MENAFN - ProactiveInvestors - Australia
Vmoto: riding global growth in "green" electric powered scooters
Vmoto e-scooters in China factory
(MENAFN - ProactiveInvestors - Australia) Vmoto Ltd (ASX: VMT, AIM:VMTX) is an Australian based company that is listed on the ASX and AIM, and has been ranked in the top 5 as a global scooter manufacturer and distributor that specialises in electric powered scooters for sale into fast growing international markets.
It has targeted and penetrated Business to Business Enterprise (B2B) markets in a short timeframe.
A lower cost profile from a manufacturing base in China should support efforts in 2013 to target the Chinese market and spur higher sales in 2013/14.
Vmoto is now reaping the considerable benefits of the new management team that was assembled in 2011 to re-vamp the Vmoto business plan.
The Company has the look and feel of a high growth business that is very successfully penetrating the global electric scooter market that currently exhibits an annual compound growth rate of 9%. Break even was previously set at an annualised rate of 8,200 units of high end electric scooters and Vmoto.
The break even point could be improved by producing its existing high end E-Max series of electric scooter and low cost units for the newly established Original Equipment Manufacture (OEM) contract with PowerEagle.
The OEM contract agreement with PowerEagle is expected to reap 86 million from production of a total of 270,000 low cost units that are designed for the Chinese consumer market, and will be produced from 2013 to 2015.
An additional OEM contract has been completed with E-Tropolis of Germany that will result in the production of a minimum of 15,000 high end electric scooters that will be sold in Europe - from 2013 to 2015.
The E-Tropolis contract is valued at 24 million and when added to the Power Eagle contract could produce total revenues of:
- 1.90 million in 2012
- 14.98 million in 2013
- 29.42 million in 2014
- 64.02 million in 2015
(This assumes that the value of the scooters is averaged out over the life of both terms).
Vmoto reported sales of 4,300 scooters to 30 June 2012. Since then it has aggressively expanded its network of distributors to now include 27 countries.
This will underpin increased sales from both consumers and fleet buyers with potential to boost total revenues from all sources tenfold by 2015.
Although not without risks, including ongoing access to funds to support expansionary objectives and development risks, Vmoto looks to have significant wind in its sail " capable of executing on its business model.
At lower production volumes, the group is not yet profitable. Breakeven point is pegged at 8,200 of its own high end Vmoto / E-Max units per annum.
Profitability is forecast in 2013/14.
The feature that differentiates Vmoto is its ability to couple chic Italian design with German engineering and low cost Chinese manufacturing capabilities. The Chinese factory has substantial capacity, of 150,000 " 300,000 units (depending on model), with scope for further expansion.
We have placed a target share price of 3.5 cents for Vmoto based on a 2013/14 target Price to Earnings multiple of 12.0 times, which reduces to 10.0x in 2014/15.
This provides potential for a quantum increase in the valuation from current share price for a company with a fascinating "green" journey.
Share Price: 0.021
Issued Shares: 896.09M shares
Market Cap: 17.92M
Cash: 1.83M (Dec Qtr 2012)
BACKGROUND " CRTICAL MASS ACHIEVED FOR STRONG GROWTH
In 2011 Vmoto completely restructured its management team with the appointment of Charles Chen as MD, Kai Jian Chen as Non-Executive Director and Ivan Teo as CFO (now Finance Director), and who are all based in China and are well versed in the manufacture of scooters.
Additional hires included George Hou to manage the Nanjing Manufacturing facility and Michael Fulton who has well rounded experience in the international sale and marketing of scooters.
Patrick Davin who is the founder of the Vmoto brand and concept remains with the Company as head of strategic planning.
Management also shifted focus from fuel driven scooters to concentrate on the production of high end electric scooters with the purchase of E-Max Electric Scooters of Germany.
This allowed Vmoto to couple chic Italian design with German engineering and low cost Chinese manufacturing capabilities that the Company owns in Nanjing and has the capacity to produce up to 300,000 scooters per year.
The Company specialises in the production and sale of high quality electric scooters under the Vmoto brand that is AIMed at the value market in Asia, and the E-Max brand that targets Western markets with premium products along with production on an original equipment or "OEM" basis that includes the massive deal to manufacture up to 270,000 electric scooters for Power Eagle.
Vmoto is the top selling brand of European electric scooter and has established marketing and distribution facilities in Barcelona, Spain, and opened a new facility in Germany to capture growth in one of the world's fastest growing scooter markets.
