What’s the real EV story that’s going unnoticed?
21st July 2022 |
When you hear the words “electric vehicle” (or letters EV), what springs into your mind?
Tesla?
If so, you’re probably missing a bigger EV story.
On the other side of the world, a mysterious yet monumental transition to EVs is taking shape, providing what we believe to be one of the biggest future opportunities for investors.
In parts of Asia, the EV landscape consists overwhelmingly of motorbikes and three-wheeled rickshaws, rather than swanky, electrified SUVs.
The hard numbers suggest that Asia’s EV transition is accelerating.
- Sales of electric motorbikes are projected to increase three to four times by the end of the decade.
- Asia now accounts for more than half of the world’s motorbike sales.
- In Thailand, 87% of households own at least one motorbike, dwarfing the 7% figure for UK households. After visiting Thailand this time three years ago, we can vouch for the fact that motorbikes are everywhere.
It’s worth understanding why Asia’s EV transition is speeding up.
According to prominent research group Economist Intelligence Unit, current macroeconomic conditions are conducive.
Disposable incomes in poorer areas of Asia, such as India and Southeast Asia, are typically low. This makes cars unaffordable for many.
This problem is being exacerbated by soaring fuel and food prices on the continent. For example, coal prices are five times higher than what they were a year ago. Natural gas prices are also ten times higher than last year. And with several Asian economies being heavily reliant on these imports, it’s their consumers’ pockets that are being squeezed the hardest.
This partly explains the ongoing economic crisis in Sri Lanka, where civilians have been queuing for miles for petrol.
With this in mind, owning a fossil fuel vehicle is not an option for Asian communities, leaving ownership of cheaper light vehicles as the only viable option to get from A to B.
Some of Asia’s largest motorbike manufacturers understand this opportunity and are starting to ramp up production of electric motorbikes. Yamaha and Honda are two companies who are now making their own EV motorbike models.
What’s more, a process called battery swapping is creating a more functional, efficient EV charging network in Asia.
In this instance, battery swapping is when a depleted battery is removed by hand from a light vehicle and replaced with a new, fully charged battery from a battery station.
Although they provide smaller ranges than conventional EV batteries, they’re a great fit for light vehicles. This is because the batteries can be quickly and easily removed from the vehicle system, whilst also requiring less energy to operate.
Taiwan-based EV Company Gogoro is seeking to become the “android of the electric motorbike world”. The company operates 2,200 stations across Taiwan, with its technology being ideally suited to Asia’s warm, wet weather.
Collectively, we believe current conditions in the Asian EV market give Saietta (LSE: SED) a strong investment case.
Saietta is an engineering company specialised in producing electric propulsion motors for the light EV market. Its axial flux technology (AFT) is adaptable to several modes of transport, including electric motorbikes, rickshaws and scooters.
The company’s target market is in Asia. In particular, it has a commercial partnership with Padmini VNA, one of India’s leading automotive suppliers.
We believe it’s only a matter of time before Saietta secures further commercial deals with Asian customers, as the continent continues to shape its very own EV story.
We reiterate our BUY recommendation on Saietta. You can find the original recommendation here. Remember to check the buy list for the latest advice here.
Buy list update
EQTEC (LSE: EQT)
EQTEC is a “waste to energy” company that converts waste into synthetic gas (syngas). The syngas is then used to power green energy appliances.
On 14 July 2022, EQTEC’s share price plunged 27.7% after the company completed a fundraising event, raising £3.75 million.
In the event, EQTEC issued 782 million new ordinary shares to investors and company directors. However, the shares were issued at a price of 0.50GBp per share, a significant discount to the 0.65GBp closing price the previous day.
To be clear, there is no action for you to take in light of this news.
Although a sudden drop in share price is never nice to see, and one that can bring cause for concern to investors, we actually believe it’s a positive for EQTEC.
EQTEC’s fundraising has provided it with necessary capital to help finance its waste-to-energy projects, and is a common strategy used by companies to drive future business growth. Notably, it will help to fund EQTEC’s collaboration with gas-to-liquid company CompactGTL, signed in July 2022. The project will see EQTEC deliver synthetic fuel from gases.
As a result, we’re hopeful the growth of this project, along with several others, can offset the temporary share price decline.
Another reason why we’re not deterred by the sudden share price drop is the fact that company directors subscribed for the new shares. Directors, including CEO David Palumbo, purchased a total of 37 million shares at the discounted price.
