Should you buy Vmoto Ltd?

Electric scooter business Vmoto Ltd (ASX:VMT) looks an interesting prospect.

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Electric scooter business Vmoto Ltd (ASX: VMT) today announced it has received firm commitments to raise $8.9 million through a placement to institutional and sophisticated investors at 45 cents per placement share.

The business also choose to issue new shares to directors following the vesting of performance rights. Brokers who acted in the capital raising have also been issued options over shares equivalent to 4% of the new shares issued under the placement.

Everyone appears a winner under these agreements except retail shareholders who have been diluted after not being given the option to participate in the discounted capital raising.

The stock has dropped 3 cents or 6% to 47 cents on resuming trade today and retail investors may wonder if any more capital raisings will be conducted at their expense.

Despite the iniquitous approach, Vmoto is a business that retains an attractive outlook as its electric scooter sales accelerate in Chinese cities that have serious problems around pollution, traffic congestion and overcrowded public transport.

In 2014 the company shifted a total of 76,000 units and in the first quarter of 2015 sold 19,400 units, which on an annualised basis suggests only moderate growth. However, first quarter 2015 sales were up 37% over the prior corresponding quarter and the group's ambition to grow internationally may be starting to deliver the goods.

Sales outside of China almost doubled over the first quarter of 2014 to hit 4,067 units. Moreover, international sales offer higher margins than a super-competitive Chinese market where low-cost rivals are also fighting for market share.

Despite the competition there's no ignoring the size of the market opportunity in China and globally, with the company also enjoying some powerful tailwinds. The two strongest being the cost advantages of electric transport and a long-term shift towards environmentally friendly methods of transportation.

Vmoto is forecasting a net profit of between $5-$7 million this financial year, with a market value around $66 million. The stock has traded flat over the past year and remains an interesting prospect for those looking at speculative buys.

However, Vmoto's prospects are no secret and the real key to out-sized returns is finding the Vmoto of tomorrow not today.. Luckily, The Motley Fool has fingered two potential candidates that are growing overseas and still flying under the radar of most investors!

Motley Fool contributor Tom Richardson has no position in any stocks mentioned. You can find Tom on Twitter @tommyr345 The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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