I no longer hold Vmoto and I don’t follow it anymore. However, I just happened to notice an email from Equitise (Crowd Sourced Funding) who are raising funds for a potential competitor, Savic Motorcycles. I thought Strawfolk following Vmoto might be interested in what else is on the horizon.
Investment Highlights:
- Innovative In-House Developed Technology including the bike’s proprietary motor and inverter system and a sophisticated lithium-ion battery, which is incorporated into a modular powertrain unit. It also includes disruptive vehicle software, cloud architecture and IoT data processing system.
- Experienced & Passionate Teamconsisting of engineers, advisors and executives from Ford, Harley-Davidson, Triumph, Toyota and Bosch Rexroth.
- Early Traction has seen the team build a community of over 20,000 followers across its database and social channels, and has secured 250 pre-orders, the equivalent of $6m in revenue.
- Game-Changing Design has seen the team receive several awards in their short history, including Good Design’s automotive and transport award and the Victorian Premier’s Design Award.
Vmoto released a new presentation on 16 May. I don’t think there is anything within it that we don’t already know. However, it’s a nice we’ll-presented overview of the business. It covers how it’s been performing and it’s future direction.
I have a small holding IRL in VMoto and the business is going quite well. I don’t see Vmoto shooting the lights out but it looks like it might be a steady performer going forward. The share price has also been reasonably stable this year in a very volatile market. A few highlights copied below:
There will be some dilution to Vmoto shares following this ASX announcement today (04/04/22). However, this strategic partnership with the Castiglioni family who has over thirty years of history in the motorcycle industry, and having previously owned some of the most iconic and successful motorcycle brands and companies worldwide (such as the iconic and prestigious MV Augusta) looks to be a huge vote of confidence and a much needed shot in the arm for Vmoto.
Mr Giovanni Castiglioni also has options to take up a further 21 million shares over the next 3 years, the largest tranche being 8 million shares at 65c three years from now.
I think the news will be viewed very positively by the market,
Global electric vehicle company Vmoto Limited (ASX: VMT) (Vmoto, or the Company) is pleased to announce that it has entered into a strategic advisory and investment agreement with Giovanni Castiglioni (Castiglioni) along with a partnership and investment agreement with Graziano Milone (Milone), both well-known and experienced European entrepreneurs, investors and executives in the global motorcycle industry.
The Castiglioni family has over thirty years of history in the motorcycle industry, having previously owned some of the most iconic and successful motorcycle brands and companies worldwide such as the iconic and prestigious MV Augusta. The style and design of the most successful MV Agusta motorcycles were conceived during the Castiglioni family management. The strategic agreement with Castiglioni will consist of a direct investment in Vmoto as well as the appointment of an advisor to Vmoto's board of directors with the objective of developing new sales opportunities and marketing strategies, both in the European market and globally. Castiglioni will also share his vast experience in motorcycle designs and collaborate with Vmoto on the development of new motorcycle products for the Company.
At the same time, Vmoto has also appointed Mr. Graziano Milone, partner of Vmoto's joint venture in its Italian distribution company, Vmoto Soco Italy srl (VSI), as the Company's Chief Marketing Officer / President of Strategy and Business Development. Milone is an experienced entrepreneur with a proven history of success in numerous sectors, including the distribution of motorcycles. Milone has successfully developed and increased sales for a number of renowned international trading and manufacturing groups in Italy and Europe. The Company, through VSI, has entered into an investment agreement with Milone.
Along side the direct investment in Vmoto, Castiglioni will also make an investment in VSI. Following the Castiglioni investment into VSI, both Castiglioni and Milone will each own 25% of VSI (together 50%), while Vmoto will retain a 50% interest in VSI.
Photo: Mr Giovanni Castiglioni (left hand side) and Mr Graziano Milone (right hand side) signing the agreements to enter strategic partnership and investment with the Company.
Giovanni Castiglioni commented: “I have been working unofficially alongside the members of the Vmoto team for some time and I am pleased to formalize this relationship. I am excited about Vmoto's growth potential and confident that with the Company's unique and innovative products, established B2B and B2C markets, and the strong vision of Charles and his team, the Company is on the verge of becoming one of the most successful players in the electric urban mobility space. I want to thank Charles for the trust in me and Milone for his foresight and commitment to the strategic development of Vmoto both in Italy and globally. I am very proud and excited to support them in this fantastic endeavor".
