VMT 5.26% 45.0¢ vmoto limited

Global motorcycle boom

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    Back on the 16th of July, the share price of this company enjoyed a significant bounce on the back of high volume,  marking the start of the recent upward run north of the 0.400 level. Shortly afterwards, Footmax posed the question as to whether there was anything substantive behind this move, and this question has been at the back of my mind over the past couple of weeks.

    It would be easy to simply attribute the share price gains on that day and successive days to groups of trend-chasing momentum traders, as you'd have to assume that by now traders would have noticed that this stock has started to hit new multi-year highs.

    However, it does seem that there may be something more concrete underpinning the recent upsurge in buying activity.

    Over recent weeks, a few of the motorcycle websites have featured reports highlighting the substantial rebound in two-wheeler sales worldwide that has taken place following the easing of the coronavirus-imposed lockdowns.

    Below is an extract from one such report, this example taken from the RideApart website:

    ...For several manufacturers, between suspended production and customers shying away from the dealers, the months of April and May 2020 have been challenging to say the least. Thankfully, with life gradually resuming, so are sales, and the numbers are bouncing back.  

    An increasing number of people and publications suggest that the pandemic will encourage more people to turn to motorcycles and scooters for transportation—the perfect type of commuter for social distancing.

    In the U.S., buyers didn’t waste any time running for the hills—literally—as soon as COVID-19 poked its ugly head. Honda, BMW, Suzuki, and Yamaha’s North American branches reported that sales are thriving since the beginning of the year, particularly in the off-road segment. For instance, American Honda Motor Co. confirmed that motorcycle sales for May 2020 have more than doubled over May 2019—both in the road and off-road segments (+103% and +172% respectively). For BMW North America, while official sales numbers were not disclosed, the spokesperson did say that May 2020 sales were far exceeding last year’s...

    Of more direct relevance to this company, the report then goes on to note that a similar rebound has taken place in Europe:

    ...The European market is showing a similar, positive trend. Italian sales numbers for June 2020 show a 37-percent increase over June 2019—not even over the catastrophic month of May 2020. More bikes and scooters sold in Italy post-pandemic than last year, back when nobody had even heard of a coronavirus. A total of 39,085 motorcycles, scooters, and mopeds have been registered in Italy in June.  

    While sales in the U.K. weren't impervious to COVID-19, they easily caught up and surpassed their June 2019 levels by 14.3 percent. While riders in the U.S. showed a preference for dirt bikes, in the U.K., scooters were all the rage with sales up by 43 percent year over year...

    The jump in scooter sales in the UK in June sounds promising, however the surge in registrations in Italy over the same month is perhaps more propitious.

    As was highlighted by one poster here last month, the Italian government is offering citizens subsidies subsidies of up to €500 for purchases of bicycles or electric scooters, and thus it is reasonable to assume that a healthy proportion of the 39,000 two-wheelers sold in Italy in June would have been electric models. Perhaps the CPX might be proving even more popular in Italy than in France.

    We know from the registration numbers in France that a few Super Soco models were top-sellers in that country in May and June, and the passage above indicates that sales will be strong in Italy as well, suggesting we might have two major European markets in the bag.

    In addition, there is reason to believe that European electric two-wheeler sales will remain buoyant for the remainder of the year.

    I noticed earlier this month that the Tapei Times published an interview with Ko Chun-ping, the Chief Executive Officer of Kwang Yang Motor Co. This company is a competitor to Vmotosoco, distributing scooters in Europe which are solde under the KYMCO brand.

    One of the questions asked relates to the impact of the pandemic situation on sales, and the CEOs comments in relation to Europe perhaps provides a hint as to why Charles seemed to be in an ebullient mood in the AGM:

    ...Orders from European markets have recovered lately as some countries are reopening their economies gradually, as infections are under control. Currently, Spain, France and Italy are our top markets in Europe, and we are seeing orders from European markets rebound and approach normal levels. In particular, orders this month have surpassed those we received during the same month last year. Looking ahead, we are positive about the outlook for European markets as scooter distributors and shops need to buy environmentally friendly scooters in preparation for the implementation of new European emission rules that are to take effect in January next year. Therefore, we expect our employees to have to start working overtime in the second half of the year, which has been the norm for us for years...

    All things considered, there is reason to suspect that the jump in the VMT share price over weeks might be not be purely trader-driven. Motorcycle sales have been upbeat across a swathe of countries around the world in June, a trend which has been highlighted by some of the motoring websites in recent weeks.

    In addition, that comment by Ko Chun-ping in the Taipei Times interview suggesting a possible stock-up by scooter distributors in Europe later this year indicates that we should expect to see an upbeat forward guidance in the soon-to be-released VMT market update.
    Last edited by Inchiquin: 29/07/20
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