an alleged accounting scandal regarding the capitalizing of supposedly unusable scrap silicon. The accusations have caused the name to experience downward pressure even though the amount disputed in dollars was miniscule in comparison to its overall size.
Even so, the new contract announcement led shares to gains of over 3.5% while memory chip maker, Qimonda (QI) jumped over 18%. With the positive news, shares in all of the solars were ushered higher. JA Solar Holdings (JASO) gained over 10.5% ahead of their first quarter earnings report expected on May 12 (11c estimate vs. 7c last year). Suntech Power Holdings Co. Ltd. (STP) was also higher by over 5.5% following its initiation with a Buy rating by Jesup & Lamont.
With oil hitting new highs, it’s smart to remember that the higher it goes, the closer solar power comes to being cost equivalent. With that in mind, investors would be wise to watch.
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