Charles Chen, Managing Director of Vmoto, said: “I am thrilled to have someone as experienced and successful as Giovanni not only joining our share register, but also coming on board as the new team member as a global advisor who focuses on our sales strategies, global marketing and development. His experience and impressive track record in the global motorcycle industry gives me great confidence in his ability to support Vmoto in delivering unprecedented growth and success, enhancing the Company's already bright future. I am also thrilled to consolidate my friendship and collaboration with Graziano Milone who, in addition to playing a strategic and important role for Vmoto, has increased his stake in the Company as a demonstration of the trust he places in Vmoto".
Graziano Milone, CMO / President of Strategy and Business Development commented:" I am very happy that Giovanni joins our team and I am sure that his experience and contribution will be an integral part of Vmoto’s growth. His experience in style and image will be important for the development of Vmoto's future products. On this occasion, I thank Charles and his team for the trust he placed in me".
Vmoto recently announced a record preliminary financial result for financial year 2021, confirming its status as a leader in the manufacturing and distribution of zero-emission electric motorcycles/mopeds, both in the B2B and B2C markets. The Company achieved an unaudited net profit after tax of $8 million, strong operating cash flows, highly liquid working capital and a strong cash balance with no bank debt.
Vmoto's position as a leading electric motorcycle/moped company in Europe, combined with a well-established and competitive manufacturing base in Nanjing, has led to strong financial performance by the Group in recent years and has enabled the Company to take advantage of the incredible opportunity presented with the global electrification of the entire transport industry. The significant and fast growing market opportunity in front of the Company, has attracted Castiglioni to become an investor and shareholder in Vmoto.
The Company recently attended the latest international EICMA show, where it successfully launched the new Vmoto "Stash” project, a 7kw urban electric motorcycle. In addition, the Company has several new models in the pipeline, to be released in the coming 36 months, which will enable Vmoto to consolidate its position as one of the world’s most significant producers of premium electric two-wheel vehicles.
Investment Agreement
Castiglioni and Milone have agreed to subscribe for 1.2 million and 300,000 Vmoto Shares respectively, at an issue price of the lower of $0.36 per share; and the market price per share as at the Completion Date less 15%. They have also subscribed for 21 million and 2.1 million free attaching options respectively (on the material terms set out in Tables 1 and 2 below) which, if exercised, will inject a further $12.9 million in cash into the Company. The Shares and Options will be issued pursuant to the Company's 15% annual placement capacity.
Vmoto Soco Italy srl (VSI”)
Castiglioni, through his nominee, has also agreed to acquire a 25% interest in Vmoto’s Italian distribution company, VSI, from the existing 50% joint venture partner. Mr Milone, through his nominee, will retain a 25% interest in VSI and Vmoto will maintain its 50% interest in VSI.
VSI serves as an important international distribution arm for the Italian market and actively facilitates Vmoto's growth in pursuing business opportunities around the world.
In addition, Vmoto has agreed with each of Castiglioni and Milone, to a put and call option to acquire all of the shares held by Castiglioni's nominee and Milone's nominee in VSI, the share price of which is tied to an EBITDA multiplier based on the 2023 and 2024 performance of VSI. The put and call option periods commence on the date of approval of the financial statements of VSI for the 2024 financial year and lapse 6 months thereafter.
European Design and Products Development
It is important to underline that Vmoto has in addition to the strategic partnership with Castiglioni and the key global appointment of Milone, inaugurated the European design and product development center in Italy. The first products designed for new Vmoto premium series are the result of the collaboration with C-Creative, one of the leading design and engineering centers in the sector, led by the world famous designer, Mr. Adrian Morton and the key engineer, Mr. Paolo Bianchi. Together they have created some of the most iconic and successful motorcycles of the past 20 years.
Photo: First model of VMOTO new premium product series, VMOTO STASH
Table 1 – Option Terms issued to Mr Giovanni Castiglioni (or his nominee)
Table 2 – Option Terms issued to Mr Graziano Milone (or his nominee)
-ends-
On 31 January Vmoto provided an update on its activities for the quarter ended 31 December 2021 (4Q21). Vmoto said it delivered strong operational and commercial performance, driven by increasing demand for the Company's products, particularly its B2B products.
