At Dongguan on Apr 23: A module of Anwell's second solar panel production line being developed.

All photos by Leong Chan Teik

ARRIVING IN Dongguan recently, we looked out for signs of the impact of a sharp economic downturn. Yes, we spotted tall building structures where work had slowed down. Cranes were left idle. Factories were shuttered.

Dongguan is an industrial city two hours away from Hong Kong by road, and home to thousands of factories across a wide range of industries.

Given the gloomy environment, we were surprised that at Anwell Technologies’ premises, we came upon a hive of activity: Workers were building a module of a manufacturing line for producing solar panels.

By starting work on the module, Anwell is displaying confidence in its new venture of manufacturing solar panels which convert sunlight into electrical energy.

The company already has a complete manufacturing line which it had transported up north to Henan in December 08 – and is in the midst of testing it. The new module (in Dongguan factory) for a second manufacturing line will boost its production capacity.

In Henan: Anwell's first solar production line. Photo taken on Apr 23.

Already, Anwell’s plant in Henan is one of the largest such plants in China. It is capable of producing panels totaling 40MW a year initially.

Anwell has invested over HK$100 million into the project so far, including a S$10-million 3-year interest-bearing convertible bond issued by an Anwell subsidiary, China Bright International Enterprises.

By 2013, the plant, which will be developed in phases, is targeted to produce 1000MW.

After Dongguan, we traveled to Henan to the sprawling site (680 acres) where Anwell’s solar plant is being built from scratch. It employs 200 people currently.

Ken Wu, the CFO of Anwell, explained that solar panels are commoditized products.

They can be divided into two varieties: crystalline silicon and the emerging technology of thin film.

The thin film variety is what Anwell will be producing because it has the following advantages, the key of which is the lower production cost per watt:

Ken Wu briefing Singapore analysts on the layout of the Henan solar plant.

* Less material usage;
* Independence from shortage of silicon supply;
* Automated process;
* Performs better at lower light levels;
* Cost reduction potential

10 PhD holders in R&D team

Mr Wu pointed out that his company has a p
roven business model of vertical integration as its top management has design and process expertise.

Anwell has more than 200 people in its R&D department. Two are professors, 10 have PhD degrees and 30 are senior engineers.

Anwell’s vertical integration model translates into a low start-up cost (as it manufactures its own equipment) and flexibility in modifying and enhancing the production process.

And being located in China, Anwell enjoys low operation and fixed costs - a trump card of Chinese manufacturers across numerous industries.
A rare advantage enjoyed by Anwell is the financial support it has been receiving from the Chinese Government for research and development.

Dr Sam Yeung, Chief Technology Officer, Anwell Technologies.

Given such circumstances, over the years Anwell has emerged as the world’s second largest manufacturer of equipment for replicating optical discs such as DVDs. It has established a global sales channel, which now can be leveraged on for its solar panel business.

Analysts’ recommendations

After the trip, analyst James Lim of DMG & Partners wrote that he has "generally been comfortable on the handling of the solar business by management so far."

He added that Anwell is currently trading at 0.14x P/B – and maintained his recommendation and target price at NEUTRAL and S$0.18, respectively.

Jackie Lee of NRA Capital has a target price of 28 cents and called the stock "a long-term buy for investors with a strong risk appetite."

***PROGRESS & PROSPECTS: Just last week at the Anwell AGM held in Singapore, its shareholders quizzed the management on the progress and prospects of the solar venture. Anwell chairman and CEO Franky Fan responded - you can read our report here.

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