It is a good question you ask. It seems to me the recent sell off is not simply due to the profit downgrade, but also reflects a sense of frustration on the part of shareholders, probably not entirely unjustified.
When I first bought shares in Vmoto some years ago, I mentioned this stock to an acquaintance as an example of an interesting company. He poured cold water on the idea, saying he didn't trust Chinese stocks. I thought this was a stupid thing to say: this was an Australian company operating in China, so surely it was a bit of a stretch to suggest it was a Chinese company just because of its China focus.
I have a suspicion that many prospective investors- like that guy I spoke to years ago- have stayed well away from Vmoto, because of a perception that it is somehow a Chinese company. This perception is not really fair, but it is what it is. Given this, the conduct of the management and directors of this company needs to be impeccable.
But recent events won't do anything to improve Vmoto's image problem: consider the 'Revised Earning Guidance' announcement. The concern I have here is not the earnings downgrade per se, rather, the fact that the share price was falling on quite high volume three weeks before this announcement.
Obviously, the suspicious share price movements before the 'Revised Earnings Guidance' announcement will do nothing to dispel the notion that there is something unsavory about this company. Even the sharp-as-a-sloth ASX seemed to quickly pick up that something looked a bit odd.
However, the good news here is that Vmoto isn't a Chinese stock, it is an Australian stock, and there is a higher bar for listed Australian companies compared to those listed on the stock exchanges of places like China. For example, here shareholders have the opportunity to hold the board accountable by employing the 'two strikes' rule which can force the company board to face re-election if at least 25% of shareholders vote against successive remuneration reports.
So, to get to your question, this is one reason I am keeping my Vmoto shares: because if you hold on to your shares, you can influence the company by voting against the remuneration report, until the management improve their game. I get the impression sometimes that Australian shareholders underestimate the influence they have over the companies they invest in.
But on a more practical level, I also think there may several reasons to think that the Vmoto share price might perform a bit better in the year ahead.
1. Firstly, the aforementioned electric scooter subsidy in France, starting from January 1. This will hopefully lead to an increase in electric scooter sales in France and help boost their international sales.
2. Some experts seems to be of the view that the oil price is headed up to $60, perhaps even higher, following on from the recent production cuts announced by the major oil producers. If you take a view that higher oil prices are good for electric vehicle sales, this could be a bit of a sales booster, though probably not anything major.
3. The US Fed Reserve is expected to raise rates this week. Assuming this comes to pass, this should result in a weaker Australian dollar, and as an Australian company generating most of its sales overseas, this should make Vmoto a bit more competitive.
4. There are some tentative signs that the ASX might perform strongly in 2017. Over the past decade or so, the ASX 200 hasn't gone anywhere, whereas over the same period major US indices like the Nasdaq or the Dow Jones have surged.
I think the poor performance of the Australian stock market has got much to do with the fact that the Australian interest rates are higher than almost everywhere else in the world, but as I mentioned above it appears that this is about to change, with the US looking like it will finally start raising rates.
In short, I think it is likely that we are about to see a good year for Australian stocks, and this should help Vmoto too, for as the saying goes, a rising tide lifts all boats.
5. Finally, this is a bit more speculative, but Trump could be the real wild card. Trump has been talking tough on China lately, and has threatened to put a tariff on goods imported into the US from China. Were this to happen the Chinese would retaliate, which could make things tough for US companies selling motor vehicles in China, thus again putting Vmoto in a more competitive position.
Overall, I think there are potentially a large number of Australian companies that could indirectly benefit from many of Trump's proposed policies, though it is all a bit up in the air at this point.
(20min delay)
