Company Overview: Global electric vehicle company, Vmoto Limited (ASX: VMT) is into the business of developing, manufacturing, marketing and distribution of electric two-wheel vehicles, including electric mopeds and electric motorcycles. The well-known brands are (a) Vmoto, which is aimed at the value market in Asia, (b) E-Max, which targets the international B2B markets with a high-end premium product, and (c) Super Soco, which is a third-party brand Vmoto markets into international B2C markets. The company has its operation in Australia, China, Europe and Singapore. The company started to trade on ASX in January 2002.
VMT Details
Key Takeaway from FY21:
- Prime Launches & Agreements: VMT signed an agreement of multi-year sponsorship and marketing to supply electric mopeds and exhibit its brands at the world class electric motorcycle racing event - FIM ENEL MotoE World Cup (a part of MotoGP). During the year, it launched new products, i.e.,
- "VMOTO" premium brand: it supplies high quality products to international markets.
- TS, New TC, CUmini, VS2, VS3, Stash and Concept F01: these products target a wider group of B2C and B2B customers and complements its existing product range.
- Total Revenue: As per its preliminary final results for the full year ended 31 December 2021, its total revenue was up by ~41% on FY20, to $86.2 million. The reasons behind the increase are total sales of 31,275 units of electric motorcycles/mopeds delivered (up 33% Y-o-Y) during the year.
- EBIDTA Growth: With the rise of ~76% in its EBITDA of $10.2 million, VMT’s NPAT was up by ~120% and reported at ~$8.03 million.
Revenue Information (Source: Analysis by Kalkine Group)
Top 10 Shareholders: The top 10 shareholders together form around 42.27% of the total shareholding, while the top 4 constitute the maximum holding. Chen (Yiting Charles) and Munro (Raymond Edward) are holding a maximum stake in the company at ~8.26% and ~7.72%, respectively, as also highlighted in the chart below:
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Top 10 Shareholders (Source: Analysis by Kalkine Group)
Key Metrics: The company has reported an increase in its cash balance to ~$18.63 million in FY21 and marked a major reduction in its total debt from ~$2.65 million in FY19 to ~$0.39 million in FY21.
Liquidity Profile & Debt Profile (Source: Analysis by Kalkine Group)
Key Risks: The company is exposed to the following risk factors:
- COVID-19 and Omicron Variant Risks: Due to COVID-19 and the new variant, the company might get affected by the lockdown regulations and restrictions, which might affect its sales and operations.
- Demand & Supply Gap: The new vehicle availability has been witnessed as a major challenge globally, along with global logistics and pricing, which thereby affects stock availability and its management.
- Currency Price Risks: Considering the market volatility, its price is dependent on the external demand and supply of the raw material and it’s sourcing etc.
Outlook: The company believes that the underlying fundamentals of the business would assist in delivering strong growth across key international markets for FY22 and beyond. In addition, VMT’s growth would be backed by the launch of the new Vmoto premium brand and products in FY21. New “VMOTO” premium brand has been launched with a focus on supplying high quality products to the international markets, with a key focus on Australia, Europe and the United States. VMT will now be focused on promoting the VMOTO and Super Soco product series to B2C distribution and B2B fleet operations distributors and customers. Looking forward, the company would be attentive on implementing its strategy of selling high performance and value for money electric motorcycles/mopeds into international markets. It would also seek expansion of both its B2B businesses and B2C distribution network worldwide. It had firm international orders of 12,488 units as of 31 December 2021, which provides a very solid runway for FY22 sales. VMT continues to expand its commercialisation strategy and is confident about delivering strong sales and revenue growth for FY22 and beyond.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: As per ASX, the stock of VMT is trading lower its 52-weeks’ average levels of $0.325 - $0.505. The stock gave a positive return of ~16.30% in the past year, creating a good time to accumulate. The stock has been valued using EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average multiple, because of the increase in operational and marketing expenses, supply chain constraints in the sector. For the purpose of valuation, few peers like Apollo Tourism & Leisure Ltd (ASX: ATL), 'National Tyre & Wheel Ltd (ASX: NTD), Carbon Revolution Ltd (ASX: CBR), and others have been considered, which comes under Automobile sector.
Considering the rising revenue, growth in NPAT and EBITDA, upside potential in valuation, current trading levels, virtually debt free status, with new launches and partnerships creating a hopeful outlook, and the key risks associated with the business and current market volatility due to global tensions, we recommend a ‘Speculative Buy’ rating on the stock at the market price of $0.385 (shown in the chart below). The stock has not traded today and therefore, there is no price and volume change for 18 March 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
VMT Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
The Green colour line reflects the 21-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).
The Blue colour line reflects the 50-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 50-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).
The Yellow colour line reflects the Trendline, which shows whether the direction of the scrip is upwards or downwards.
The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.
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