Aptera Motors Corp. (SEV) research, news, and more from GeoInvesting

Company description

Tue, 07 Feb 2017 14:43:44 GMT

Sevcon, Inc., through its subsidiaries, designs and sells motor controllers under the Sevcon name in the United States, the United Kingdom, France, South Korea, Japan, and China. It operates in three segments: Electronic Controls, Capacitors, and Battery Chargers. The Electronic Controls segment produces and sells microprocessor based control systems for use in on and off-road vehicles, including cars, trucks, buses, motorcycles, fork lift trucks, aerial lifts, mining vehicles, airport tractors, sweepers, and other electrically powered vehicles. The Capacitor segment produces and sells special metalized film capacitors to electronic equipment manufacturers for use as components in the power electronics, signaling, and audio equipment markets. The Battery Chargers segment designs, manufactures, and sells battery chargers to electric vehicles, power management, and uninterrupted power source systems for industrial, medical, and telecom applications, as well as electronic instrumentation for battery laboratories. Sevcon, Inc. was founded in 1987 and is based in Southborough, Massachusetts.

Research

Mon, 17 Jul 2017 15:46:28 GMT

SEV ($13.68) signed a definitive agreement to be acquired by BorgWarner for $22.00 per share, a 64% premium to Friday’s closing price. In early February 2017 when the stocks was trading at $13.50 we highlighted a huge contract win the Company announced where management's comments inferred the Company may be on the verge of reversing its historical pattern of lackluster growth.

We believe it's worth noting that legendary investor Mario Gabelli of GAMCO Investors who held a stake in SEV also holds a stake in EML ($30.35). Mario Gabelli owns a 16.6% of EML through several of his entities. Gabelli was one of the activists who lit a fire under SEV’s management. You can see our full summary of EML in our March 28, 2017 article titled, “Industrial Goods Company May Prove That Boring Can Be Beautiful.”

Research

Tue, 07 Feb 2017 16:33:14 GMT

SEV ($15.69) - Yesterday, we briefly discussed that a huge contract win sent SEV shares exploding 50% last Friday. Shares tacked on another 16% in yesterday’s trading session. We referenced management quotes that inferred that the company may be on verge of reversing its historical pattern of lackluster growth.

In 2005, the company reported $31.6 million in sales and $0.20 EPS. As you can see from the table below, growth has not been spectacular since 2005. However, the last two years marks the first time the company has broken above the $40 million top line range. The large losses over its last 3 quarters have resulted from the company increasing its spend on R&D and personal to pursue new growth opportunities in the EV and battery power markets.

The company operates in three business segments

The Electronic Controls segment produces and sells microprocessor based control systems for use in on and off-road vehicles, including cars, trucks, buses, motorcycles, fork lift trucks, aerial lifts, mining vehicles, airport tractors, sweepers, and other electrically powered vehicles. 70% of Sales

The Capacitor segment produces and sells special metalized film capacitors to electronic equipment manufacturers for use as components in the power electronics, signaling, and audio equipment markets. 3% of sales
The Battery Chargers segment designs, manufactures, and sells battery chargers to electric vehicles, power management, and uninterrupted power source systems for industrial, medical, and telecom applications, as well as electronic instrumentation for battery laboratories. 27% of sales

After more research, it looks like strong profitability won’t happen until at least 2018. The company’s capital spend and it’s hiring of engineers is intended to aggressively pursue customer opportunities in the EV and Power Generation markets. The company is doing this by investing in its own infrastructure, building new relationships with companies playing in the EV market and retooling its current customers’ infrastructures. The company will still face challenging market conditions as it prepares for new growth.

2016 Year End Conference Call Notes

“In summary we are fully aware of our prospects as we enter 2017 but we expect challenging conditions this year, we expect to see an uptick in our on-road business as a result of our strong project pipeline.”

“Of course investing in the future ahead of revenues has a significant effect in the short-term profitability and that is a major factor behind our loss for the quarter and for the year. We believe the payback for these investments although a few years away will be substantial.”

Serving huge market opportunity

Vehicle to Grid (V2G) and Vehicle to Home (V2H) technologies.
Overall growth in EV

Building Long term revenue visibility

The WIldcard

SEV is serving a hot industry segment which could lead to shares going on a silly “TSLA” induced momentum run regardless of value. It is not inconceivable that given the current company’s project pipeline and $500 million in projected future revenues that its realizable revenue pipeline could approach one billion soon. Furthermore, some of the infrastructure markets that were hurting the business could get a “Trump” boost.

Caveats

Underfunded Pension
Going to probably continue to lose money in the short term
Capital raise risk
500K warrants
Could possibly attract short articles/hit pieces

See these articles for more color on the SEV Story

Seeking Alpha article discussing new project
Telegram.com talking about the role of activists

Research

Mon, 06 Feb 2017 16:43:45 GMT

SEV ($13.51) - We have been tracking SEV for several years, witnessing management’s failed attempts to drive consistent top and bottom line growth. This eventually resulted in a proxy battle that effectively dismantled the Board of Directors. Proxy battles can sometimes be a precursor to positive operational developments since they can lead to:

Directors that move swiftly to work harder due to fear of losing their jobs (i.e. they are now “on notice” that shareholders may want them out)
New Board nominees put forth by activists that may have a method for unlocking shareholder value.

Shares of SEV rocketed higher in Friday’s trading session on the announcement that it had won a substantial contract for automotive drivetrains.

“Sevcon had been working with the customer throughout 2016 to help optimize the drivetrain for the project. Sevcon will now develop an inverter based on its existing Gen5 technology. Start of production is expected to be in the fall of 2018. Over the initial three-year production period, revenues are likely to total in the range of $150 to $200 million.”

With TTM revenues of $50 million this contract is a game changer for the Company. Shares jumped 51% on Friday and were marked up 5% in pre-market trading today.

More interestingly, we took a look at the the company’s fiscal 2016 year end press release which could imply that several more shareholder friendly news releases could be in the cards.

“During fiscal 2016 we expanded our extensive on-road project development pipeline, which we expect to result in significant future production opportunities and substantial revenue and profitability growth,” said Sevcon Chief Executive Officer Matt Boyle. “We have more projects in the pipeline than ever before and we expect that customer enthusiasm for Sevcon’s capabilities will continue. Two of the major projects in our pipeline are expected to go into production in 2017, one in 2019 and one in 2020. One manufacturer of luxury high-performance sports cars has nearly doubled the Sevcon content on its program scheduled for production in 2020. This demonstrates the success of our investments in engineering to provide high quality solutions for some of the world’s largest vehicle manufacturers. In the last fiscal year we added 42 more engineers globally, which represents an 82% increase in engineering headcount alone. We attract and retain engineering talent through successful delivery on projects, and we expect that momentum to continue as a result of our planned investments.

“We are bullish about our prospects as we enter 2017. While we expect challenging conditions in traditional, industrial markets this year, we expect to see an uptick in our on-road business as a result of our strong project pipeline. In fact, we now have six milestones to accomplish on our major projects between now and the end of fiscal 2017, with the first targeted for the current quarter. As we look even further out, our project pipeline and the market demand for electrification solutions provides us with significant opportunity for growth,” concluded Boyle.

Even though SEV is losing money, it appears that profitability is around the corner. Thus we are tracking it closely.