When company executives purchase shares, it is normally a good sign that they are optimistic about the future growth and profitability of their company.
In addition, on 18 July 2022, EQTEC revealed it has received Phase One planning permission for its waste recycling and anaerobic digestion facility in Southport, UK.
The Phase One plant will be capable of converting 80,000 tonnes of waste per year into six million cubic metres of biomethane, before being injected into the national grid transmission system.
On completion of Phase Two, which is the next step for EQTEC’s Southport facility, EQTEC would have ownership of the UK’s first fuel-to-syngas-to hydrogen facility.
We remain excited by EQTEC’s potential in leading the green energy transition across the UK and continental Europe.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
Aston Martin Lagonda Holdings (LSE: AML)
Aston Martin is a manufacturer of luxury cars.
The company has faced mounting financial pressures over the past year, with its debt level rising and share price tumbling.
In fact, Aston Martin’s debt costs £130 million a year in interest alone.
However, a reversal in Aston Martin’s fortunes looks a real possibility.
Last week, Saudi investment group, the Saudi Public Investment Fund (PIF), contributed £650 million of capital to help service its debts. Of this, £78 million in shares were bought by PIF, whilst also taking part in a £575 million rights issue, making it the company’s second largest investor.
Following this, the PIF will be entitled to two seats on Aston Martin’s board.
According to Aston Martin, the capital will help to give the company a “substantial liquidity cushion” and “accelerate future capital expenditure”.
From our point of view, the Saudi investment is a positive for Aston Martin and will help secure the financial future of the company.
We also believe the capital inflow will help it to boost the rollout of its EV models, as it adjusts to the green energy transition. We believe this could go a long way in helping Aston Martin boost long-term business growth. The company is hoping for its car fleet to be entirely electric by 2030.
Initially, the market reacted negatively to the news. On 15 July 2022, Aston Martin’s share price hit a yearly low of 351.17GBp during intraday trading.
However, its share price has since surged to 524.2GBp at the time of writing, a near 50% gain.
For now, there’s no action for you to take. We’ll keep a close eye on the latest developments with the PIF and will assess the long-term impact on the stock. Currently, we view the news as a positive for Aston Martin, and reiterate our BUY recommendation on the stock. You can find the original recommendation here.
The Frontier Tech Investor “Top Three”
Sometimes it’s hard to decide on which stocks to invest in from our buy list.
Below is our Frontier Tech Investor “Top Three” section showing three stocks in open BUY positions. If you’re trying to figure out what to invest in next, these are three that we think are a great place to start.
This doesn’t mean our other stocks are no good: this is just a tool to help you spot the next Frontier Tech Investor stock that could be worthy of your consideration.
Pod Point Group (LSE: PODP) – The UK’s inadequate (for now) electric vehicle (EV) charging network is threatening to bring the EV transition to a halt. By 2032, the shortfall of EV charge points in the UK is estimated to reach 250,000. However, Pod Point’s innovative range of EV charging solutions could go a long way in ensuring this deficit is reduced. The company’s charging technology is fit for homes, public charging bays, lamp posts and commercial buildings, and can ensure that the EV transition reaches all areas of the UK. In our view, Pod Point can unlock the potential of the UK’s EV charging network. You can find the original recommendation here.
Team17 (LSE: TM17) – Team17 is a video game publisher. It has a large collection of games which contains some of the most popular games of the gaming world. One of these is Worms, the enthralling last-man-standing survival game born out of the 1990sgaming boom. Team17 is keeping up with the times and offers its games across a number of contemporary technology platforms. It has even flirted with the idea of non-fungible tokens (NFTs), a megatrend which could revolutionise the gaming industry. At a time where sceptics think online gaming will come off the boil following the ease of lockdown restrictions, Team17 keeps gamers coming back for more. You can find the original recommendation here.
AB Dynamics (LSE: ABDP) – AB Dynamics is a provider of automotive testing services. The automotive industry is undergoing rapid transformational change, heading for an electric and autonomous future. This brings an ever-changing regulatory landscape, with automotive manufacturers needing to ensure they adhere to the latest safety standards. AB Dynamics testing services are helping to make arduous, chaotic testing periods more seamless than ever before, ensuring that the vehicles of tomorrow are fit for our roads. You can find the original recommendation here.
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Analyst, Frontier Tech Investor
