Naked Brand (NAKD) and Electric Vehicle Maker Cenntro undervalued?

Hopefully since this is a NASDAQ listed company it is OK to post this here….

I’ve been thinking about this one and wanted to sleep on it and crunch some numbers to see what a real valuation of this weird sorta deal would be. I had to research both companies to see how this would work. I’m also just going to copy and paste some other persons article where it makes sense…why waste time.

Naked Brand is an apparel stock that has been on the edge of Nasdaq delisting for several years.

Cenntro Automotive is a privately held electric commercial vehicle maker looking to expand its production to meet soaring demand.

The oddly assorted companies are planning a merger that will bring Cenntro public and give it a cash infusion.

Couple important things to consider…per Schwab:

Shares outstanding are 906M

It shows 0% held by institutions but I’m not sure that is correct.

Market Cap is 627.3M.

“Naked’s acquisition of Cenntro is clearly extinguishing Naked as a swimsuit and lingerie company, meaning Naked is acting in a manner very similar to a SP** and launching an effective initial public offering (IPO) for Cenntro through the merger. Naked is bringing $282 million in cash to the deal, after already providing Cenntro with a $30 million loan to help it ramp up its EV production.

Naked will spin off FOH Online, the e-commerce branch of Frederick’s of Hollywood that it acquired back in 2018 for $18.2 million, as part of the merger process. Curiously, the new Cenntro will continue trading under the Naked ticker on the Nasdaq exchange, according to the press release.”

I really like this actually. Cenntro gets a lot of cash so no more share dilution right now. I’m not thrilled with the almost 1B shares but compared to other companies it is fine I guess. Naked keeps its FOH business which goes back to being a private company most likely. So far so good…

I then spent some time on Cenntro’s website and I like the vehicles. I work in one of the largest cities in the US and their vehicles are exactly the type I see running around downtown delivering to restaurants, businesses, etc….This is really more of a rival to Rivian and Ford delivery vans then it is to the luxury market. I love this point since the luxury sedan market is quickly getting too much competition….you want to be in a business that other businesses want to buy from, not retail.

Important facts from the website:

3300+ Vehicles Delivered

20 Million+ Miles Traveled

238 Patents Granted

32+ Countries Certified

26+ Countries Shipped

6+ Assembly Plants

That’s right…..they have 6 assemble plants already. What other EV manufacture has that?

Check out their website: https://www.cenntroauto.com

I actually really like all their vehicles but check out the ORV and iChassis. The iChassis is an autonomous driving platform that is pretty cool. I have not seen anything like it from the other EV manufactures. The metro can be anything from a small dump truck (perfect for landscapers in parks, golf courses, etc) and the Logistar 400 is basically a UPS style van. I think once you see their vehicle fleet you will be pretty impressed.

Current Targets:

In 2021, 1,500 vehicles delivered, $25.3 million in revenue.

In 2022, 21,500 vehicles delivered, $506 million in revenue.

In 2023, 74,800 vehicles delivered, $2.1 billion in revenue.

IF they can accomplish this, the stock is trading at about 1.25X next years revenue. Yup….

Final Thoughts:

“On April 24, the index sent a noncompliance warning to Naked after its shares traded under $1 for 30 consecutive days. At that point, Nasdaq officials gave Naked the standard 180 days to raise its bid price above $1 for 10 consecutive days to comply or be taken off the index. Naked failed to meet the deadline by the Oct. 26 deadline, but Nasdaq granted a 180-day extension on Oct. 27. The company must now comply by April 25, 2022.”

Cenntro is not going to take this route to go public if they think there is a high likelihood that the stock will stay under $1. They are betting it gets above $1 and they are going to do whatever they need to do to get it there. For the next six months I expect to see:

Constant updates for vehicle sales to pump up the stock price.

  1. Updates for patents and vehicle upgrades.
  2. “Surprise” beat on earnings first two quarters of 2022.
  3. No further dilution by offering more stock…that would take the price down.
  4. Ticker symbol change announcement once the deal is finalized by the end of 2021.
  5. At least one major deal with a big company before April 2022.
  6. They have 8 trade shows on their current calendar…hopefully will lead to more sales.

Bear Case:

Cenntro’s targets could be too aggressive and they can’t meet them. This doesn’t seem likely to me but companies often offer too rosy of a future outlook.

People can’t get past the Naked brand and don’t buy the stock which leads to de-listing. (This is why I’m pretty positive they will request a ticker change with NASDAQ).

There are too many shares and bag holders which will cause resistance on the way up. (This didn’t stop Lucid and SOFI….they had so many bag holders in the 20s after they dropped down to the teens).

They say they have 6+ assembly plants…so far in my research I have only found references to facilities in Jacksonville, Florida and Düsseldorf, Germany.

With the shareholder split 70% / 30 % at the close of the transaction, I have no idea how this will effect the stock of naked shareholders. Any experts that can enlighten?

Most important comment from CEO of Cenntro in call: “While we confidentially submitted a draft S-1 to go public via an IPO, we came to believe that Naked allowed us to go public faster, providing the working capital to support our substantial backlog. “. And that my friends, is as bullish as it gets.

Don’t look at this as buying the previous company….you are buying shares of Cenntro.

Position: 20k Shares.

This article was written by u/Phx-Jay

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