Solar wafer maker PV Crystalox Solar (PVCS:25p) has reached a settlement with one of its customers, a leading photovoltaic company that failed to purchase wafers in line with its obligations under a sales contract, in relation to a €36.5m (£32.5m) arbitration award made by the International Court of Arbitration of the International Chamber of Commerce (ICC). The photovoltaic company had the right to receive the outstanding 22.9m wafers under the contract, so both parties have agreed to eliminate the wafer deliveries which reduces the award to €28.8m, of which €14.5m was paid to PV Crystalox in May. The final payment of €14.3m will be made on 30 November.
PV Crystalox only recognised €20.5m of the award in its 2017 annual accounts, so the final agreed settlement is €8m higher. Moreover, with €3.9m of inventories and €390,000 of assets held for resale on its balance sheet covering all liabilities, then opening net funds of €26.8m at the start of 2018 is set to more than double before accounting for operating losses this year. By my reckoning almost all of PV Crystalox’s last reported net asset value of €51.8m will be backed by cash once it receives the balance of the financial settlement, a sum worth 29p a share on a fully diluted basis.
So, having included the shares at 19p in my 2014 Bargain Shares portfolio, and last rated them a hold at 22.5p (‘Bargain Shares: Another chance to bag some bargains Part II’, 16 May 2018), I rate the shares, at 25p, a hold ahead of news of the restructuring or disposal of PV Crystalox’s German silicon wafering operations, and a likely capital return to shareholders. Hold.