Highlights
• 7,410 units in total sold in 4Q21, in line with the Company's expectations, bringing total unit sales for FY21 to 31,275 units, up 33% on FY20 and up 57% on FY19
• Record international unit sales for FY21 of 29,945 units, up 40% on FY20 and up 74% on FY19
• Strong positive operational cash flows for 4Q21
• Strong net cash position of A$18.6 million, with no bank debt as at 31 December 2021
• Firm international orders of 12,488 units as at 31 December 2021, providing a very solid runway for FY22 sales
• New international distributors appointed, and ongoing discussions and samples shared with a number of potential new B2C and B2B customers
• Vmoto expanded its partnership with Helbiz (NASDAQ: HLBZ), an intra-urban transportation company headquartered in New York, USA, and will supply 2,000 additional electric mopeds to Helbiz for deployment in the Italian market
• Vmoto launched new VMOTO premium brand and products and exhibited its new and existing range of products at 2021 EICMA, a world class international motorcycle exhibition
4Q21 Sales Performance
During 4Q21, Vmoto sold a total of 7,410 units, with more than 93% of units being sold into international markets, while just under 7% of units were sold into the Chinese market. Total international units sold in 4Q21 of 6,917 units was up 23% on 4Q20 and up 6% on 4Q19, demonstrating continued strong momentum in the business.
Sales figures from 4Q21 are in line with the Company’s expectations and reflect general seasonal fluctuations, including the National Day holiday in China in October 2021.
Record international sales units were delivered for FY21 with 29,945 units sold into international markets (excluding China), up 40% on FY20 and up 74% on FY19.
The chart below illustrates the Company’s historic international unit sales, by quarter, for the previous three financial years:
My Take
Three weeks ago Noddy shared the profit guidance announcement: “Vmoto expects to achieve net profit after tax (NPAT) of between $7.5 million and $7.8 million for FY21 (the final results being subject to completion and independent audit)”
There was no confirmation in the 4Q update which I thought was a bit strange.
Sales versus Orders
Total Sales were 7410 units for the quarter, down on 2Q and 3Q spoiling what appeared to be an increasing quarterly trend. However, keeping an eye on the order book, this was to be expected.
Orders over the last 3 quarters were trending down which had me concerned. It would appear that international orders for Vmoto can be quite lumpy!
The good news is that firm International Orders at end of 4Q were for 12488 units. Looking at the Sales versus Orders graph I prepared below, the 4Q order book appears to be an all time record for Vmoto beating 4Q20 by 13.5%.
Looking at the table below it seems that sales lag orders by 1 to 2 quarters. Sales for 4Q21 (7410) is somewhere between the orders for 2Q21 (9639) and 3Q21 (6067), which is what you might expect.
Projecting forward with the order book at 12488 units, we could reasonably expect sales for 1Q22 to be upwards of 10,000 units and possibly one of Vmoto’s best sales quarters.
Going Forward
Given there is a strong order book going into FY22 and the EV tailwinds, I feel reasonably confident that sales will continue to increase strongly going forward. I like the look of the new SuperSocco range which is expected to attract a premium market in US, Europe and Australia.
The legal dispute with their Chinese partner hasn’t been resolved yet which clouds things a little for now.
Valuation
I’m happy to retain my current valuation of 63c for now, however I won’t be buying further shares above 42c until I see the order book continue to grow next quarter and the legal dispute with their Chinese partner resolved.
Disc: Held IRL and SM
Vmoto is one of my top 10 stocks by portfolio weight IRL. The Q321 market update released on 2 November highlighted some outstanding sales results:
• 10,142 units in total sold in 3Q21, up 40% on 3Q20 and up 52% on 3Q19
• International sales of 9,889 units for 3Q21, up 61% on 3Q20 and up 104% on 3Q19
• Positive operational cash flows for 3Q21
• Strong cash position of A$17.4 million, with no bank debt as at 30 September 2021
• Firm international orders of 6,067 units at 30 September 2021, providing a solid runway for FY21sales
• New international distributors appointed, and ongoing discussions and samples shared with a significant number of potential new B2C and B2B customers in new markets
• Vmoto exhibited its brands and products at a number of the world class electric motorcycle racing events, FIM ENEL MotoE World Cup (“MotoE”) across Europe during 3Q21
The 5th dot point (international orders) may be something to watch going forward. Since Q420, when the orders peaked, there has been a trend downwards in orders. Hopefully this is just a COVID related blip!
I’ve plotted the Sales (blue) and Orders (orange) from quarterly updates since Q319 on the graph below. As you can see there seems to be about 2 - 3 quarters lag time between when orders are received and the realisation of sales. I think Vmoto is in for a pleasing FY21 result, however I will be watching the trend in orders and sales more closely in future quarterly updates.
What does Vmoto do?
Vmoto designs, manufactures and markets electric two-wheel vehicles including electric mopeds and motorcycles. The company offers its products primarily under the Vmoto, Super Soco, and E-Max brand names. Vmoto Limited was incorporated in 2001 and is based in West Perth, Australia. Vmoto has a market cap of $107 million.
