Vmoto Limited

VMT Details

Vmoto Limited (ASX: VMT) is a global electric two-wheel vehicles manufacturing and distribution company, in B2B and B2C markets. It has a market capitalization of ~$110.01 million as of 25^th May 2021.

Result Performance – For the Financial Year Ended 31 December 2020 – (FY20)

For the year ended 31 December 2020, the company reported a rise in total revenue by 33.6% YoY to $61.0 million on the back of 18% YoY increase in total sales units of electric two-wheel vehicles to 23,547. It reported an EBITDA of $5.8 million for the full year, up 101% on FY2019. A significant increase in EBITDA contributed to NPAT for the full year to rise by 181% YoY to $3.7 million. The period witnessed cash flows from operating activities rising by 139% YoY to $4 million, and cash position improving by 126% YoY to $15 million as of 31 December 2020.

Key Data (Source: Company Reports)

Recent Updates

• On 13 May 2021, the company confirmed that it has issued 192,569 fully paid ordinary shares in lieu of Directors fees and advisory services.
• On 13 May 2021, the company released the outcome of the annual general meeting wherein following resolutions were carried on: (1) Non-Binding Resolution to adopt Remuneration Report, (2) Re-Election of Director – Ms Shannon Coates, (3) Election of Director – Mr Blair Sergeant, (4) Approval to issue Performance Rights to Managing Director – Mr Charles Chen, (5) Approval to issue Performance Rights to Finance Director – Mr Ivan Teo, (6) Ratification of Issue of Employee Shares, and (7) Issue of Shares to Director - Mr Kaijian Chen

Key Risks:

The company is exposed to intense competition due to low entry barriers and the global thrust towards clean energy vehicles. In addition, the company faces competition in terms of greater financial stability, research and development, marketing, distribution, and technological obsolescence. In order to address this risk, the company is deploying towards R&D, recruiting competent technicians as well as is constantly monitoring the market.

Outlook:

The company has secured an order of 5,904 units from Greenmo Group in January 2021. Further, the company is exploring new markets like India, where it signed an MOU with one of India’s largest travel technology companies, Bird Group in March 2021. Meanwhile, the company continues to grow the product range and is analyzing and developing a new electric three-wheel delivery vehicle. In addition, it is also in negotiation with a top European industrial design company to manufacture new electric two-wheel vehicle models.

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

After the previous week of strong closing, the stock has given a stronger closing at $0.41 but forming ‘Dragonfly Doji’ which otherwise suggests indecision and potential trend reversal. However, ‘Dragonfly Doji’ has formed in bearish market, it could be signal of bullish trend reversal. The technical indicator RSI with a reading around 45 and a curve at the end pointing up, suggests gaining of bullish momentum for the stock.

Going forward, the stock may have resistance around the 38.2% retracement level of $0.47 whereas support could be around the lower Bollinger band of $0.37.

Stock Recommendation:

The stock declined by ~21.15% in 9 months. It has made a 52-week low and high of $0.195 and $0.670, respectively. The company is actively looking for orders in new B2B markets and is growing positively towards these new business opportunities. 

Considering the current trading levels, management thrust on to expand the existing product line and distribution channel, the rising market presence across geographies and a new venture into three-wheeler vehicle, we give a “Speculative Buy” rating on the stock at the current market price of $0.410 per share, up 3.797% on 25^th May 2021.

Nanosonics Limited

NAN Limited

Nanosonics Limited (ASX: NAN) is a leading provider of innovative solutions to prevent the transmission of life-alerting infections. It has developed and commercialized a disinfection technology, Trophon® which is fast becoming the global standard of care for ultrasound probe disinfection. The company has a market capitalization of around $1.61 billion as of 25^th May 2021.

Result Performance – For the First Half Ended 31 December 2020 – H1FY21

For the first half ended 31 December 2020, the revenue was reported at $43.1 million, down 11% YoY led by the fall in purchases by GE Healthcare due to the impacts of COVID-19 and the impact of a stronger Australian dollar. While, global revenue recovered in Q2FY21, up 48% versus Q1FY21 as GE Healthcare resumed purchases of capital equipment in Q2FY21 and a rise in consumables and service revenue. Meanwhile, operating profit before tax fell to $0.2 million in H1 FY 2021 from $6.7 million in H1FY20 as a result of the impacts of COVID-19, mainly in Q1FY21 revenue, and the continuing investment in the company’s growth strategy. A sharp decline in operating profit before tax and increase in income tax expense led to a 74% YoY decline in NPAT to $1.5 million.

Key Data (Source: Company Reports)

Key Risks:

There is a risk of COVID-19 related restrictions on the company’s operations, including its global supply chain. Further, the key distribution customer accounts for ~54% of overall revenue, the majority in the USA, losing of the same will have a huge negative impact on the earnings of the company. Meanwhile, the potential for increased competition exposes the company to the risk of losing existing and new market share. Besides, the company operates in a highly regulated industry.

Outlook:

As per the management, the ongoing revenue growth is expected to continue further in FY21, based on market improvements seen in Q2FY21, mainly driven by increased installed base growth and rise in consumables across all regions. Further, the company is optimistic that overall market conditions, primarily in hospitals, are likely to continue to improve on the back of COVID-19 vaccination programs underway. In addition, the company commits to continue to invest in the strategic growth priorities of the business through market expansion, R&D, and infrastructure and capability improvement. Total operating expenses for FY21 is expected to be at the lower end of the $75 million to $78 million range indicated previously.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (illustrative)

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

In the previous week, the stock made a new low of $4.88 but gave a stronger close having cut significant loss and forming a ‘Dragonfly Doji’ on the chart thereby signaling bullish reversal for the stock. Confirming to bullish trend reversal, the stock has given a stronger close at $5.33 for the ongoing week. The technical indicator RSI with a reading around 39 and a curve at the end pointing up, suggests neutral to up momentum for the stock.

Going forward, the stock may have resistance around the converging point of 38.2% retracement level and 20 periods SMA of $6.16 whereas support could be around $5.10.

Stock Recommendation:

We have valued the stock using EV/Sales multiple-based valuation (on an illustrative basis) and have arrived at a target price with the potential of lower double-digit (in % terms) growth. We have applied a slight premium to the peer average EV/Sales (NTM) considering expectations on a rise in sales in FY21 on the back of improving market conditions experienced across regions and product line.

Considering the aforesaid facts, we give a ‘Buy’ rating on the stock at the current market price of $5.340 per share, down by 0.187% on 25^th May 2021.

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 Valuation has been achieved and subject to the factors discussed above.

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