Diamond Equity Research Initiates Coverage on ElectraMeccanica Vehicles Corp. (OTCQB: ECCTF) with a Valuation of $10 Per Share

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Accesswire 20-Nov-2017 9:30 AM
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NEW YORK, NY / ACCESSWIRE / November 20, 2017 / Diamond Equity Research, a leading equity research firm with a focus on micro capitalization and small capitalization public companies has initiated coverage of ElectraMeccanica Vehicles Corp. (OTCQB: ECCTF). The in-depth 23-page initiation report includes detailed information on the ElectraMeccanica's business model, services, industry, valuation, management, and risks.
The full research report is available here. Highlights from the report include:
Large Market Opportunity
Electric vehicles, although around for a while, have only recently begun to gain wide acceptance. Discussions around GHG emission levels, government and international policies and improved battery management systems boosting range have finally increased public interest in electric vehicles. We view the company as ideally positioned given its factory and showroom locations to secure a large market share in the growing Canadian electric vehicle market. Data from FleetCarma.com, a clean technology information and technology website reported 2015 EV sales in Canada to be 6,933 in 2015, a 32% increase in sales from 2014. Tesla's Model S has made large gains, growing its sales 137% year over year. We expect EV vehicle sales to continue experiencing strong top line growth in the coming years.
Expanding Order Book and Purchase Price Value
ElectraMeccanica (OTCQB: ECCTF) announced $1.604 billion (CDN), approximately $1.267 billionU.S. dollars, in anticipated purchase price value* as of 09/14/2017. The combined retail and corporate orders are for 19,485 SOLO electric vehicles and 24,202 Tofino electric vehicle models. These vehicles offer an affordable alternative to consumers within the high growth electric vehicle market. We expect the company's purchase price value to increase as it further expands its marketing effort.
ElectraMeccanica Should Not Be Compared to Traditional Automobile Manufacturers
We believe ElectraMeccanica cannot be compared to traditional automobile manufacturers, which trade at significantly lower trading multiples because of their lower top line growth. General Motors (GM) trades for approximately .8x Enterprise Value to Sales, with their revenue projected to decrease over the coming years, as they seek greater profitability. We note a key advantage of Tesla over smaller companies such as ElectraMeccanica has been its extensive relationships with investors, allowing Tesla to attractively tap equity and debt markets as needed as it pursues profitability. As an early stage company and with a cash balance and working capital surplus of $1,588,772 and $926,324 respectively as of the second quarter of 2017, financing is a key risk factor for ElectraMeccanica. Tesla currently trades for 4.94X enterprise value to revenue on its 2017 consensus estimated revenue, which is a significant premium to other automotive companies. If ElectraMeccanica can achieve the strong top line growth management is expecting, our valuation indicates there is significant upside for current shareholders. Similar to Tesla, Snap Inc. (SNAP) and Amazon (AMZN) and other high growth equities, we believe the market will allow ElectraMeccanica to not be profitable over the short-term, as long as the company is exhibiting strong top line growth and capturing market share.
Attractive Valuation
Given the uniqueness of ElectraMeccanica's business model and the limited number of public companies to compare it to, we built a standalone discounted cash flow analysis in order value the business and performed comparable company analysis. Given ElectraMeccanica has a limited operating history, we built a bottom-up model to value the business projecting the sales of their three current vehicles: SOLO, Super SOLO, and Tofino. Our model indicated a fair value per share of $10, significantly above current trading levels. For comparable company analysis, we screened for public companies with extremely high projected top line growth similar to ECCTF. Specifically, we tried to focus on technology and renewable energy businesses. We selected Tesla, Vivint Solar Inc. (VSLR), Snap Inc.(SNAP), Ag Growth International (AFN), Revolution Lighting Technologies (RVLT) and Adomani (ADOM). These companies were chosen because of their strong top line growth and cutting-edge focus on innovation and design processes. Using the average peer group forward-looking enterprise value to revenue multiple of 4.6X and projected 2018 revenue for ECCTF, we arrive at a per share value of $9. Our valuation model indicates significant upside from current trading levels if ECCTF trades in line with other high growth public companies. We acknowledge the difficulty of comparing ElectraMeccanica to any other public company other than Tesla and the limited sample set of public electric vehicle companies.
About ElectraMeccanica Corp.
ElectraMeccanica was incorporated on February 16, 2015, under the laws of British Columbia, Canada. The company is engaged in the planning, development, and manufacturing of single person electric vehicles. ElectraMeccanica is not a typical start-up in that it is building its operations in collaboration with well-known coach builder, Intermeccanica. InterMeccanica has more than 57 years of automobile production experience and has produced award-winning and high quality reproductions of Porsche Speedsters and Roadsters. ElectraMeccanica's reliable, efficient battery electric technology and expertise in automotive technology have combined to produce the SOLO, the company's flagship electric vehicle. The company currently trades on the OTCQB under the ticker ECCTF, but recently filed an application to have its shares listed on the NASDAQ Capital Market.
For more information, visit www.electrameccanica.com.
About Diamond Equity Research
Diamond Equity Research provides institutional, quality research to emerging growth companies that are undercovered and undervalued. Diamond Equity Research is an approved sell-side provider on premiere institutional investor platforms including Factset, Morningstar, and Thomson One. The founder, Hunter Diamond, CFA, brings extensive experience working as a research analyst and investment banker focused on emerging growth companies. Hunter Diamond, CFA holds his Bachelor of Science and Master of Business Administration from Cornell University. The firm is headquartered in midtown Manhattan.
For more information, visit www.diamondequityresearch.com.
Disclosures:
Full disclosures pertaining to this report can be found in the report at diamondequityresearch.com. ElectraMeccanica Corp. has paid for this report as company sponsored research, which is meant to subsidize the high cost of creating the report and monitoring the security, however the views in the report reflect that of Diamond Equity Research. Diamond Equity Research LLC is being compensated by ElectraMeccanica Vehicles Corp. for producing research materials regarding ElectraMeccanica Vehicles Corp. and its securities. Payment is made in cash and is billed one time and upfront for an annual subscription. As of 11/20/2017 the issuer had paid us $17,500 for our services, with services commencing on 10/13/2017. Additional fees may have accrued since then. For a full list of risk factors to investing in ElectraMeccanica, read the latest quarterly and annual SEC filings.
Contact:
Hunter Diamond, CFADiamond Equity Researchresearch@diamondequityresearch.com
SOURCE: Diamond Equity Research