Vmoto Limited

VMT Details

Expansion of Product Offering:Vmoto Limited (ASX: VMT) is primarily engaged in the development, manufacturing, marketing and distribution of electric powered two-wheelers. The company recently updated that the voting power of Raymond Edward Munro and Susan Roberta Munro ATF increased from 6.74% to 7.8%. As per another recent update, the company notified that it has launched two new electric scooter models, E-Max VS1 and Super Soco CPx. The models were launched at the 2019 Esposizione Internazionale Ciclo Motociclo e Accessori Motorcycle Show in Milan, Italy.

Market Update for the Quarter Ended 30 September 2019: The company reported a strong cash position of A$6.4 million at the end of the period, up by A$1.3 million on 2QFY19. The balance increased by A$2.2 million in total since 31 December 2018. Total unit sales for the quarter stood at 6,027, up 94% in comparison to prior quarter unit sales of 3,115. Out of the total unit sales, 4,839 units were sold in the international market, representing a growth of 57% on 2Q19 and 77% on 3Q18.


Sales Performance (Source: Company Reports)

As at 30 September 2019, the company’s order book comprised firm orders for 4,421 units, which augur an upward movement in sales for the coming quarters.The company has also continued to receive orders from existing and new distributor after the end of the quarter, which is expected to grow further, with the increased popularity of B2C products among motorcycle enthusiasts, government policy and initiatives such as green initiatives, banning petrol vehicles, and subsequent growth in the demand for electric vehicles. In the next 3-6 months, the company expects to deliver orders received for B2B E-Max and B2C Soco models from international customers and distributors.

Stock Recommendation: Over the period of one year, the stock generated a whopping return of 260%.During 1HFY19, the company had gross margin and EBITDA margin of 22.7% and 5.5% as compared to 1HFY18 margins of 19.8% and 2.9%, respectively. Current ratio of the company stands at 1.83x, higher than the industry median of 0.99x. As per the company’s observation, the newly launched E-Max VS1 has significant market potential in Europe, South America, Asia Pacific, and Africa. The new Super Soco CPx will also be distributed in over 40 countries. The above two products are expected to offer good growth opportunities in the next quarter and beyond. In 3Q19, the company expanded its operations in the Netherlands through distributors like Go Sharing and is currently negotiating a deal with Zig Zag Italy to expand in Italy.

On 08 November 2019, we recommended a "Speculative Buy" rating on the stock at the market price of $0.130. Since then, the stock has seen a substantial uplift of ~84%. As per ASX, the stock made a new 52-week high of $0.245 as on 13 November 2019, and is trading close to it with higher PE multiple of 180.0x. Considering the above scenario, we are of the view that most of the positive factors have been discounted at the current juncture. Hence, looking at the trading levels and overall fundamentals, and in anticipation of some profit booking by the market players, we suggest interested investors to book profits at the current market price of $0.240, up 33.333% on 13 November 2019.
 
VMT Daily Technical Chart (Source: Thomson Reuters)
 

Oliver’s Real Food Limited

OLI Details

Signs of Recovery in Q4FY19 and Q1FY20:Oliver’s Real Food Limited (ASX: OLI) is engaged in the management of Quick Service Restaurants in Australia under the brand “Oliver’s Real Food”. The company recently updated that its securities have been reinstated to official quotation after lodgement of the Annual Report and Appendix 4C for the quarter ended 30 September 2019. Hence, the key management will now be allowed to trade in OLI Securities. In another update, the company notified that the 2019 Annual General Meeting will be held on 29 November 2019.

Q1FY20 Profit: The Management announced that the company delivered a positive unaudited EBITDA of $466,000 during the quarter ended 30 September 2019, on the back of strong trading and tight management controls.

Financial Highlights for the Year Ended 30 June 2019: During FY19, the company generated revenue amounting to $34.97 million, down by approximately 2.5% on prior corresponding year revenue of $35.94 million. Net loss for the year stood at $15.66 million as compared to a loss of $0.64 million in FY18. Loss during the year was mainly due to some poor performing stores, which have now been closed. This resulted in substantial asset write-offs and write-downs, leading to the replacement of the entire board and much of the senior management team. The company has incorporated balance in the operations through subsequent overhead reductions after the appointment of new Board, improved menu selections, and a renewed focus on each store.


FY19 Income Statement (Source: Company Reports)

Stock Recommendation: The stock of the company generated negative returns of 16.28% and 14.29% over the period of three months and six months, respectively. Currently, the stock is trading below the average of its 52-week trading range of $0.019 - $0.115 and has a market capitalisation of ~$9.03 million. In FY19, the company has a gross margin of 73.5%, higher than the industry median of 51.8%. On the valuation front, the stock has an EV to Sales multiple of 0.3x as compared to the industry median of 1.2x, depicting an undervalued position at the current juncture. Though FY19 proved to be a challenging period due to store performance, the company’s efforts for recovery are clearly depicted in the small amount of profit earned in Q4FY19 and positive EBITDA in Q1FY20. Hence, considering the improvement in business performance, current trading levels and valuations, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.037, up 2.778% on 13 November 2019.

 
OLI Daily Technical Chart (Source: Thomson Reuters)

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