Company Overview: Vmoto Limited (ASX: VMT) is developing, manufacturing, marketing, and distributing electric two-wheel vehicles, including electric mopeds and electric motorcycles. The company has its operations in Australia, China, Europe, and Singapore. The company got listed on ASX in 2002.
VMT Details
Material Business Updates
Historical Financial Trend:
VMT illustrated sustainable historical growth while keeping the value proposition intact. The operating revenues have been growing since FY17, with net income entering the expansionary territory. Operating revenues grew at a ~54.6% CAGR (FY17 – FY21).
First Quarter FY22 Performance Commentary:
Improved Operating Metrics: In Q1FY22, 7,998 units were sold, up by 36% PcP and up by a substantial ~94% on Q1FY20. International unit sales stood at 7,677 units, up by 35% PcP and a considerable 96% on Q1FY20. VMT’s order book has registered 9,116 units of international orders as of 31 March 2022.
Financial Position: As of 31 March 2022, the company delivered a strong cash position of $24.7 million with no bank debt. The cash position increased by $6.1 million, primarily due to positive operating cash flow from customer receipts, profitability trend for FY22, and the company’s growth reiteration.
Full-Year FY21 Performance:
Top 10 Shareholders:
The top 10 shareholders together form ~41.13% of the total shareholding. Chen (Yiting Charles) and Munro (Raymond Edward) hold a maximum stake in the company at ~8.21% and ~7.92%, respectively.
Key Metrics:
Rising sales and distributorships have rendered favourable revenue trends with growing operational efficiency, illustrating economies of scale. The current ratio stabilised to 2.93x in FY21 from 3.58x in FY20, sustaining elevated levels.
Outlook:
Key Risks:
High potential competition in the electric two-wheel vehicles with more significant R&D, marketing, financial, and distribution resources may drain substantial top-line. Any disruption in VMT’s business relationship with Super Soco may affect the manufacturing operations in China.
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:
The stock of VMT gave a negative return of ~6.25% and ~13.79% in the past three months and six months, respectively. The stock is currently trading lower than the 52-weeks average price level band of $0.325 - $0.490. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the decent growth in the order book and growth sustainability illustrated by repeat orders, the company might trade at a slight premium to its peers’ EV/Sales multiple average. For valuation, a few peers like Apollo Tourism & Leisure Ltd (ASX: ATL), National Tyre & Wheel Ltd (ASX: NTD), Carbon Revolution Ltd (ASX: CBR) have been considered. Given the strong financial performance, negligible debt obligations, order book expansion, engagement of new distributors, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.375, as of 13 May 2022.
Markets are currently trading in a highly volatile zone due to specific macroeconomic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
VMT Daily Technical Chart (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 for upside potential, risks, holding duration, and 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 stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in stock prices tend to find resistance when they are rising, and an 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
Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.
Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.
There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.
You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.
The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.
Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.
Please also read our Terms & Conditions and Financial Services Guide for further information.
On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.
Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.