Axiom Hoists Red Flag Over Trina Solar Debt

Trina Solar Ltd.

shares have been on a roll recently but an analyst raised red flags Friday regarding liquidity. The China-based solar power company's accounts payable grew more than 35 percent in the recent quarter while the company's inventory hit a record level. "This raises the probability of big inventory write-downs" Axiom's Gordon L. Johnson II said in a note Friday. Trina's solution will be to soon raise capital that will dilute the value of its shares according to Johnson, who maintains a Sell rating and $8 target. Trina shares area up 33 percent in the past three months, including 13 percent this week when it acquired control of a company building a Chinese solar project. Shares traded recently at $14.06 , up a further 1 percent. Trina's true debt picture is "grossly skewed" by relatively high accounts payable, Johnson said. Although the company's official debt balance fell to a record low of $6.45 a share in the recent quarter from $8.89 a year ago, Johnson figures that including payables, Trina's actual debt is now about $8.95 a share. High debt, and specifically accounts payable, "can be a sign that assets you don't actually own assets you think you own," Johnson said, pointing to inventory. Short interest accounted for some 17.8 million of Trina's 76.7 million shares outstanding as of Aug. 15, up from 16.9 million July 30.