Annual revenue from global distribution in 2012 was reported at 8.2M and strong growth is expected from the "electric revolution" that covers both individual consumers and large scale fleet sales such as the potential to provide Correios of Brazil with 7,000 new electric scooters. Numerous other global opportunities are under trial that include postal services, courier and delivery services, fast food delivery and government fleets.
Vmoto's receipts from customers during the December 2012 quarter increased by 31% in comparison to the previous quarter mainly due to receipts from PowerEagle for scooters produced and delivered.
Operating cash flow for the quarter saw continued investment in working capital, predominantly due to the continuing build up of stocks required to fulfil the orders from PowerEagle.
However, such investment was still at a lower level than incurred in the prior three month period.
As at 31 December 2012, the total operating facility drawn down was RMB26.9 million (approximately AUD4.2million) and the total undrawn operating facility was RMB7.1million (approximately AUD1.1million).
In January 2013, the Company repaid RMB13million (approximately AUD2million) and drew down RMB13million (approximately AUD2million) from its operating facility.
DIRECTORS AND SENIOR MANAGEMENT TEAM
Simon Farrell was recently appointed as Non-Executive Chairman. He has over 30 years' experience in private and public corporate business especially in the mining industry at senior management and board level, principally in the areas of finance, marketing and general management. He was previously managing director of ASX and AIM listed Coal of Africa which he was responsible for growing to a market capitalisation of more than 1 billion. He holds a BCom degree from the University of Western Australia and an MBA from the Wharton School at the University of Pennsylvania. He is a Fellow of both the Australian Society of Accountants and the Australian Institute of Company Directors. Mr Farrell currently resides in London and has very strong relationships with brokers and fund managers in the UK.
Charles Chen serves as Managing Director and Executive Director. He founded Freedomotor Corporation in 2004 that was subsequently acquired by Vmoto. He holds a Bachelor of Automobile Engineering from the Wuhan University of Automobile Technology in China and a postgraduate Diploma of Business Administration from South Wales University the UK. He held senior executive roles with Hainan Sundiro Motorcycle Company from 1993 to 2002 prior to its acquisition by Honda in 2001, and is currently based in Nanjing China where he is responsible for the management of Vmoto operations within that country.
Oliver Cairns serves as Non-Executive Director that is based in Perth, and has over 13 years of experience as a corporate advisor to small mid-cap corporate entities. He worked with Blue Oar Securities and was a corporate financier and Nominated Adviser for several resource and industrial companies that listed on AIM in London, and established Pursuit Capital which focuses on the capital requirements and strategic planning of junior international companies.
Kai Jian Chen serves as Non-Executive Director and has extensive experience in the motorcycle manufacturing industry in China. He was formerly the VP of Hainan Sundiro which was the second largest motorcycle manufacturer in China, VP of Changzhou Supaigi E-Vehicle Co, and currently serves as VP for Xinri E-Vehicle Co Ltd which produced 2M electric bicycles and scooters in 2010 for the Chinese domestic market.
Ivan Teo serves as Finance Director, is a Chartered Accountant with over 10 years of experience in corporate finance, audit and business advisory, is fluent in English, Mandarin and Cantonese and is based in Nanjing, China.
Patrick Davin is president of Strategic Business Development and was previously the owner and creator of Vmoto which he established in 1999 after a long term association with Chinese commerce and industry. He has relocated to China where he is personally involved in the daily operations of the Company and its strategic growth pathway.
Michael Fulton is the International Sales and Marketing Manager and has 5 years of experience in international marketing, sales, and distribution networks for electric scooters. He was previously the joint owner and Commercial Director of Baroni EV's Ltd which was the first company to introduce electric scooters in the UK, USA and New Zealand markets.
George Hou is General Manager of the Nanjing Manufacturing Facility and has a Bachelors Degree in Motor Vehicle Design and Manufacturing from Wuhan University of Technology. He has over 17 years of management experience in electric vehicle, scooter and bicycle manufacture.
SHAREHOLDING AND FUNDING
The Directors control 5.8% of the issued shares, and other major holders include Pershing Australia Nominees with 7.8%, Bin Wu 4.2% and Patrick Davin 3.3%.
145.4M options are listed that are exercisable at 0.04 by 31/12/2014,and 23.2M unlisted options are exercisable at 0.025 - 0.09 from 2013 " 2015. An additional 20.0M Incentive performance rights have been issued to senior management that must reach performance benchmarks from 2013 " 2015 or be cancelled.
