ZAP Merger With One Of Worlds Largest Motorcycle Manufacturer; MDB Capital Analyst Shares His Thoughts On The Deal
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{"s" : "bidu,eslr,ge,mxwl","k" : "a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00","o" : "","j" : ""} On Thursday November 4, 2010, 11:17 am EDT
67 WALL STREET, New York - November 4, 2010 - The Wall Street Transcript has just published its Alternative Energy & Utilities Report offering a timely review of the sector to serious investors and industry executives. This Special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Climate Change Regulatory and Political Uncertainty - New Dividend Tax Rate Legislation - Uptick in M&A - Growth for Pure-Play Alternative Energy Companies
Companies include: A123 (AONE); Ener1 (HEV); ADA-ES (ADES); AEP (AEP); Agrium (AGU); Allegheny Energy (AYE); Alliant Energy (LNT); and many more.
In the following brief excerpt from the Alternative Energy Report, expert analysts discuss the outlook for the sector and for investors.
Jon Hickman joined MDB Capital Group LLC in 2005 to cover emerging-growth companies in the technology, media and health care sectors. Prior to MDB, he was an Equity Analyst at Security Research Associates and Halpern Capital, where he covered technology and life science companies. Mr. Hickman began his career in 1980, working with Bank of America's trust department in San Francisco, where he analyzed private companies. He then spent 16 years managing institutional growth-oriented money at Wells Capital Management and later at Jurika & Voyles. Mr. Hickman has a B.A. in chemistry and an MBA in finance from Brigham Young University.
TWST: Would you tell us a bit about ZAP and their merger this summer with Jonway Auto Group.
Mr. Hickman: ZAP is a very interesting little company. It is headquartered out of Santa Rosa, Calif. They have actually been around quite a while. Right now they can still make a claim that they've produced more electric vehicles than anybody else in the United States. These vehicles have been mostly electric scooters or electric bikes. More recently the company moved into a three-wheeled, utility-type vehicle, kind of a funny-shaped, three-wheeled vehicle. By doing a three-wheeled vehicle, you don't have to meet all the safety standards that a normal highway-speed vehicle has to meet. So ZAP was able to get around these standards and produce a relatively cheap vehicle that has enjoyed some pretty good acceptance around the country. These small electric vehicles were just powered with normal lead-acid batteries. You could get a lithium-ion upgrade, but it changed the price of the vehicle quite dramatically and most people didn't choose that option.
Most recently, ZAP has been involved with a Chinese auto manufacturer and has been producing a sturdier and more utilitarian vehicle with four wheels that looks much more like a car or van than their previous electric vehicle. They have been importing that vehicle from China, putting the finishing touches on here in the United States, in Santa Rosa, and then distributing from there. This car again is not meant as a highway-speed vehicle; it has a 35-mile-an-hour top speed on it - again, so you don't have to meet all the safety requirements - but the car is much sturdier and, I don't know, more normal-looking. These vehicles have been well received in spite of a pretty poor economy in the last couple of years. So because ZAP had this long history and fairly successful electric vehicle experience here in the United States, they were approached by a French fund that only invests in China. This fund, the Cathay Fund, made a fairly significant equity investment in ZAP last year with the goal of using ZAP's experience to get into the Chinese electric vehicle market. Using its Chinese contacts, the people at the Cathay Fund introduced ZAP to the Jonway, a Chinese vehicle manufacturer.
Jonway is one of the largest, if not the largest, motorcycle manufacturers in the world, and they have been moving into electric vehicles based on their motorcycle history and experience. So now they have taken ZAP's know-how in taking a basic Chinese gas vehicle and modifying it into an electric car. ZAP knows how to do that really well, and so they have married that experience with Jonway's manufacturing capacities. Earlier this past summer, ZAP actually acquired 51% of Jonway's automobile division. The merger actually makes quite a bit of sense, as Jonway auto products will provide ZAP with an instantaneous revenue stream that's much, much larger than what ZAP has been experiencing before. And ZAP should be able to be cash flow positive based on this new revenue level.
TWST: What is your number one stock pick and why?
Mr. Hickman: The one that's obviously performing with revenues, generating rapid revenue growth and accelerating bottom-line earnings is Satcon. The stock has actually moved up quite nicely along with the good news. I think it's trading around the $4 level right now. It's down a little bit today because of the capital raise announcement, but kind of the low $4. I would argue that at this level, the stock is still a very solid buy. I wouldn't be surprised if somebody came along and they wanted to get into the inverter business and snap them up. Of the others that we've talked about, Altairnano has its partnership now, so they are 51% owned by Canon. So that makes that kind of less attractive. I'm pretty interested in Quantum. With their Fisker contract, the potential for the post office and other initiatives in alternative energy, solar power, there's a possibility that calendar 2011 could be a very, very good year for Quantum. I think that's the one I would keep my eye on.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
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