Dave Hammond | Optimac.ca | February 9, 2016: GreenPower Motor Company Inc. (TSXV: GPV, OTCMKTS:GPVRF) is a Vancouver, Canada, based public company, which was founded in 2010 and began sales and marketing activities in 2014 for its new line of zero emission All-Electric Plug-in (“AEP”) long-range transit and school buses in North America.
In this note we hone in on GPV’s upcoming foray into the Canadian marketplace, with the delivery of North America’s first ever, all-electric plug-in (AEP) double decker bus. In transportation circles of influence, this unveiling is certain to garner serious attention, and where one bus sells, we think more will follow. We introduce the idea of a domino effect, specifically by taking a look at BC Transit and potential for ongoing double decker sales.
We have updated our model to reflect the $3M financing that closed in Dec ’15, use of proceeds being primarily to fund production. GPV already has 24 buses under LOI’s, which lines-up nicely toward our 40 bus base case scenario, and handedly suggesting a profitable year ahead. Our ‘16E to ‘18E sales estimates are unchanged from our Nov 4th ’15 report, however we have adjusted our FX assumption (CAD:USD from 1.30 to 1.40), having a positive impact on our forecasts. Overall we continue to have a bullish view for all-electric plug-in buses globally, and we believe GPV is the best small cap pure play for exposure to this emerging and disruptive technology in North America.
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| Highlights – In This Report | Key Catalysts |
| · Deal #1 into CAD – We believe a double decker is now on the assembly line with expected delivery in Q2/16 (Victoria, BC); after a 1-yr trial we could see this partnership with the Greater Victoria Harbour evolve | · Delivery of the Victoria Double Decker; expected in Q2/16; already seeing lots of press on the subject of BC Transit and potential for moving toward clean bus solutions |
| · In CAD, we think BC Transit could be next. With a near 900 bus fleet, of which ~10% are aging high capacity diesel powered double decker’s and BC Transit plans to renew ~half the fleet inside 5 years (no doubt eyeing clean alternatives); GPV’s deal in Victoria will garner serious attention | · General ops update to shed light on other buses in production, corporate initiatives, potential USA and/or Canadian grant/subsidy programs, etc; Q1/16E |
| · We have adjusted our model to reflect Dec ‘15 $3M financing (at $0.35) to fund production; and we have adjusted our FX assumption to reflect strengthening USD, having positive impact on our forecasts (CAD:USD from 1.30 to 1.40) | · Purchase Order(s)/LOI’s – finalize existing LOI’s and at any point we could see announcements re. new business (we think GPV’s sales pipeline for ‘16/’17 is easily in the 100’s of buses) |
| · ‘16E Sales on-track with 24 buses and counting – provided LOI’s convert, this surpasses our 20 bus downside scenario (see Nov 4th report), and lines-up nicely toward our 40 bus base case | · Qualify under ‘Buy America’ – could see an update re. establishment of a production/final assembly arrangement or facility in USA to qualify for Federal grants under ‘Buy America’ provisions |
| Forecasts | 2015E | 2016E | 2017E | 2018E |
| Buses Sold/Delivered | 1 | 40 | 90 | 150 |
| Revenue ($CAD) | $1.2M | $25.2M | $55.4M | $87.9M |
| EBITDA | ($2.1M) | $1.2M | $4.3M | $7.4M |
| FD EPS | ($0.03) | $0.01 | $0.04 | $0.07 |
| Valuation | ||||
| EV/Sales | 23.4x | 1.1x | 0.5x | 0.3x |
| EV/EBITDA | -13.1x | 22.8x | 6.3x | 3.7x |
| EV/Unit Sold & Delivered | $27.1M | $0.7M | $0.3M | $0.2M |
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