Vmoto owns a 30,000 sqm state of the art manufacturing facility in Nanjing, China; capable of up to 10x current production. It also owns a European subsidiary and warehouse in the Netherlands to support the strategic focus of accelerating sales into the European market.
Global coverage includes Europe, Asia Pacific, North America, South America, Australia, New Zealand and South Africa. European sales are most advanced with international units representimg 91% of CY2020 units sold.
Vmoto has a global B2C distribution network of 46 international distributors and 1,200 dealers in over 50 countries, with dealers' networks increasing.
Vmoto’s E-Max range of electric mopeds has secured a reputation in the international market as one of the best performing electric two-wheel delivery vehicles available.
There is also Increasing popularity of food delivery, third party delivery services and ride-sharing due to advances in app technology and mobile networks.
Electric performance
Vmoto is performing strongly both on and off the track!
In its latest ASX announcement (15 June) Vmoto said they had signed a sponsorship and marketing agreement to supply scooters and exhibit its brands at the world class electric motorcycle racing event, FIM ENEL MotoE World Cup (“MotoE”) during the 2021-2023 season.
Vmoto said the European electric scooter and motoryclce market is of strategic importance to Vmoto and is estimated to grow to US$758.5 million by 2025 equating to the second-largest market after Asia Pacific.
Off the track Vmoto is also performing extremely well! Revenue has grown over 840% over 3 years to $61 million (2017 - 2020). Over the same period Vmoto has gone from a loss of $6.3 million to a profit of $2.34 million.
Down the track revenues are forecast to more than double to $132 million (Dec 2023) and profits to grow over 250% to $9.7 million, ie. a 30% annual earnings growth over 3 years (Simply Wall Street data, 1 analyst S & P Global, see graph below).
Market Update (3 May 2021)
In the Market Update Vmoto announced:
- 5,869 units in total sold in 1Q21, up 42% on 1Q20 and up 54% on 1Q19.
- Positive operational cash flows for 1Q21
- Strong cash position of A$15.8 million, with no bank debt as at 31 March 2021
- Firm international orders of 10,702 units as at 31 March 2021, including the significant B2B order from Greenmo Group, with 3,864 units remaining to be delivered in 2Q21, providing a solid runway for FY2021 sales
- New international distributors appointed, and ongoing discussions and samples shared with a significant number of potential new customers in new market
- GO Sharing successfully raised EUR50 million (approximately A$77.8 million) with ambitions to further expand its ride-sharing operations into new markets
- Vmoto expanded its B2C product offering with the launch of three new B2C electric two-wheel vehicle models, the new TS, the new TC and CUmini model, unveiled at the 2021 Vmoto Soco
Valuation
Assuming Value = E/S x PE
= $9.7 million* (Forecast 2023 E) / 279 million (shares outstanding) x 25^ = $0.97
^I have used a PE of 25. I think this is reasonable given earnings are forecast to grow at 30% per year over the next 3 years.
*Simply Wall Street data
Now, discount at 10% per year over 3 years
= $0.97 x 0.7 = $0.68
The Simply Wall Street DCF value is $0.63.
Assuming the lower value estimate of $0.63 per share, VMT is undervalued by 63% (closed @ $0.385 on 7 July 2021).
Vmoto's future strategy
Vmoto continues to execute on its strategy of selling high performance and value electric two-wheel vehicles into international markets and continues to build both its B2B and B2C distribution network worldwide.
As the COVID-19 situation continues to evolve around the world, especially in India, the Board and Management remain in continuous discussion and preparedness, should the implementation of a revised strategy be required. However, having ended the 2020 financial year in a strong operational and financial position following numerous commercial achievements, the Company is confident in the strength of its global growth strategy and therefore, expects similar levels of growth to be delivered for the 2021 financial year.
Vmoto continues to focus on expanding its product range to extend its reach and appeal to a broader spectrum of the market for electric vehicle users, following the successful launch of 3 new B2C models in February 2021 and a new B2B electric delivery two-wheel vehicle in April 2021.
Additionally, Vmoto is evaluating and developing a new electric delivery three-wheel vehicle in consultation with its existing and new B2B customers, and is in discussions with a top European industrial design company with the objective of developing new electric two-wheel vehicle models to further enhancing the Company’s product range.
The global focus on mitigating the impacts of climate change and the transition towards electric vehicles provides Vmoto with a strong platform from which to accelerate its growth. As a result, the Company has broadened its commercialisation strategy and is confident it will be able to continue delivering strong sales and revenue growth in the coming year and beyond.
Disc: Added to RL portfolio
