IPO Watch: LDK Has A Hidden Gem (LDK)

 Solar Co., Ltd. (NYSE: LDK) is seeing shares rise more than most solar peers today.  We thought perhaps maybe it was part of a value screen we ran late last week with forward valuations being cheaper than utility stocks.  The move is also likely more than what the recent Japan-effect would account for in solar.  It looks like the news today may be more tied to a special situation brewing here specific to LDK with a Hong Kong initial public offering..

A fairly fresh report from Pacific Epoch is driving the stock.  The company reported that LDK has moved a step closer to listing its polysilicon business in Hong Kong by launching a roadshow for its initial public offering.  The original report was in imeigu.com and it was reported March 24 with the “unnamed industry source” qualifier. 

We would treat any reports out of China as being more rumor than gospel for the time being but the move in the shares is enough to drive interest.  The report showed that LDK hired Citigroup to underwrite a $700 to $800 million IPO to fund its production capacity expansion.

As Paul Ausick freshly noted, LDK trades at under 5-times projected 2011 earnings.  Finding low-P/E stocks often implies slow growth, no growth, or secular trends developing that a company may not be able to avoid.  

LDK shares were recently up more than 5% at $11.85 and shares traded as high as $11.98 earlier this morning.

JON C. OGG