Electrameccanica Vehicles Corp

Electrameccanica Vehicles Corp (NASDAQ: SOLO) is a Canada-based development-stage electric vehicle designer and manufacturer Company.

Rationale for Valuation – Speculative Buy at USD 4.88

• As per valuation metrics, Price/Earnings and EV/EBITDA multiples of the SOLO are currently lower as compared to the corresponding multiples of the Automobiles & Auto Parts industry.
• On the liquidity front, the current ratio was 28.52x in September 2020, which was higher than the industry median. Also, the liquidity position stays strong, with the confidence to increase the investment for the future.
• The Company's debt/equity ratio in the last period was considerably below the industry median. In September 2020, the debt/equity ratio was 0.01x.
• From the technical standpoint, 90-day RSI stood at around 44.54, which is supporting the upside movement.

Key Risks

• The environment in which the Company operates is subject to several legislative and regulatory requirements. A failure to comply could adversely impact the local environment and manufacturing capability.
• The impact of COVID-19 has reduced customer demand and increased volatility while simultaneously impacting the entire supply chain.
• Fluctuations in exchange rates could impact the profitability and balance sheet position.

Recent News

On 17 February 2021, the Company has expanded its retail footprint with seven additional locations.

Q3 FY20 Trading Update (for the third quarter ended 30 September 2020, as on 10 November 2020)

• Led by an increase in custom-built roadsters, the total revenue increased to CAD$0.3 million as compared with the corresponding period of the last year.
• In Q3 FY20, the net loss surged to CAD$14.9 million against the same year-ago quarter, primarily related to the fair market revaluation of the Company’s warrant derivative liability.
• On 30 September 2020, the cash and cash equivalents and short-term deposits stood at CAD$101.1 million, with cash used in operations increased to CAD$7.2 million.
• Successfully delivered the first shipment of EVs into the U.S. Moreover, it was in line with the Company’s ongoing vehicle rollout strategy.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

The Company has increased its cash position by CAD$50 million in Q3 and anticipated production ramp over the upcoming quarters. The third quarter brought with it several key milestones for SOLO. In September 2020, it started shipping the first production SOLOs and will be dramatically expanding the sales efforts by opening in new seven locations. The Company has a highly experienced management team with significant beneficial insider ownership. By 2040, over 500 million passenger EVs will be on the road globally, accounting for over 30% of all passenger vehicles. Further, it expects that year-over-year 2021 revenue growth will be greater than the previous year. Therefore, it is well-positioned for strong progress and delivers enhanced shareholder value with a renewed focus on costs and efficiency. The stock made a 52-week low and high of USD 0.8901 and USD 13.60, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Speculative Buy” stance on Electrameccanica Vehicles Corp at the closing market price of USD 4.88 (as on 8 March 2021,), with lower double-digit upside potential based on 33.64x EV/NTM Sales (approx.) on FY21E sales (approx.).

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.