Sunday, 18 October 2020

VivoPower is the Best of the Electric Vehicle Hype Companies

VivoPower International PLC (VVPR)
Current Price: $8.95
Target Price: $40.00
Upside Potential: 347%
Market Cap: $148 million
Shares Outstanding: 16.5 million
Float: 5.8 million

On October 9, VivoPower International PLC (VVPR) rocketed to $24 on over 100 million shares traded after acquiring a 51% stake in a light electric vehicle company.  The stock has pulled back to $8.95 after announcing an equity offering priced at $8.50. That shook out the initial retail day traders and the stock is ideally positioned to move back up. VVPR compares extremely favorably to other electric vehicle companies that have moved to extremely aggressive valuations on little evidence of revenue. A $40 stock price would lead to a market cap of less than $700 million, a price that we believe is fair compared to these industry peers. We are up to 924 followers despite not giving out a lot of alerts, a fact that we think is indicative of a successful, diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel as well as follow our Small Caps, Big Gains blog where we put up our Canadian picks. You can also follow us on Twitter @StockTradePicks which has over 4,600 followers.

The press release:

LONDON, Oct. 09, 2020 (GLOBE NEWSWIRE) -- VivoPower International PLC (Nasdaq: VVPR) (“VivoPower”) – an international battery technology, electric vehicle, solar and critical power services company is pleased to announce that it has signed a definitive agreement to acquire a 51% shareholding in Tembo e-LV B.V. (“Tembo”).

Tembo is a Netherlands-based specialist battery-electric and off-road vehicle company with global sales and distribution channels across four continents. It services a diverse range of sectors – from mining, infrastructure and utilities to government services, game safaris and humanitarian aid – by providing customized light electric vehicles, often for rugged applications.

The purchase consideration will be USD$4.7 million, and VivoPower will have the option to acquire the remaining 49% of Tembo in the future. The transaction is subject to customary closing conditions including capital structuring and funding mix requirements.

Tembo generated USD$2.3 million in revenue (unaudited) for its fiscal year ended December 31, 2019.

Based on an analysis of publicly available industry data, the Company estimates that the potential global addressable market for commercial fleet electric vehicles could be at least USD$36 billion within the markets in which Tembo is currently active (which presently do not include the United States, Asia or South America).

“We look forward to working even more closely with the Tembo team in scaling up its capacity to deliver customized and/or ruggedized commercial fleet electrification solutions. Furthermore, this acquisition will enable VivoPower to accelerate the roll out of our sustainable energy solutions offering, with an initial focus on the mining, infrastructure and utilities sectors globally,” said Kevin Chin, VivoPower’s Executive Chairman and CEO.

VivoPower and Tembo have over 700 active customers combined, many of which are in the mining, infrastructure and utilities sectors.

“VivoPower’s investment will allow Tembo to build additional capacity to meet pent up demand from our customers and improve efficiencies of scale. Given that the Tembo and VivoPower teams have already started working together on customer-initiated requests for proposals, we believe that this will translate into a growing order book,” said Tembo founder and CEO, Frank Daams.

Tembo generated $2.3 million in revenue in 2019. In comparison, Electrameccanica Vehicles Corp. (SOLO) has a market cap of $219 million and has revenue of only a few hundred thousand each year despite a several year expectation of production and sales of its three-wheeled city vehicles. SPI Energy Co., Ltd. (SPI) merely announced the EdisonFuture electric vehicle subsidiary and signed a framework for development with a Chinese manufacturer and has a $156 million market cap. While SPI has existing solar revenues, revenue growth has been going deeply in the wrong direction. SPI's revenues were $98 million in 2019, down from $126 million in 2018. The net loss increased to $15 million in 2019. Workhorse Group Inc. (WKHS) has a market cap of nearly $3 billion despite revenues being less than a million a year. Nikola Corporation (NKLA) has a market cap of over $7 billion despite being a startup that is more than a year away from any revenues. 

VVPR, like SPI, also has an existing solar business. But unlike SPI, these revenues and net loss figures have been trending in the right direction: 


The quarter ended June 30, 2020 saw nearly $14 million in revenue, an increase of 49% and putting it on an annual run rate of $55 million. The net loss is down to about $1 million to $1.5 million per quarter. With the revenue expected from the acquisition of Tembo and the synergies of the 700 combined customers, strong revenue growth should continue and cash flow positive results are within reach. If that is achieved, that leaves the company in a position where it doesn't need to keep financing and has a share count of only 17 million and a float much smaller than that. In a hot industry, that is a situation ripe for a major run. 

Given how far advanced VVPR is relative to SOLO and SPI, it should clearly trade at a higher market cap than either of those companies. And given how it is trading at less than a tenth of other startups like WKHS and NKLA, a $700 million market cap is a reasonble starting point. 

Disclosure: We are long VVPR


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How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology

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