The company reported 1.8m cash and 1.1 undrawn bank operating facility as at 31 December 2012.
Receipts from customers increased during the December 2012 by 31% to 2.7 million in comparison to the previous quarter. This was mainly due to receipts from PowerEagle for scooters produced and delivered.
THE GLOBAL ELECTRIC SCOOTER MARKET
Pike Research is a market research and consulting team that provides in-depth analysis of global clean technology markets. Pike predicts that global sales of e-motorcycles and e-scooters will reach an annualised rate of 18.6 million units by 2018.
This will be driven by demand from postal services, courier and delivery companies, and government fleets, with China constituting 81% of the overall market.
E-motorcycles and e-scooters will become one of the biggest growth markets in the motorcycle industry, with demand driven by incentives to reduce emissions, lower costs, and will be assisted by improvements in battery technology that provide longer driving range and better re-charging ability.
Vmoto POSITION IN GLOBAL MARKET - RANKED AS TOP 5 FIRM
Vmoto has the widest global distribution network of any e-scooter manufacturer and is at the forefront of the "electric revolution" for this type of transport.
It has a global network of customers and distributors located in 27 countries, and over 110 employees that are spread across Australia, China and Europe and led by an experienced and established management team.
Pike Research confirms that Vmoto is ranked as a "Top Five" performer within the e-motorcycle and e-scooter industry that is driven by a strong dealer network in Western Europe that is developing consumer and fleet markets. It is positioned to manufacture quality product that can effectively compete on cost in Asian Pacific markets.
Market leaders in the petrol scooter sector are Piaggio and Vespa.
Vmoto owns a Chinese manufacturing facility that is located in Nanjing, China within a special economic and industrial zone for the manufacture of small vehicles.
Vmoto maintains excellent relationships with local and government authorities and operates under its own manufacturing license.
The facility currently comprises over 30,000m of useable factory space that includes an area for research and development and a centralized production line that has annual capacity to produce up to 300,000 scooters and was valued at A8.3 million in January 2011.
The plant is strategically located close to quality parts suppliers, and is surrounded by infrastructure that includes a nearby world class deep water and container port.
Vmoto ATTAINS "CRITICAL MASS" AND ORDERS SKYROCKET
The management re-structure of Vmoto that took place in 2011 has successfully developed the business to the point where it has achieved critical mass, and is now generating a cascade of sales orders.
The immediate focus of the business is to grow sales in China. This has been achieved with the recent OEM agreement with Power Eagle which is a major Chinese producer of over 50 different electric bicycles, scooters and motorcycles. Power Eagle sells into in China, as well as exported to many countries.
This OEM agreement is expected to generate 86 million in sales through to 2015. This is from the production of 270,000 scooters over this term.
Vmoto has already delivered 6,300 units in the December quarter of 2012, and will accelerate production in 2013 to 42,000 scooters. In 2014, this will increase to 72,000 scooters in 2014 and 150,000 scooters in 2015 - at a monthly production rate of 12,500 units.
GREEN MARKET FOCUS IN EUROPE
Vmoto is also focused on the European market due to EU directives and incentives that are AIMed at the reduction of emissions, and a move to more "greener" and more environmentally friendly transportation solutions.
The focus on the B2B sector has gained "blue chip" clients along the way.
European sales, marketing, technical support and spares are handled from a facility established in Barcelona, Spain.
The Company is also aggressively courting direct fleet sales from market leaders such as:
- E.On which is Europe's largest utility company that has placed scooters in the Czech Republic and Sweden;
- Louwmann Group of the Netherlands - a major importer and automotive retailer;
- National Postal Service of Spain "Correos";
- Newspaper delivery company DAO of Demark,
- TNT Post of Italy;
- Finland Post along with additional sales into Italy, Monaco, Netherlands, Slovenia and Croatia.
In November of 2012 Vmoto, secured an OEM contract with E-Tropolis which is a prestigious German e-scooter company that owns the top selling brand in Germany and Italy.
The deal will cover production of all 3 E-Tropolis scooter models for a minimum of 15,000 units over 3 years, and will generate 24 million in revenues from 2013 " 2015.
Additional benefits to Vmoto will include growth of sales into European and global markets, and synergies between the two companies that include research and development of new scooter technology.
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