Vmoto - Will the time come? 

It's worth considering that there may come a time, though not today, when Vmoto warrants our close attention once again. 

The company's share price has taken a hit, albeit not as severely as some others in the past two years, due to declining revenue and profit, a significant 27.5% dip, which is undeniably concerning.

Typically, a company on a backward trajectory should be of no interest. However, there’s an interesting context here. My hypothesis is that Vmoto experienced a remarkable boost during the height of the Covid-19 pandemic, and now they're feeling the aftershocks.

Two factors contributed to this boost:

• Consumers. Homebound individuals, flush with cash, indulged in purchases, including electric scooters. Much like larger items such as couches and TVs, consumers expedited their plans and invested in electric scooters.
• B2B Customers. Vmoto's substantial B2B revenue comes from food delivery companies that thrived as people ordered food from home. These companies expanded and renewed their fleets, creating a surge in demand. Fleet upgrades aren't an annual affair, so this year, orders are likely much more thin.

However, it's essential to remember that this downturn might not spell the end for Vmoto, and here's why:

• The company's $15 million investment in a new factory reflects their confidence in sustained long-term demand. Why else would management be expanding operations?
• This new facility will deplete their cash reserves, leaving approximately $14 million. I also expect they'll need further investments for molds, new bike models, and staff. Still, we could hypothesise this should leave them with a comfortable $10 million in cash.
• Crunching the numbers, at today's share price of $0.20, Vmoto’s is on a market capitalization of $59.50 million. With my estimation above, let’s say an anticipated future enterprise value of around $50 million. With the company presently delivering $5 million for half a year (just reported), that’s a forward PE of ~5. Not too demanding.

Of course, this hinges on the idea that the current setback is a temporary phase as Vmoto adjusts to a post-Covid reality. It's a significant "if." 

So, while today's price might not tempt us to buy, keeping a watchful eye on Vmoto seems fair. 

As noted by @Rick , competitors here are worrying. There's the new players, and the established bid brands like Vespa doing more electric models. This also needs to be kept in mind.

Having been profitable for a few years, Vmoto are no longer on a 4C cycle, but did provide Quarterly update for their Q1.

The consistency in execution continues. 

• Sales up 35%
• Unites sold up 36% 
• Positive Cashflow of $6.1M
• Cash Position of $25M, no debt. 

The only point reported that’s negative is that the order book continues to slowly diminish : was at 12K Units last quarter and now at 9K Units. When Andrew asked him this question in the Strawman meeting, Blair Sergeant had said: “We haven’t had one of our corporate customers place a massive order with us recently”. I’m not worried about the order book given they seem to be pushing marketing and partnerships through the right channels and I feel management have a clear focus on continued growth. 

From these numbers reported, we can estimate that Vmoto has now got a run rate of ~5K units/quarter. 

You certainly can’t extrapolate 1 quarter’s cashflow and suggest that might be a reflection on the whole year with capital heavy businesses, but $6M in a quarter for a business with:

• A market cap of $113M, 
• $25M in the bank, no debt
• Growing at 35% YoY 

That seems like the valuation is off for me. But that certainly won’t be something that will be picked up in this type of market. I reckon we’ll have to continue to be patient with this one. 

First Half-Year Activities

Solid results from Vmoto. My confidence in this company continues to grow as they continue to execute. I will take the time later to update my valuation on the company and share further thoughts on the details of their announcement. The growth they’re maintaining now makes the stock look particularly cheap, and will look cheaper still if they can maintain this.

For now, here are the financial updates shares this morning:

Financial Overview for 1H21

• Strong financial results o Total revenue of $39 million, up 50% on 1H20
• Net profit after tax (NPAT) of $4.0 million, up 119% on 1H20
• Earnings before interest, tax, depreciation and amortisation (EBITDA) of $5.4 million, up 100% on 1H20
• Strong positive cash flows from operating activities of $1.7 million
• Strong cash position of $16.7 million as at 30 June 2021, up 11% from $15 million as at 31 December 2020, with no bank debt as at 30 June 2021
• Net tangible assets of $39 million at 30 June 2021, up 20% on 31 December 2020

Dics: held.

Source: https://newswire.iguana2.com/af5f4d73c1a54a33/vmt.asx/6A1048013/VMT_Half_Yearly_Report_and_Accounts

I’ve been following the company for some months now. It appears shareholders had very high expectations for the year, given that the stock has been sliding downwards since the preliminary release at the end of last month, shaving more than 25% off the highs in January.

What’s interesting about Vmoto is that while they are listed here on the ASX, part of their sentiment from their early days, which seem to have been made up of low quality product in the local market, appears to still hang in the air. They do well in Europe, but I can’t see any signs of them doing well here yet. I agree with the director’s that eventually conversion to EV bikes will happen here too, and this could help with their slim margins.

While this is likely to remain a business with small margin, and one that will continue to be under competitive pressure by China, they’ve executed well in the last 3 years. Their multi-channel revenue covers some of the risk, and quite simply, I love the idea of electric motors.

Ref: https://thedriven.io/2021/02/25/perth-based-e-scooter-maker-vmoto-booms-in-europe-but-not-australia/