Vmoto's 2Q21 Market Update
Continued growth, cash flow positive, large bank balance with no debt. Once again starting a quarter with more orders in the book than pcp sales.
Disclosure: I hold.
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.
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:
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
Analyst: Harry Stevenson - Industrials Analyst, +61 8 9488 1429
Recommendation: Buy, Price Target: $0.78/sh (up from $0.72/sh)
Strong Full Year Results
VMT has released unaudited preliminary final results for the full year ended 31 December 2020. Results for the year were strong across the board with the company exceeding our previous forecasts (adjusted for impact of share based payments approved late in the year). With the award of the of VMT’s largest B2B order from strategic partner Greenmo Group in early FY’21 we look for a step change in unit sales through FY’21 with the company set to benefit from easing of lockdowns across Europe and continued transition to E-vehicles. The company launched a range of three new vehicles in late February which we expect will be well received given the welcome bump to performance. We have pushed through some adjustments to our full year FY’21 forecasts to reflect FY’20 results and as a result price target rises to $0.78/sh.
Vmoto Ltd, Year End: 31 December
Click on the link at the top for the full report, or open the attached file below.
Another great announcement from VMT. It's only a MOU but the potential in the Indian market is huge!
• Vmoto has signed an MOU with one of India’s largest travel technology companies, the Bird Group, regarding the potential exclusive distribution of VMT’s CUX and CUmini range of twowheel electric vehicles (EVs) across India
• Subject to Bird Group’s technical evaluation of CUX and CUmini samples, Bird Group will order a minimum 10,000 units in the first year, representing a total sales value of approximately A$13.8 million
•India is the largest internal combustion engine (ICE) two-wheeler market in the world, having sold 162.6 million units between 2011 and 2020, and the Indian two-wheel EV market size is expected to reach USD750 million by 20251
• Current Indian government policies support the transition of the ICE two-wheeler to two-wheel EVs, including subsidies, stringent emission regulations and a proposed banning of ICE two-wheel vehicles
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.
The release of three new models today announced by Vmoto. The market wasn't very excited about them but I was. They looked pretty cool to me!
• 6,028 units in total sold in 4Q20 in line with the Company's expectations, bringing total unit sales for FY2020 in international and China markets to 23,547 units, up 18% on FY2019 and up 117% on FY2018
• Record international unit sales for FY2020 of 21,416 units, up 24% on FY2019 and up 112% on FY2018
• Continued positive operational cash flows for 4Q20
• Strong net cash position of A$15 million, with no bank debt as at 31 December 2020
• Firm international orders of 6,798 units held as at 31 December 2020, not including the additional significant B2B order from Greenmo Group of 5,904 units secured January 2020
• Currently more than 11,000 firm international orders held, providing runway for strong year of sales for FY2021
• Significant interest from business customers including food delivery, parcel delivery and ridesharing companies for Vmoto’s B2B products and in advanced discussions to secure orders from a number of B2B customers
• New international distributors appointed, and ongoing discussions and samples shared with a significant number of potential new customers in new markets
• Commenced marketing and promotion of the online World Premiere event organised by Vmoto whereby we will launch 3 new electric two-wheel vehicle models in 1Q21
sorry attacment was too big, please follow link
Vmoto has secured a significant (repeat order) for 5904 units from their strategic B2B Greenmo Group ~ approx A$13M
Units expected to be delivered 1Q21 and to be used for Greenmo Group's European expansion
• Net profit after tax expected to be between $3.2 million and $3.4 million for FY2020, a significant improvement on FY19 NPAT of $1.3 million
It's been an interesting few months for Vmoto. Tensions in China, errors in reports, poorly received incentive plans; all contributing forces that have resulted in the market driving the share price down.
The fundamentals never changed though, and today's announcement appears to have been the reassurance that investors were waiting for.
Disclosre: I hold.
Remember to back your analysis with conviction and not forget about it. I missed out with Vmoto, a good lesson learned.
My bull case was very optimistic on future growth and now the market has caught up to reality. The reality being, the market is seeing 150K scooters sold equating to revenues of $300M and 7% operating margin in 2030. The valuation matches with my assumptions.
Future catalysts would be entirely driven by outperformance by management. In other words, if they can either increase margins or grow faster, then the valuation must go higher. With the 25% revenue growth rate to 2030, I am assuming 25,000 scooters sold in FY21. So far, in 1HFY21 they sold 10,510. I predict a strong second half. The question is will management deliver Q3 results even stronger than what the market is expecting? If so, then it will blow out my forecast. Management reporting anything above 10,000 scooters in Q3 will significantly increase the valuation.
From the second (and latest) link:
Vmoto has provided a Q’2 market update
The VMT investment case is built on growing unit sales with increased returns to scale. VMT has had a strong start to the FY20 financial year and in our view will be able to maintain this growth into FY21. VMT is well positioned to benefit from government incentives, changing consumer preferences, maturing technology and a growing ride share market. The establishment of the Vmoto Soco manufacturing company continues to set the pathway for further collaboration between the two entities over time. The electric two wheel market is set for growth over the coming years, in our opinion, VMT is well placed to benefit.
Vmoto Limited (VMT)
--- click on link above for the full 30-Jul-2020 report and for the 03-Aug-2020 client note ---
[I am not a VMT shareholder]