Vmoto Limited

VMT Details

Q3FY21 Market Update: Vmoto Limited (ASX: VMT) manufactures and sells electric and petrol two-wheelers in Australia and China.

• Sales Performance: During Q3FY21, VMT sold 10,142 units, with over 97% sold in international markets, while just under 3% sold to the Chinese market. Global sales surged 61% PcP and up by 104% relative to Q3FY19, representing a solid momentum.
• Financial Position: As of 30 September 2021, VMT registered a cash position of $17.4 million, with no bank debts. Cash position surged by $2.4 million since 31 December 2020, primarily driven by positive operating cash flows.

H1FY21 Financial Performance

• Increase Sales Units: Total units sold reached 13,723 units, up by 13% PcP, including 13,139 units in international markets. The significant uptick was primarily driven by increased interest from businesses operating in food delivery, ride-sharing and parcel delivery services.
• Bottom-line and Cash Flow Improvements: As a result of proliferated sales, VMT recorded a 120% increase in NPAT and an astonishing 100% increase in EBITDA on a year over year basis.

Key Financial Highlights (Source: Analysis by Kalkine Group)

Key Risks

• Supply Risk: Due to the shortage of semiconductors and chips, the company can face a supply-side constraint during COVID-19, as the uncertainty prevails.
• Competition Risk: The automobile market is highly competitive and holds the potential to drain VMT’s market share.

Outlook

• Order Book: The company had concrete international orders for 6,067 units. VMT expects sales to maintain upward momentum with repeat and international orders.
• International Orders: VMT holds concrete international orders for 9,636 units, catering for a robust runway for top-line build-up.
• MotoE Agreement: VMT entered into a supply agreement with MotoE, a motorcycle-racing event, to supply scooters of MotoE during the 2021-2023 seasons. This would also unlock an advertising avenue.
  

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

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 positive return of ~18.57% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.325 - $0.580. The stock is trading at a resistance level of ~0.47 and a support level of ~0.36. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in percentage terms). The company might trade at a slight discount to its peers’ median EV/Sales multiple, considering high competition and supply chain risks, etc. For the purpose of valuation, few peers like GUD Holdings Ltd (ASX: GUD), ARB Corp Ltd (ASX: ARB), Carbon Revolution Ltd (ASX: CBR) and others have been considered. Considering pandemic risks, high sensitivity to the business cycle, heightened competition from large size automotive manufacturers, indicative downside in valuation, recent rally in stock price, decent approach to 52 weeks’ high, we suggest investors to book profits and give a “Sell” recommendation on the stock at the current market price of $0.440, as on 02 November 2021, at 11:30 AM (GMT+10), Sydney, Eastern Australia.

VMT Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision 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.

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.

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.