See: Sunpower disposes manufacturing and services business for $463.0 mil
The sale price translates to 12.2x 2019 price-to-earnings (P/E) and represents close to 50% of Sunpower’s current market cap. To Cheong and Ho, the deal is “attractive”, as it gives the company a valuation more than twice the 5 to 7 times value ascribed by the street. Furthermore, the disposal of the order-driven M&S business will leave investors with the remaining power-producing-related green investments (GI) business, which offers greater revenue visibility and certainty.
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Despite recommending investors to accumulate the stock due to its low valuation, where Sunpower’s FY2021F adjusted P/E of 6.7 times remains below the stock’s five-year forward P/E mean of 9.1 times, Woon and Ling say they are more conservative on the stock given Sunpower’s high debt levels. That said, they add they do not foresee any “immediate liquidity issues” as the company still has committed facilities to draw down from. Following its M&S sale, Woon and Ling see longer-term prospects to the counter, with Sunpower’s business model pivoting towards a REIT-like model with some differences.